IR35 and Corporation Tax

[Herts47]

A bit of a cluster fook really.
As been said all money from IR35 PAYE should have been paid to your personal bank account, not LTD.
Now your accountant must notify HMRC/fix the mess.

If not, you are looking at double taxation in either of:

1. Money to LTD, no salary = 20% corp tax.
2. Money to LTD, all salary to your LTD's PAYE = EE NIC+ER NIC+personal tax.

I had no choice and had to agree to the net earnings go into my limited company account. I'm sure my accountant will be able to demonstrate this wasn't profit and, having checked my personal tax account, the agency earnings state it is deemed employment, and has a full record of PAYE paid.

[malvolio]

When I started this contract, I was told by the agency that I had to have my earnings paid into my Limited Company account. I had a battle in trying to get any understanding of how IR35 worked from them - and ended up doing my own research in the end. They told me I was not an employee but deducted PAYE and the payslip is in my name not my company - which technically makes me an employee. I didn't get paid holiday pay as "I wasn't an employee". I was told my employer would be my limited company. The VAT was added to my payslip as part of my earnings and I was sent an auto generated invoice.

So it's not me that has got myself into a pickle as you state. It's the agency not understanding the rules. They also taxed me far more than they should have as they didn't apply the correct cumulative code that HMRC sent them (found that out from HMRC the other day).

Hopefully my accountant will be able to resolve any issues with HMRC on the corporation tax, and he has submitted VAT returns in the normal way to them (and I've paid the VAT etc).

It is you, actually. There's a guide to IR35 over on the right of this page, and the re is a detailed description (along with much else) on the IPSE website which between them will make a complicated thing a little clearer.

Anyway, there isn't a VAT liability to sort out since what you're being paid is VAT exempt (and should go into your own account, not YourCo's, but if it does it should come straight back out again. Similarly, no profit means no CT liability.

As has been said, if your accountant doesn't understand IR35 he is of no use to you and it looks from the outside like he's making things worse. That's not what you pay him for. Also CT, VAT and PAYE are handled by separate areas within HMRC so it's not surprising there is confusion of what you are actually liable for.

And after 20 years contracting I've yet to meet an agency - much less an individual agent - who understands IR35.

[Herts47]

A) It doesnt have to be paid to personal. Its just easier.

B) To the OP you shouldn't need to pay Corp Tax provided your accountant has set it up up right as a deemed employment payment (i think you said they have).

Hopefully this is what my accountant will do/has done already. It shows as a deemed employment on my personal tax account on HMRC.

[Herts47]

I'd get a new one then really. Its pretty key for us.

Yes it is pretty key but he is now familiar with IR35 - he hadn't had any clients that fell under this until now.

[mudskipper]

Hi Herts47

See here

Off-payroll working in the public sector: reform of the intermediaries legislation - technical note - GOV.UK

Particularly the 'Rebecca' example. Rebecca has been adding VAT and being paid to her ltd, which sounds like your situation.

[Herts47]

Hi Herts47

See here

Off-payroll working in the public sector: reform of the intermediaries legislation - technical note - GOV.UK

Particularly the 'Rebecca' example. Rebecca has been adding VAT and being paid to her ltd, which sounds like your situation.

Hi Mudskipper

Thank you for this link. Rebecca is exactly the same situation as me with the exception that I didn't earn anything outside of IR35 for the company year, and I went to permanent employment somewhere else in March. It looks like the agency have done this correctly then as they have generated the invoice with VAT, taken VAT off to calculate my PAYE due, then added back into my payment on my payslip that's then paid to my Ltd company. My accountant has calculated VAT due each quarter which I've paid as normal. As I haven't earned anything else outside of IR35 or paid employment, I would not expect to incur any corporation tax. My accountant will need to make it clear that I have already paid PAYE on all my earnings into my business account and am therefore not liable for any more tax. Hopefully! Really helpful information and thank you.

[cojak]

Moved to Accounting

[elsergiovolador]

Hi Herts47

See here

Off-payroll working in the public sector: reform of the intermediaries legislation - technical note - GOV.UK

Particularly the 'Rebecca' example. Rebecca has been adding VAT and being paid to her ltd, which sounds like your situation.

This example doesn't raise any eyebrows? Rebecca receives £4200 as her salary, but draws only £3000 from the company. Isn't she misusing company account to keep personal funds? All the money (except VAT) from caught service is worker's personal money, so company cannot touch it unless the worker gives a loan to the company. What I am missing or the guidance hides inconvenient facts?

[northernladuk]

What I am missing?

A permanent ban.

HTH

[Lance]

This example doesn't raise any eyebrows? Rebecca receives £4200 as her salary, but draws only £3000 from the company. Isn't she misusing company account to keep personal funds? All the money (except VAT) from caught service is worker's personal money, so company cannot touch it unless the worker gives a loan to the company. What I am missing or the guidance hides inconvenient facts?

They're not necessarily personal funds. You are assuming they are, as tax has been deducted at source. But that's a poor assumption and incorrect.
It would be easier to take it personally rather that via the LTD. but that's an option not mandatory.