5% Allowance

[Adelarosa]

Hi there
I have just started as a contractor, unfortunately I fall under the IR35 but I can still claim VAT allowance plus the 5%allowance for admin stuff of the business and whatever is left over at the end of the year, take it as corporation tax. Im currently doing the 1st weeks books, and I was wondering how shall I treat the allowance, shall I calculate the 5% of my weeks gross earnings and put it aside for later, ie leave it in the bank account and take it off when needed?

Many thanks for your help.
Alex

[JB3000]

Hi there
I have just started as a contractor, unfortunately I fall under the IR35 but I can still claim VAT allowance plus the 5%allowance for admin stuff of the business and whatever is left over at the end of the year, take it as corporation tax. Im currently doing the 1st weeks books, and I was wondering how shall I treat the allowance, shall I calculate the 5% of my weeks gross earnings and put it aside for later, ie leave it in the bank account and take it off when needed?

Many thanks for your help.
Alex

Sockie?

[jamesbrown]

Sockie?

Emphatically.

[LisaContractorUmbrella]

Almost definitely. But just in case - have you got an accountant? If so this is the sort of question that they will be able to help with. If you don't have an accountant, get an accountant

[Pondlife]

Sockie?

Emphatically.

How so? Seems a reasonable first question from someone who has managed to get (or thinks they do) a contract that falls inside IR35.

[Craig at Nixon Williams]

The 5% is of your net turnover (your turnover after you have accounted for any VAT payable) – you would then deduct any qualifying expenses before calculating the employers NI and salary payable.

If you are only in your first week, then I assume that you have only recently formed the company – in that case you will not be entitled to the full NI allowance for the year as it should be pro-rated according to how long you have been a director in the tax year.

I would advise against taking a dividend from the 5% allowance until the end of the year as you may need to use this to pay for any non-qualifying expenses that are incurred.

My other advice would be to get an accountant if you don’t already have one.

Craig