Within IR35 and you get taxed twice or am I being really stupid?

**The Lone Gunman** · 8 January 2007, 17:50

I would duck if I were you.................... INCOMING!!!!!!!!!!!

**Sockpuppet** · 8 January 2007, 17:54

Originally posted by Mervalous

Im still trying to get my head around the IR35 stuff but luckily I wont be going contracting for another month or 2 so I can ask you lot lots of stupid questions and not get any mickey taking at allll

Anyway if I was to be within IR35, I would get company taxed as Im limited company and then taxed the normal rate on my wages going to me from my limited company right.... or am I missing something totaly obvious as I did read all my IR35 stuff before the xmas break...

You can't pay tax on the same money (well sort of).

Inside IR35 = pay yourself a deemed salary which lowers your profit so lower CT bill.

**Mervalous** · 8 January 2007, 18:00

I know I know Im probably misreading something really obvious and I will now be told contracting is not for me. I have looked into this quite a bit but this one area just has me puzzled.

As they way I think about it:

in or out of IR35 Ill be recieving my money like this:
Company - Agency - My LTD Company - Me
So Id expect that when the agency pay my company the company gets charged company tax at 19%, then when my company pays me Ill be getting the standard Tax payments. Only way it workds better is if Im getting dividends as my main payment or is that out when within IR35.... god one min I think I have this IR35 stff down and the next i confuse myself again...

**Sockpuppet** · 8 January 2007, 18:07

CT Tax @ 19% is on PROFITS. Not cash flow in.

Go read the first timer guides. Are you sure your caught in IR35....do you have a contract yet? Its a contract by contract thing so you should not be caught by it if you are sensible.

**expat** · 8 January 2007, 18:07

Originally posted by Mervalous

I know I know Im probably misreading something really obvious and I will now be told contracting is not for me. I have looked into this quite a bit but this one area just has me puzzled.

As they way I think about it:

in or out of IR35 Ill be recieving my money like this:
Company - Agency - My LTD Company - Me
So Id expect that when the agency pay my company the company gets charged company tax at 19%, then when my company pays me Ill be getting the standard Tax payments. Only way it workds better is if Im getting dividends as my main payment or is that out when within IR35.... god one min I think I have this IR35 stff down and the next i confuse myself again...

Your company pays 19% Corporation Tax on profits. Any money that the company pays to you personally as salary is not a profit to the company, because the company has not kept that money.

So if you personally are paying income tax on it because it is (deemed to be) salary, that particular money is not profit to the company, so the company does not pay Corporation Tax on it.

**VectraMan** · 8 January 2007, 20:48

What happens if you lose an IR35 investigation? You have to pay the extra income tax, but presumably get back the corporation tax you've paid. Do they just work out the balance?

**ASB** · 8 January 2007, 21:08

Originally posted by VectraMan

What happens if you lose an IR35 investigation? You have to pay the extra income tax, but presumably get back the corporation tax you've paid. Do they just work out the balance?

That is the interesting one......

You'll need to reopen the CT year and there just might be circumstance where that can't happen. Same if you've paid divis etc. There is some guidance in the parctioners guide on HMRC website.

In theory it makes no difference iat the end of it all, but I'm not entirely convinced.

**Mervalous** · 9 January 2007, 09:48

aha sory guys I was being a bit dense, missed the whole CT tax is on profits thats all.

I havent got a contract yet, Im waiting till around the end of Jan to start looking. From what Ive been reading it may be difficult for me to fall OUT of IR35, my job is a software tester but I will try and peak to some other software testers and see how tnhey get round it, just seems the nature of what i do would put me within IR35 from the definitions Ive seen. Obviously I do need to do more research though.