Is Bank Interest classed as IR35 income ?

[Dynamic_Dude]

Question: my current (only) contract falls under IR35. Does the interest that I get paid on the company bank account get treated as IR35 income when calculating the deemed salary ? Also I get a VAT discount under the Flat Rate Scheme. Is this extra money IR35 income as well ? Thanks !

[malvolio]

Yes. Yes.

IR35 works on all income as a result of one contract - you wouldn't get the interest or the VAT if you didn't have the contract. QED.

[xoggoth]

Are you quite certain of that Malvolio? I'm not. Just because money is earned on "deemed salary" I am not sure it becomes earned income.

[Lucifer Box]

Are you quite certain of that Malvolio? I'm not. Just because money is earned on "deemed salary" I am not sure it becomes earned income.

Xog is correct. Interest and VAT do not form part of the IR35 deemed payment calculation (according to my accountant).

[xoggoth]

But then Malovolio is usually pretty hot on accountancy matters. Any input from any proper accounty type people? Interesting to know for sure.

[Lucifer Box]

But then Malovolio is usually pretty hot on accountancy matters. Any input from any proper accounty type people? Interesting to know for sure.

If he is right, I'll be having words with my accountant for sure.

[malvolio]

Virtual VAT from the Flat Rate scheme is a slight mystery in IR35 terms, I agree, since it came in long after IR35. But that said, it is included in CT calculations,as is interest income, so I can't see it being outside IR35.

AFAIK, your deemed IR35 salary is total income, less allowable deductions such as pension and expenses, less 5%. Hwoever I will (just this once!) be willing to be proved wrong on this one!

[Lucifer Box]

Virtual VAT from the Flat Rate scheme is a slight mystery in IR35 terms, I agree, since it came in long after IR35. But that said, it is included in CT calculations,as is interest income, so I can't see it being outside IR35.

AFAIK, your deemed IR35 salary is total income, less allowable deductions such as pension and expenses, less 5%. Hwoever I will (just this once!) be willing to be proved wrong on this one!

I've just looked at the IR35 section on the HMCR webtulipe and none of the examples include interest in the calculation. It doesn't say one way or the other though so I would not take that as conclusive. The only time my accountant did a deemed calculation for IR35 (in 2000), he said interest was not included and this was never challenged. Stands to reason though - I'd rather keep the money in a non-interest paying account than pay 95% of the interest to fat boy.

As far as VAT goes, I would have thought the business precedent of decades applies, which is you simply ignore it for anything other than VAT calculations.

[BlasterBates]

Lucifer's right interest and investments like shares are treated differently.

[Technically Blonde]

AFAIK, your deemed IR35 salary is total income, less allowable deductions such as pension and expenses, less 5%. Hwoever I will (just this once!) be willing to be proved wrong on this one!

Only the income from the contract that is caught by IR35 is included in the deemed salary calculation. Bank interest, share dividends, income from other sources not caught by IR35 are EXCLUDED from the deemed salary calculation.