Help Required: IR35 neglected

[djhns]

I took on doing my own Ltd accounts as i thought it was easy enough

For the 07/08 year, my limited company paid myself £5k (therefore not subject to PAYE tax or NI) and from the profit a dividend of £30k.

I have completed and lodged all necessary Company accounts, Corp tax and self assessment tax returns.

Originally i was advised by HMRC that i did not need to complete a P35 and P14 at the time as no PAYE or NI was due. But after speaking to them recently they said i should do one anyway.

In the P35 qestion 6, it asks whether the company is Managed Serviced Company (MSC) or subject to IR35. After doing some reading i realise The company is a MSC. Therefore PAYE and NI is now subject to the whole Service income. YES... STUPID ME!!

Can anyone advise what i can do apart from speaking to a professional accountant to re-do/adjust for the oversight?

I am stressing at all the fees, penalties, and extra NI i now need to pay.

Any help is appreciated. Much thanks

Stressed!!!

[Moscow Mule]

After doing some reading i realise The company is a MSC.

I very much doubt that it is.

Even if it is, overall tax won't be that much different (a few K) as you will adjust your corp tax for less profit...

If you're asking these questions, I'd really suggest engaging an accountant.

[VectraMan]

After doing some reading i realise The company is a MSC.

If your company was a managed service company, you wouldn't be doing your own accounts. It would be being managed by somebody else.

[djhns]

Ok, after speaking to HMRC, the Ltd is not a MSC (as that usually refers to a group of companies or rather) however, it is still caught under IR35.

Therefore.... The accounts now need to be accounted for differenctly. i have still unpaid a whole lot of taxes and ni.

I was deciding to play ignorant as i was at the time but i know i won't be able to sleep at night until this is sorted.

I am waiting to hear back from the service company whom i bought this Ltd from for advice. Had i known it wasn't so simple, i would have continued to pay others to do it.

Any other other suggestions would be greatly appreciated.

many thanks.

[sweetandsour]

As the others have said, it sounds like you have read things wrong because you would not be operating an MSC yourself.

On the other hand, you may well be operating a PSC and you may well be inside IR35, but you didn't ask about that.

I think this is a lesson for the people who think that their accountants are not worth the money.

[Hex]

Ok, after speaking to HMRC, the Ltd is not a MSC (as that usually refers to a group of companies or rather) however, it is still caught under IR35.

Are you sure it's caught by IR35? Just 'cos HMRC say they think it is doesn't mean it actually is. They have a vested interest. Why not get it reviewed by a professional contract review service?

[djhns]

Well basically, if i strip out the Ltd Co. and strip out the job agency, i would virtually be just another employee of the client. Which is why i will be caught under IR35.

I have quoted for a professional company to review my old contract and they are charging £75 + VAT. After speaking to HMRC, they also do a review service free of charge!!!

[MPwannadecentincome]

Well basically, if i strip out the Ltd Co. and strip out the job agency, i would virtually be just another employee of the client. Which is why i will be caught under IR35.

I have quoted for a professional company to review my old contract and they are charging £75 + VAT. After speaking to HMRC, they also do a review service free of charge!!!

And of course HMRC will give the answer that favours themselves!

£75 + VAT is not really a lot of money if it saves you hundreds in extra tax and NI.

[djhns]

Yes, £75 odd is not much but i'm 99% sure that i will be caught under IR35. Unless they can do magic to make it otherwise.

Btw, does anyone know where to seek guidance on how to prepare Ltd co accounts if it fell under IR35? Are all Service income received fully deducted as Salary expense to the employee (myself) and additional employers ni contribution. Therefore the company will always be runing at a loss?

[TykeMerc]

Yes, £75 odd is not much but i'm 99% sure that i will be caught under IR35. Unless they can do magic to make it otherwise.

Btw, does anyone know where to seek guidance on how to prepare Ltd co accounts if it fell under IR35? Are all Service income received fully deducted as Salary expense to the employee (myself) and additional employers ni contribution. Therefore the company will always be runing at a loss?

No the company doesn't run at a loss, if IR35 caught then you simply have less money to pay yourself because of the additional NI and Income Tax on salary rather than dividend payments.