Director employee status in IR35 Director employee status in IR35
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  1. #1

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    Default Director employee status in IR35

    Hi, I am interested in any information around 'director employee status' in the IR35 context i.e. I am effectively already a PAYE employee of my PSC I receive a salary and pension etc (I could even take this further and write my own HR policies). But more practically I have questions, if Im deemed to be an employee of another entity such as an agency or client under IR35, do I need 'wind down' things like the PSC salary to free up the tax free allowance for the new salary etc. I would like to keep the company open for possible non-UK clients but it seems redundant for the period of the UK contract. I am assuming the 'client' salary would not go through the company accounts? But the costs of running the company would continue e.g. pension payments etc so would the losses be offsettable against future earnings or capital? Anyone point me at some discussion on this thanks.

  2. #2

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    possibly, maybe probably, maybe not
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  3. #3

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    Good start would be to understand if you really are an employee of your Ltd right now. You might be surprised at the answer.
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  4. #4

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    You would likely have two PAYE employments, one with your Ltd and one with whatever approach the client/agency allows to ensure their liabilities are covered in ensuring the correct tax is paid for inside IR35 contracts.

    The discussion you will find on this forum relevant to this will be how client/agencies require the contract to be paid into a payroll or umbrella service rather than them willing to pay the Ltd gross as they do for outside IR35 contracts.

    In this scenario there is no advantage in having the inside IR35 payments received by the Ltd as it is post tax, so a common approach is to retain the Ltd for any outside IR35 contracts and use a payroll service (either independent or provided by client/agency) or umbrella to receive the gross amounts and sort out the tax so you receive the net of tax amounts personally as an employee under PAYE.

    It's entirely ok to be employed by multiple PAYE schemes at the same time but as you mention it does mean the personal tax allowance and income tax bands need careful appraisal to ensure the right tax is paid via each PAYE scheme (tax codes and all that). For this reason my accountant recommended I was removed from my Ltd PAYE scheme (but kept it running rather than close the scheme as it's easier to resume than restart) and so I was only under PAYE for the umbrella handling my inside IR35 contact payments.
    Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on.

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