| Calculation of Deemed Payment
If you assess the value of any exposure
to IR35 (as outlined in example on page 3) and the likely risk of challenge this
will assist you in making decisions on whether to take dividends/salaries or
indeed leave the funds to grow in the company.
Payment of Deemed Payment
The mechanism for collecting IR35 tax is
for the deemed salary to be treated as paid on 5 April and the related PAYE /NIC
costs to be accounted for as normal for the month ended 5 April. The Inland
Revenue accepts that final figures will not always be available by 19 April and
estimates are allowed. Corporation tax relief is available for the year in which
the deemed payment is treated as made.
Beware of Double Taxation
Due to a fault in the rules
there is a risk that if you have a deemed salary in one year when you come to
take the income out of the company in a later year it could be taxed again. The
only relief against being taxed twice is if the income is taken as a dividend.
In this case the dividend income is ignored when preparing
your tax return.
Watch Timing of Income
If there is a negative deemed
salary in a year this reduces to zero. It is NOT available to reduce a
deemed payment in the next year. If you are clearly within IR35 you should be as
careful not to take too much salary out as too little. |
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End of Year Returns
The P35 annual return of
salaries contains a new question
“do the rules relating to payments for services provided
through a service company or a partnership apply to you?”
With the present uncertainty over how the status rules will be
applied the “no” box should normally be ticked. To avoid incurring penalties
if you lose a status review it is important to assess each of your contracts now
and prepare in writing your justification of why IR35 should not apply to
you.This document should be retained with your accounting records.
We hope you have found this update to be of interest. The
information provided is intended only as a general guide. It is important to
take individual advice, taking into account your personal circumstances.
If you require a review of your arrangements or assistance
in putting your case to the Inland Revenue, please contact Seonaid Illingworth
at
CONDIE & CO
Tel: (01383) 721421 Fax: (01383) 729865
E-mail: seonaid.illingworth@condie.co.uk
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