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IR35

Hi All,

We have a situation where a director/shareholder is in in business with 3 other directors/shareholders each holding 33% of Company A. 

One of the directors is the sole shareholder and director of Company B and wants to raise invoices from Company B charging company A for work that he does in Company A, as he feels he will have additional control and for various other reasons.

This isnt a problem under IR35 is it,  as he would either take a dividend from Co A or Co B,  so the tax effect is basically the same, and any charge from B to A will pay corporation tax, so the tax liability is the same.

Thanks in advance.

DG

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28th Mar 2012 10:41

Not enough information to say

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28th Mar 2012 12:05

Ok not sure I follow,  I was

Ok not sure I follow,  I was under the impression that IR35 only applied,  sorry I dont have the exact wording to hand, when the arrangement mean that less tax/NI would be paid compared with the case were there no arrangement in place.

 

In this case if the arrangemt wasnt in place then the individual would take a dividend from company A, and so the tax effect is identical.  So my understanding is that we dont need further info as to the details of the arrangement, as doesnt it fall down on this point.

 

Thats only my understanding though.

 

What do you think, am I incorrect?

 

DG

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By khalm0
28th Mar 2012 12:16

Does not apply. IR35 is around contracting work when you are pretty much working at a permanent company but not via their payroll. IR35 tries to get you to pay the usual tax and NI instead of the dividend.

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28th Mar 2012 12:36

Thanks that was my understanding too.

 

DG

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I agree in that ...

IR35 seeks to identify individuals who, without the presence of an intermediary, would otherwise fall be treated as an employee by the end client. On the basis that your client is a director of the end client then he would have no obligation to receive payment as an employee unless he has a contract of employment with them already.

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