IR35

IR35

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I have got a new client who works through an agency and is splitting from previous accountant who informs that previous arrangement re dividend and salary wasn't allowed anymore. (And also the 30 pounds per week admin fee was a lot).

Is there any way that this arrangement can carry on or does the whole of the years income have to be treated as PAYE.
Simon Lewis

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Euan's picture
By Euan MacLennan
08th May 2007 10:08

Be more specific
An individual obtaining work through an agency would definitely be subject to PAYE on his pay from the agency, but as you mention dividend and salary, I assume you are talking about a one-man company which obtains work through an agency.

If so, the agency pays the company gross and having the agency as an intermediary is irrelevant to the IR35 position. That depends solely on the work done by your man for the end-client of the agency. If the circumstances of his job are such that he would be treated as an employee of the client, rather than as self-employed, if he were working directly for the client, the IR35 rules apply to his one-man company, as it is the last intermediary in the chain from the client and is the company which is paying the individual. Under IR35, 95% of the company's income for the work has to be paid out for the benefit of the individual in the form of pensions, expenses, er's NIC and what is left as salary under PAYE.

If your man is not working effectively as an employee of the end-client, IR35 does not apply and he can continue to draw a salary of £5,000ish with the balance by way of NIC-free dividends.


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By AnonymousUser
08th May 2007 16:24

Yes

To see if IR35 applies you look at the engagement.
If it would amount to employment had the worker contracted directly with the client as an individual then he is caught.
Simple as that.

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