Can IR35 contractors claim employers allowance on the NI?

Can IR35 contractors claim employers allowance...

Didn't find your answer?

Hi All,

Can someone advise if they think that IR35 contractors can claim employers allowance on the NI?

Ta!

Replies (10)

Please login or register to join the discussion.

avatar
By taxhound
11th Apr 2014 17:30

yes but no

I believe they can claim on regular salary payments but not on a deemed payment.  So I would ensure all payroll is done via regular payroll so it can be claimed.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

HMRC blurb says:

Personal and Managed Service Companies

You cannot claim the allowance for any deemed payments of employment income. However, you can claim the Employment Allowance against the employers Class 1 NICs arising on the earnings paid to your employees.

For more information about Service Companies and deemed payments go to http://www.hmrc.gov.uk/ir35

Thanks (1)
avatar
By DMGbus
11th Apr 2014 23:13

Make the "salary" £22,449 and keep deemed amount lower that way

The maths tell me that an annual SALARY of £22,449 gives rise to NICer of £2000.03.

This tells me that in IR35 cases then "salary" should be at least £22,449 then the whole EA of £2000 is obtained.

When I used to deal with IR35 clients I used to try and ensure that the salary was as high as possible to virtually eliminate any "deemed payment".    I did this as my understanding was that whilst salary was taxed and could be drawn, the extra "deemed salary" was not available to draw - it was taxed but not drawable, not a good situation to be in.

Thanks (0)
avatar
By girlofwight
12th Apr 2014 09:29

Agree with tax hound
Tax hound's post is in line with my understanding.

Thanks (0)
By Steve Kesby
12th Apr 2014 10:29

There's absolutely no point...

... not having a salary that exactly equals the deemed payment, unless the deemed payment is less than the optimal salary figure for the particular client. If the money needs to be kept in the company credit it to the DLA.

The tax and NIC payable isn't altered, except for the fact that the employment allowance will be available.

Thanks (0)
avatar
By khalm0
14th Apr 2014 09:22

Hi Guys,

 

Thanks for your repsonses so far. Just another question... what is the definition of deemed payment?

With my IR35 clients, i run payroll at the minimum to not exceed the personal allowance and there is a little employer NI paid which I guess would be exempt on the new ruling. Remaining gets paid via dividend at year end or interim dividend during the year.

Can someone explain where and how a deemed payment comes into play?

 

Thanks again guys.

Thanks (0)
Replying to RogueNation:
avatar
By whatdoyoumeanwashe
14th Apr 2014 09:45

NON-IR35?

I think perhaps what you mean is "with my NON-IR35 clients, I run payroll at the minimum...."?

 

khalm0 wrote:

Hi Guys,

 

Thanks for your repsonses so far. Just another question... what is the definition of deemed payment?

With my IR35 clients, i run payroll at the minimum to not exceed the personal allowance and there is a little employer NI paid which I guess would be exempt on the new ruling. Remaining gets paid via dividend at year end or interim dividend during the year.

Can someone explain where and how a deemed payment comes into play?

 

Thanks again guys.

Thanks (0)
avatar
By User deleted
14th Apr 2014 09:33

???

You have IR35 clients but don't know what the deemed payment is?

Thanks (1)
avatar
By whatdoyoumeanwashe
14th Apr 2014 09:52

All, I've just been looking at my clients' payroll for the coming year and working out what best to suggest those owner-managed limited companies that are outside of IR35 pay as a salary, and it looks like, where previously they've paid at the primary threshold (£641/month last year), they may as well now pay right up to the personal allowance of £10,000 (£833/month) since the corporation tax saving outweighs the 12% Class 1A primary contributions, assuming they're eligible for the employment allowance? It's Monday morning and so I just want to make sure I'm not missing something?! Thanks!

Thanks (0)
avatar
By Paul Soper
14th Apr 2014 11:03

Deemed salary extraction

I suppose it is so long since IR35 came in that the nuances of the system get forgotten.

I did this as my understanding was that whilst salary was taxed and could be drawn, the extra "deemed salary" was not available to draw - it was taxed but not drawable, not a good situation to be in.

Deemed salary is not 'drawable' but dividends are - you draw the amount you wish as dividend and then elect to match the dividend against the deemed salary - the dividend is only taxable to the extent that it exceeds the deemed salary.

Thanks (1)
avatar
By khalm0
14th Apr 2014 12:22

Yes I have clients that are outside of the scope of IR35 ( i have left it to the client to ensure that contract is bullet proof and also to take out neccessary insurance policies against investigations / tax liabilities arising from being caught out ) but all of these clients are only paid a simple minimum via payroll and dividend at the end of the year, thus not been in a senario where deemed payments would come into play.

 

Thanks (0)