IR35 deemed payment calculation when NO salary paid

IR35 deemed payment calculation when NO salary...

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Hi all, just got an IT contractor who paid no salary this tax year. I intend to use any withdraw as director loan and clear that by a single dividend payment. BUT I really don't know what to do regard IR35 deemed payment? Has anyone came accross this before? Many Thanks.

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Euan's picture
By Euan MacLennan
25th Mar 2014 12:28

What do you mean?

Assuming that the company is subject to IR35, the deemed payment is calculated as the difference between the salary calculated under IR35 on the company's income less personal expenses of the worker and whatever salary was actually paid to the worker.  If no salary was actually paid, the deemed payment is the same as the salary required under the IR35 rules.

But to answer your question, No - I for one have not come across this before.

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By keynes
25th Mar 2014 12:31

I meant do i have to file deemed payment at all?

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Replying to Mikesch:
Euan's picture
By Euan MacLennan
25th Mar 2014 13:12

If that is the question ...

keynes wrote:

I meant do i have to file deemed payment at all?

... the answer is Yes.

In your original question, you mentioned paying a dividend instead of making a deemed payment.  The rules are that the worker is taxable on the deemed payment as income to be disclosed on the worker's SA tax return and the company deducts the deemed payment from its profits for corporation tax purposes, per ESM3181.  However, if a dividend is paid to the worker (or anyone else), the company can apply to HMRC for the dividend to be exempted as income in the hands of the worker (or other shareholder), in which case the worker would not disclose the dividend on his SA tax return, per ESM3260.

However, I hasten to add that this is just my understanding of the rules.  I avoid deemed payments like the plague and so, have no personal experience of them.

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By User deleted
25th Mar 2014 12:51

Who knows?

If the company falls within IR35 - yes.

If the company does not fall within IR35 - no

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By keynes
25th Mar 2014 13:07

Thanks to all of you.

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By Steve Kesby
25th Mar 2014 13:18

I avoid clichés...

... like the plague! :)

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