Am I understanding IR35 correctly

Am I understanding IR35 correctly

Didn't find your answer?

Long retired former practitioner - now company secretary, book keeper, accountant, general helper to my sons company, that was formed in 2006 developing software etc. in sons spare time. Son until recently worked under PAYE for a firm. Son has been asked back by that firm to do part time IT consultancy work. The firm intend to pay sons company a gross amount for his services. It would seem that this arrangement is caught under the current IR35 rules. I think I have grasped the deemed payment rule but is there anything I should be doing other than :

    Operate PAYE on the salary son will draw from the company.

    Charge travel and other allowable expenses in son's company P&L account (is the 5% deduction to cover other expenses and allowed in the deemed payment  calculation purely a notional amount even though some of these expenses may have been charged in the son's company accounts ?).

     Do I need to advise HMRC that it would seem that IR35 applies or just wait and send them the deemed payment calculation in due course.

     Perhaps then pray that this all is OK (and hope that government come up with some easy to follow guidelines when and if they abolish the current Business Entity Tests ! )

      Have I missed anything ?.

       I would really be grateful for any advice on these matters - need to be able to show my son that his old dad might still be reasonably capable or perhaps not !

       Thanks for any help.

      Bankrec

   

Replies (1)

Please login or register to join the discussion.

avatar
By MattG
16th Feb 2015 14:24

HMRC guide

Check out the following HMRC page:

https://www.gov.uk/ir35-what-to-do-if-it-applies

In particular the calculator:

www.hmrc.gov.uk/ir35/ir35.xlt

The 5% comes off the total and is in addition to any eligible travel expenses (and other expenses that could be claimed if the worker had been an employee). The calculator shows you the order to go in.

If you've made the appropriate deductions, having treated the 95% residue as salary, then there won't be any deemed payment (when I asked a question a while back the conclusion was that you would want to make sure everything goes through payroll, as you get the employers NI allowance that way).

The only slightly tricky bit is working backwards to find the appropriate amount of salary such that pay+NI = 95% of residue, mostly due to rounding etc.

Thanks (1)