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Client Assessed under IR35

Adjustment to corporation tax

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We have client who has been assessed and found to have operated under IR35 in 2016 and HMRC are requesting an additional £10,000 in personal tax.

In the accounts, the client deemed they did not fall under IR35 at the time so they operated on a directors salary scheme and dividends. Dividends were included in the accounts and no corporation tax relief was given.

Is it possible to now get any corporation tax relief on it?

i.e. originally £10,000 salary in accounts, £40,000 dividends.

Now HMRC are saying the full £50,000 are taxable as a salary under IR35.

The client has a specialist dealing with the IR35 but I wondered if any of the additional tax could be recouped in some way?

Replies (2)

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By Chris.Mann
08th Apr 2019 15:02

A dividend paid by a company is not an expense, it is a distribution, of the company.

The dividend is an income of the shareholder.

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Replying to Chris.Mann:
By Wilson Philips
08th Apr 2019 15:04

I think you're missing the point that where IR35 applies the company is usually entitled to a CT deduction for the deemed payment, even if it is paid out as a dividend, and that the corresponding dividend is not taxed on the individual.

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