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IR35 Deemed Payment to Directors Loan Account

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Hi

Hopefully this is a quick question, but one my accountant doesn't seem able to answer!!!

The vast majority of my work falls inside public sector IR35.  However, perhaps stupidly (and very uninformed), rather than withdraw all of the IR35 income as salary, some of it has been used within the business to pay rent and buy stock for a secondary project.  

This means that my deemed payment is (I think) likely to be relatively high (around £8,000).

Would it be acceptable to pay myself that £8,000 as a paper exercise only and in fact create a journal entry taking it as directors salary but putting it in to the directors loan account?  Is that permitted by HMRC?

Thanks so much.

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By SXGuy
27th Feb 2020 18:10

As you should have drawn it but didn't you efectively loaned the company that money, so I see no reason why it couldn't be allocated to the dla for future repayment.

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By Montrose
28th Feb 2020 17:33

A general point-HMRC does not "permit" -but seeks to see if there is any tax payable as a consequence of - transactions. In certain circumstances they will give advance clearance [under a statutory power to do so] that they will not seek to raise a tax charge if certain actions are taken by the taxpayer .

In your case you need to be sure that the proposed transaction is within 9 months of the Company's year end in which the IR35 event took place, otherwise the credit to your DCA could arguably be treated as pay at the date the book entries are made, and subject to PAYE again.

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Replying to Montrose:
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By KDRS
29th Feb 2020 01:36

Thank you.

So if the payslip for month 12 was to include the transaction then this would be acceptable?

Would I even need to put it on the payslip or could technically be done at any time?

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Replying to KDRS:
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By Montrose
29th Feb 2020 14:53

The relevant date is the one on which the ledger entries are actually made.

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