I'm aware that this has already been discussed at length but I don't know if a firm conclusion was reached and I've yet to see any more helpful guidance from HMRC (or anyone else for that matter).
PSC client has been advised by his sole customer that from 1 September 2019 PAYE will be applied to payments to the PSC. Current thinking seems to be that the gross sales value is included in accounts turnover, with the tax deducted hitting the P&L as a deductible expense. I understand also that the turnover is excluded from the CT computations, and that the individual is entitled to draw out the cash as either a salary or dividend without further tax. This leads to a question:
Ignoring all other expenses (although I don't think that we should) treating the PAYE as a deductible expense would lead to a CT loss. Further, if the cash extraction is taken as salary this too would create/increase the CT loss. Going forward, it probably makes no odds as the company will be unable to do anything with the losses but in year 1 it seems that there could be a sizeable loss to carry back. Common sense and logic would suggest that any expense items (PAYE, salary) related to non-taxable income should also be disregarded but I can't find anything that conclusively says that we need to - it's expenditure incurred wholly and exclusively for the purpose of the company's trade. So, the question is - do we in fact have an allowable loss to carry back?
And before anyone points it out, yes IR35 has been previously considered, but that's a separate matter.