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Payroll when caught by IR35?

Do you still need to run a payroll if caught by IR35?

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Client receiving money net of PAYE. I assume I can just close the payroll scheme? 

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By sarahg
04th May 2021 14:55

There is not enough information to reply to this - as a start

- Who is the contract between?
- Whose name is on the payslip?
- Who received the net pay?

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By Hugo Fair
04th May 2021 15:26

Even if (loads of assumptions) client is a one-person (sole shareholder of and sole employee of) limited company AND is the person receiving net pay (after deduction of tax/nics/etc by deemed employer) AND is not likely to undertake any other non-IR35 work ... feel free to continue this list of basic assumptions ... then:
* How does he/she intend to account for any expenses when drawing up accounts for company (if net pay received by individual), OR, more likely, how does he/she intend to withdraw money from the company (if it is the recipient of the next pay)?

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By mikeyban
04th May 2021 18:03

Making the assumption that this is your client’s sole income, then you keep the payroll and record the amounts taken from the company as non taxable wages ( there will be a function for this on your payroll) and still do the RTI submissions... the advice is to do the withdrawal as non taxable salary rather than non taxable dividends as if you have say a wife as a shareholder the ‘worker’ dividends will be tax free but the wife’s will not so you will effectively be taxed twice... I hope this helps...

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Replying to mikeyban:
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By Hugo Fair
04th May 2021 18:30

As I said previously, we (any responders) are having to make inter-locking assumptions (some possibly subconsciously) ... so, although there's nothing wrong with the process you've outlined, it's by no means the only valid way to proceed.

In most cases the deemed employer will have paid the net pay to the IR35 company (not the individual) ... and, as per your suggestion, IF the individual wants to do so he/she can pay themselves a salary via PAYE operated by the IR35 company (and can 'set-off' the tax/nics already deducted from those PAYE calcs).
But if the gross salary used at this point is the same as that used by the deemed employer, then all of it will have been used either as deductions (taken by the deemed employer) or as net pay (taken by the individual) ... so there's no turnover left from which to pay any IR35 company operating expenses (like your fees)!

Hence the set of example assumptions I mentioned and the couple of questions that I posed. This is not a simple situation with a single categoric answer ... about the only certainty is that it would very unwise to "just close the payroll scheme"!

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Replying to Hugo Fair:
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By Tax Dragon
04th May 2021 20:29

Hugo Fair wrote:

As I said previously, we (any responders) are having to make inter-locking assumptions...

For once it's only appropriate, given the question was based on an assumption...

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