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Using Ltd company as intermediary

My client is caiught under IR 35 from April 2020 and wants to use his company as an intermediary

Didn't find your answer?

When putting his sales figure in his ltd company accounts will this be the net figure he has received with tax and Ni deducted ?

Or will it include tax and Ni?

Thanks

 

 

 

Replies (13)

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By pauld
11th Feb 2020 15:40

What is he using now as an intermediary if not his limited company?

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Replying to pauld:
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By Paul11
11th Feb 2020 16:00

He is using his ltd company but not under IR35 rules up until April. the sales are going through the Ltd company without tax or Ni being deducted from the source.

and Salary and dividend to extract the money. Where he does pay tax/ni

From April 2020 his employers will deduct the ni and tax from the payment he gets.

From April I want to know is will I include the payment he receives with the tax and ni in the company sales or do I put the sales in the company accounts without the tax and Ni being deducted.

And then either run a payroll with the net amount he has received with no tax/ni deducted or the gross amount with tax and Ni on the sales and run the payroll with the tax and ni included but not deducted.

Thanks

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Replying to Paul11:
By ireallyshouldknowthisbut
11th Feb 2020 16:57

I would re-read the bit here you wrote:

"his employers will deduct the ni and tax from the payment he gets"

Assuming this is correct you have answered your own question about your presumably soon to be ex-client.

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By Matrix
11th Feb 2020 20:34

This may help. https://www.accountingweb.co.uk/any-answers/off-payroll-worked-example

I assume you prepared the previous accounts as outside IR35?

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Replying to Matrix:
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By Paul11
12th Feb 2020 00:13

Hi Matrix it says i can use either the net amount or gross amount. When the tax and employees tax is deducted you can then put a salary through for either the net or gross amount. What it does not mention is employers nic. Surely you would have to put the gross amount in the paye software to calculate the correct employers nic . or dont you have to pay employers nic under off payroll rules?

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By SXGuy
12th Feb 2020 07:17

Either use the net income as turnover or the gross and net it off with the tax and ni deducted.

I dunno why you keep going on about running payroll, what do you think the contractor has done?
And why would you include the contractors employers NI in your deductions, it isn't your clients is it?

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Replying to Matrix:
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By Paul11
12th Feb 2020 00:16

Yes the previous accounts were outside ir35.

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By jcace
12th Feb 2020 09:32

I presume your client is providing services to a large or medium-sized organisation. From April 2020 the responsibility for determining whether such contracts fall within IR35 shifts to that organisation and if within IR35, the fe-payer must deduct PAYE & NIC and pay employer's NIC. This brings these organisations in line with the public sector and you will find some helpful guidance (and other links) explaining the processes involved at https://www.gov.uk/guidance/off-payroll-working-in-the-public-sector-per...

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Replying to jcace:
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By Paul11
12th Feb 2020 12:33

Hi Jcace

I can see that the fee payer will deduct the tax and national insurance and employers NIC from April 2020.

my client`s Ltd company will get the net amount.

According to your link when my clients Ltd company gets paid it will have already had the tax and Ni and Employers NIc deducted from April 2020 so then I would run a payroll through the Ltd company for the Net amount and not deduct tax or national insurance or employees Nic as its already deducted. .

I wonder what will happen if the fee payer has deducted the wrong amount of tax?

Would the p60 from the fee payer be in the clients name so he could put it on his tax return and claim a tax repayment? even though it was paid to the Ltd company.

Thanks

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Replying to Paul11:
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By jcace
12th Feb 2020 12:45

Paul11 wrote:

Hi Jcace

I can see that the fee payer will deduct the tax and national insurance and employers NIC from April 2020.

my client`s Ltd company will get the net amount.

According to your link when my clients Ltd company gets paid it will have already had the tax and Ni and Employers NIc deducted from April 2020 so then I would run a payroll through the Ltd company for the Net amount and not deduct tax or national insurance or employees Nic as its already deducted. .

I wonder what will happen if the fee payer has deducted the wrong amount of tax?

Would the p60 from the fee payer be in the clients name so he could put it on his tax return and claim a tax repayment? even though it was paid to the Ltd company.

Thanks


The fee payer will be treated as though they are the employer of your (individual worker) client. They will be responsible for deducting PAYE & NIC in the same way that any other employer is.
They will also issue a P60 (or P45) in the name of the individual.
The intermediary company can run the net amounts through their own payroll as non-taxable, non-NICable payments and report using an FPS.
There will be some accounting adjustments required in order to account for the tax and NI deducted and to avoid the company paying tax thereon.
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Replying to jcace:
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By Paul11
14th Feb 2020 12:48

I think I can understand what your saying.

I use 12cloud payroll the free one on the HMRC website.

Any Idea how I could set it so it does not deduct tax and national insurance and I can submit his salary via FPS without the deductions?

Thanks.

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By The Dullard
14th Feb 2020 12:58

Maybe your client should look for somebody that knows their @r5e from their elbow now?

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Replying to The Dullard:
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By Paul11
14th Feb 2020 16:09

Its Ok I have figures it out.

Thanks for all your help.

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