IR35 calc - which months' E'ees NICs and PAYE to include?

IR35 calc - which months' E'ees NICs and PAYE...

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HI all, my first post on the forum so go easy! First I'd like to thank everyone on here. I set up my limited company just over a year ago and so many threads on here have been helpful to me. I should also say that I do not use them to replace paying for professional advice! Unfortunately I have had extremely bad experiences with a firm of (what I now realise to be) 'book-keeper accountants' who I will be binning ASAP after tax year end, and going to an actual accountant who knows what they're doing. In the meantime I'm having to cross-check every single thing my accountants are doing (I'm not joking - there have been some very basic errors made - last year the got my NICs wrong several times due to messing up the Director's NICs calculation, and now this year they're repeatedly messing up my IR35 calculation...)

Anyway, to get to the point... I'm operating inside IR35 out of choice. I do understand the issues (after a lot of research). My contracts are broadly friendly but I do  not believe working practices are, hence this decision. I just don't want to sail close to the wind. Anyway, my question is simple. I do understand the way the IR35 deemed employment calculation works which is why I've been taking a full salary, targeting a zero position and no deemed payment. The question is about Employee's NICs an PAYE tax. I pay myself on the 25th of the month so the net salary element leaves the company on that day. But the Employees NICs and PAYE tax aren't of course due to be paid to HMRC until the following month. In the case of my March salary, this means those payments don't leave the company until after 6 April. Since the IR35 deemed calculation is done on a 'received' basis I assumed that this would mean the element of March salary attributable to Employees NICs and PAYE isn't taken into account in the IR35 calculation unless I make the payment to HMRC early. Therefore I've been planning to do just that - pay HMRC early.

However I'm interested in the principle, and I can seem to find anything on HMRC's website, or on here, that will tell me whether in fact it can be included in the IR35 calculation even if I pay it later in April in the usual way.

All help gratefully received!

Replies (4)

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By stephenkendrew
31st Mar 2015 09:18

You are overthinking this

Pay a salary in March. (Shouldn't you have already done the RTI submission if you pay yourself on the 25th?)

Pay the tax and NI by 19 April.

PS - you mention employees NIC, but don't mention employers NIC. You are paying this aswell aren't you?

 

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By Glencky
31st Mar 2015 09:52

Hi, and thanks for the reply. Yes, I am paying E'ers NICs too, not mentioning them was an oversight in my post! The same point applies to those too of course.On RTI, I *usually* pay myse on 25th - trying to sort this out has delayed.

I understand your answer but not the answer to my question (as corrected slightly by you pointing out I should have included E'ers NICs in the question too) - the NICs and PAYE in respect of March salary, are they included in the IR35 calculation as 'paid' even though they won't physicaly be paid to HMRC until April? (I may well be being obtuse...)

 

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By Euan MacLennan
31st Mar 2015 10:09

Er's NIC

When you do the IR35 calculation for March by deducting 5% of the company's income and your personal expenses, you arrive at a balance which covers your gross salary for March and the Er's NIC payable on that gross salary for March.

The PAYE due for March, comprising income tax, Er's NIC and EE's NIC, is not actually due until 19th/22nd April, but it still relates to March.

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By Glencky
31st Mar 2015 14:25

Hi Euan,and thanks for this further clarification. This is exactly what I am now doing.

The reason I was confused was because the calculation is internally inconsistent in its methodology.  On the income side, you only count income actually received, with no accrual for invoices that have not yet been paid. But on the other side, although the March PAYE & NICs have not actually been physically paid as at 5 April, you do include them. This, as I say, feels inconsistent.

However I've been thinking about this more and researching more and per a comment somebody no doubt better qualified than me made on a different IR35 related thread on here, the whole thing is a sticking plaster really and on that basis I should not perhaps expect consistency! On the income side, the rationale is presumably even HMRC don't think it's reasonable to expect o treat as employment income paid to me, invoices as yet unpaid that may lead to bad debts. Yet on the other hand, again presumably even HMRC don't want to end up double-taxing anyone...

So I guess viewed from that point of view it makes sense even though it appears inconsistent.

Oh well, hopefully this thread may help somebody else in the future too!

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