IR35: Frequently Asked Questions - Computation

Each link below will take you to a question on a Computation topic.

What tax and NICs liabilities will arise?
What about corporation tax liability?
If a client makes a single payment in respect of two or more workers, how will the income be split between them?
What happens if I can't calculate the tax and NICs due on 5 April in time to pay it to HMRC by the normal date of 19 April?
Does the Personal Service Company have to pay a salary on 5 April?
Can any part of an IR35 deemed payment, if made within nine months of the end of a company's accounting period, be counted as a deduction in the calculation of the company's corporation tax liability for that accounting period?
A Personal Service Company, which only has income from relevant engagements, has two employees A - the contractor who receives a salary of £20k, and B the administrative assistant (who is a relative), who receives a salary of £5k.
- Can A deduct B's income in calculating the tax and NICs he pays on earnings from contracts caught by IR35? - Can you also confirm that B's NI contribution records will be based on what has actually been paid by B while A's will be based on the total payments made less those attributable to B?
Mr and Mrs B work as members of a partnership, of which they are the two partners. They each carry out relevant engagements during the year. 50% of the partnership income arises from such engagements and 50% from other sources. Profits are split equally. Each is provided with a car, both of which are held as partnership assets. The private use proportion of the motoring expenses is 30%. How will their income be affected by the IR35 rules?
Should the deemed payment be deducted in the Corporation Tax computation or in the accounts?
How do I pay the IR35 deemed payment at the end of the year? [Added 14/04/00]
What is the position where, in addition to making payments to the limited company/agency, a client makes payments to or in respect of the consultant direct? For example where the client reimburses travelling expenses to the consultant direct? Could the client be held liable for PAYE? [Added 14/04/00]
How do I record the IR35 deemed payment on Form P45 and Form P60? When is the IR35 deemed payment recorded on such forms? [Added 07/06/00]
Will I be taxed twice if my Personal Service Company does not pay me a salary until after the end of the tax year? [Added 19/10/00]
What if I stop working through my Personal Service Company or partnership before the end of the year (an in-year event)? [Added 19/10/00]
Is the PSC acting illegally if it does not pay the employee 95% of its income in salary, openly inviting the employee potential recourse to sue the company? If the difference in the deemed emolument and actual salary is withheld by the company is such a sum considered as profit thus liable to Corporation Tax and effectively "double taxation"? [Added 19/10/00]
A "Contract of Employment" may stipulate designated salary (which may even have been voted upon by the company's directors). How does this dovetail withHMRC's decree of 95% deemed emoluments attributable to the employee as employment income? [Added 19/10/00]
A worker engaged under IR35 terms and charged out at £100,000 but on an actual salary of £25,000 per year will have a deemed salary of £95,000. This fact may not have been declared to the worker and indeed the charge out may be information which the company may wish to treat as "commercial in confidence". If the employer went into receivership the IR35able worker would have an actual salary of £25,000 and a personal liability for deemed tax and NIC far in excess of this salary - how could this be paid? [Added 19/10/00]
Workers employed by intermediaries may generate fees after leaving the employment of the intermediary for example in royalties or with ongoing service/maintenance contracts. How is this income to be treated under IR35? [Added 19/10/00]
On what basis is the P45 completed where a worker, affected by IR35, leaves employment of the intermediary? [Added 19/10/00]
The IR35 deemed payment may result in the worker paying higher rate tax. Higher rate taxation would preclude the worker from claiming HMRC initiatives such as Family Tax Credit or Children's Tax Credit. The actual salary paid to the worker may involve a considerable shortfall to the deemed emolument, therefore the tax/NIC deductions will not be commensurate with actual income and the worker may even more so require application of the new Tax Credits! [Added 19/10/00]
How would the company's existing computerised payroll and accounting systems operate under IR35? (Page/Sage/Quicken/Quickbooks have no plans at present to update software to cope with IR35.) Accounting systems cannot process deemed emoluments, they always show the employee being owed the remainder of the actual salary. How do you allow for this in the Profit and Loss account, balance sheet figures and cash flow projections? [Added 19/10/00]
How does the company produce a payslip that has deemed tax/NIC deducted when the actual salary paid to the employee is less? Should the entry on the payslip be actual salary or deemed emoluments with deemed tax/NIC deductions? [Added 19/10/00]
How should "end of year" returns (e.g. P14, P60 and P35) be completed? Should the P60 show deemed emoluments or actual salary? (The P60 may enable the employee to obtain a loan/mortgage at 3 x "salary", when of course this is actually just "deemed" and not deemed "actual"!) . [Added 19/10/00]
How does the employee complete the HMRC Self-Assessment Return based upon deemed emoluments rather than actual salary/income?[Added 19/10/00]
What key dates do I need to be aware of over the coming months? [Added 17/02/01]
When calculating the IR35 deemed payment, what do I do about SSP and SMP? [Added 17/09/01]
HMRC’s IR35 Penalty Statement says that no penalties will be sought for an incorrect return (P35) for any deemed payment for 2000/2001, as long as certain conditions are met. Has this arrangement now been withdrawn?[Added 06/02/02]

In this section