IR35: Computation - Question 15

Is the PSC acting illegally if it does not pay the employee that 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"?

No

For all work designated liable under IR35, the PSC Ltd is legally bound to deduct Income Tax and NICs on 95% of the company's income stream generated by that employee if he/she has more than a 5% shareholding in the company. The legislation does not, however, require any amount of salary to be paid to the worker.

The IR35 deemed payment is deductible in the calculation of the company's Corporation Tax liability; therefore there is no double taxation.