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 company can make provision in an accounting period for payment of salary in respect of activity within that accounting period. A deduction may be allowed in working out the profits chargeable to corporation tax for that period, as long as the payment is made within nine months of the end of the accounting period. We have been asked whether a similar provision could be made for the IR35 deemed payment due under this legislation.
The deemed payment is a balancing item to make up any shortfall in salary paid during the tax year – it is not an actual payment. Personal Service Companies can make provision for actual salary payments made within nine months of the end of the accounting period, however the IR35 deemed payment can only be treated as a deduction in the corporation tax computation for the accounting period in which it is deemed to be paid.
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