What IR35 means for your company
IR35 asks a simple question with a complicated answer. If your company did not exist, would you be an employee of the end client? If the answer is yes, the contract is inside IR35 and the income is taxed much like a salary, with income tax and National Insurance on most of it.
Who decides depends on the client. Public sector bodies have decided the status of each contract since 6/4/2017, and medium and large private sector clients have done so since 6/4/2021. They must give you a Status Determination Statement explaining the reasons. Where the client is small, your own company still makes the decision and carries the risk if HMRC disagrees.
IR35 contract reviews
When a new contract comes in, we look at both the written terms and how the work will really be done. HMRC and the courts look at the reality, not just the paperwork. A contract that gives you a right to send a substitute means little if the client would never accept one.
The main points we look at are whether you can send someone else in your place, how much control the client has over how, when and where you work, and whether the client must offer work and you must accept it. We also look at things like whether you are treated like staff, use your own equipment, and carry any financial risk.
Where a client has issued a determination you think is wrong, we can help you set out your reasons. The client must have a process to consider disagreements and respond within 45 days.
- Right of substitution in the contract and in practice
- Control over how and where the work is done
- Mutual obligations between you and the client
- Financial risk, equipment and being in business on your own account
What is included
- Annual accounts for your limited company
- Corporation tax return and payment reminders
- IR35 reviews of new contracts and working practices
- Help challenging a Status Determination Statement
- Director payroll and HMRC submissions
- Dividend paperwork and board minutes
- Deemed payment calculations for inside contracts
- Director's loan account tracking
- Personal self assessment return for the director
Accounts and corporation tax for your company
Your company has to file annual accounts with Companies House within 9 months of its year end and a corporation tax return within 12 months. Corporation tax is paid 9 months and 1 day after the year end. Most contractor companies have simple books, but the details still matter.
Expenses are the area where we see the most mistakes. Travel to a temporary workplace can normally be claimed, but where a contract is inside IR35 those travel costs are restricted. Training, professional subscriptions, insurance and accountancy fees are usually allowable. Personal costs run through the company are not, and they can create a tax charge for you as director.
We also keep a careful record of the director's loan account. Money taken out of the company that is not salary, dividends or a repaid expense becomes a loan, and an overdrawn loan at the year end can lead to extra tax for the company.
Payroll and dividends for you as director
Outside IR35, most contractors take a modest salary through payroll and the rest of their pay as dividends, which can only be paid out of profits after corporation tax. The right salary level depends on your own circumstances, such as whether your company has other employees and can claim the Employment Allowance.
We run your monthly or annual payroll through HMRC, prepare dividend paperwork with board minutes and vouchers, and make sure dividends are only declared when there are profits to cover them. We also prepare your personal self assessment return so the whole picture fits together.
When a contract is inside IR35
If a large client says a contract is inside IR35, the fee payer, usually the client or the agency, deducts tax and National Insurance before paying your company. That income is not taxed again, so your company can pass it on to you without more tax, as long as the accounts and payroll record it correctly. We make sure they do, so the same income is not taxed twice.
Where a small client is involved and the contract is inside IR35, the job falls to your company to work out the deemed payment at the end of the tax year and pay the tax through payroll. We prepare that calculation and the payroll submission for you.
Working with contractors in Fulham
Many contractors living in Fulham, Parsons Green and Putney work for banks and consultancies in the City or at offices across West London, often on contracts that change every six or twelve months. Each new contract is a fresh IR35 question, so we keep your file open and review each one as it comes.
Fees are fixed and agreed before any work starts, after a free review of your contracts and your company records. If you are about to start contracting and want to know how it all fits together, our page for contractors explains the setup side.
Who this suits
- IT, finance and engineering contractors with their own company
- Contractors moving between inside and outside IR35 roles
- Directors unsure how much salary and dividend to take
- Contractors working for smaller clients who carry the IR35 decision
- People switching from an umbrella company to their own company
Common questions
Who decides if my contract is inside IR35?
For public sector bodies and medium or large private sector clients, the client decides and must give you a Status Determination Statement. For small private sector clients, your own company decides. Either way, it is worth having the contract reviewed.
Can I disagree with my client's IR35 decision?
Yes. Clients must have a disagreement process and reply within 45 days. A clear written explanation of why the working practices point to outside IR35 gives you the best chance.
Can I claim travel expenses through my limited company?
Travel to a temporary workplace is usually allowable. On contracts inside IR35, travel between home and the client site is restricted. We check each contract so you do not claim costs that HMRC would refuse.
Is the CEST tool enough to prove I am outside IR35?
CEST is HMRC's online status checker. It is a useful starting point, but it relies on the answers you give and does not cover every factor the courts look at. We would not rely on it alone for a contract you are unsure about.
What is a deemed payment?
It is the calculation a contractor company must do when a contract with a small client is inside IR35. It works out how much of the income should be treated as salary, and that amount is taxed through payroll.
Do I need to register for VAT as a contractor?
You must register once your taxable turnover passes £90,000 in a rolling 12 months, and you can choose to register earlier. Many contractors working through a company reach that level within a year. We check which VAT scheme suits you, as the flat rate scheme rarely helps contractors with few costs.
Should I keep my company open between contracts?
Usually yes, if you expect another contract soon. A dormant period has lower costs, but you still need to file accounts and a confirmation statement. We can talk through the options if you are thinking of closing it.