My first contractor client and the new IR35 rules. Help.

browny76 · June 2017

Hi,
The first of my limited company contractor clients has been notified that his next contract (public sector) falls within IR35, and he's unwilling to challenge the decision.
His client has increased the contract value to take into account the PAYE deductions they now have to withhold at source, since the April 2017 changes.

I have a couple of questions off of the back of this occurrence for anyone else that is going through the same situation.
1, The money that now lands in the business account as sales income, I assume I treat it as normal sales income Of course once journals have been passed to adjust for the deductions at source (cr sales, dr wages and salaries) to account for invoice value less deductions.
2, I assume I can continue to run payroll as normal (low salary utilising his tax free income allowance).
3, re question 2, I was concerned that, having been told his contract is within IR35, all income from his contract (after deductions) would have to be treated as PAYE income as per the old IR35 legislation. As the onus is now on the end user to deduct and hand over the IR35 deducted PAYE, I hope I have read the new guidelines correctly.

Apologies, but sometimes it is useful to bounce off others. If there is anything substantial I am missing please share.
Thank you.
Mark

reader · June 2017

1. Yes, the sales invoice less the tax is accounted for as sales. How else were you going to account for a sales invoice?

2. The agency/public sector has already run payroll and paid taxes so the contractor just needs to be themselves. Why would you run a low salary if payroll has already been run by the agency/public sector body and taxes paid?

3. The money only has to be taxed once by the agency/public sector. It doesn't/shouldn't be taxed again through PAYE by your client. Why are you concerned (the money for obvious reasons only gets taxed once)? Don't muddle the old rules and new rules together- you will only confuse yourself and your client.

Casu · June 2017

Mark, maybe pass this one on to someone who has dealt with such, rather than end up with a claim on your PII. Or be supervised by a qualified member whilst you do the work? Just a thought.

browny76 · June 2017

Thanks for your responses, I really just wanted to qualify accounting for the deductions, being made by the intermediary at source, within the books of my client (the Ltd Company contractor) from other AAT members that would have had to, at some stage, learn this for themselves also. Apologies if the original post was a bit vague on that.
After the intermediary has made the deductions and paid the remaining into the business account, its the side issues such as my clients Ltd Company payroll etc I needed to tidy up (is it better to consider closing it down etc), as he has been operating with his partner on the payroll for nearly 10 year)
I have recently set up on my own and need to get to grips with the new legislation rather than side step the issue and hand them over. I need to be up to speed on this, and I realise I'm playing catch up, and have struggled to locate people to bounce off for such subjects, hence why I ended up on the AAT forum.
I have since located lots of information on HMRCs site with regards to the changes as of 6th April, but again working alone doesn't bring the benefits of working in an office environment, and having colleagues to bounce off.
Again, thank you for taking the time to respond.

My first contractor client and the new IR35 rules. Help.

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