IR35 for limited companies

8 November 2022
2 minutes
Share

Operating through your own limited company under IR35 — status determinations, the deemed payment, and what the client now decides.

What changed for limited companies

Since the off-payroll reforms, the end client decides status for engagements with medium and large businesses, and the fee-payer operates PAYE where the answer is inside. The company’s director no longer makes that call for those engagements.

Where the client is a small company, the original IR35 rules still apply and the determination remains the intermediary’s own responsibility.

What an inside determination means in practice

PAYE and National Insurance are deducted before the company is paid.
The money reaching the company has already been taxed, and paying it out again as salary would tax it twice.
The company still files accounts and returns; it simply has less to distribute.
Expenses that would ordinarily be claimed are largely unavailable for that engagement.

The deemed payment

Where the older rules apply and an engagement is inside, the company calculates a deemed employment payment at the year end and accounts for PAYE on it. It is a calculation, not an invoice, and it has its own deadline.

Deciding whether to keep the company

A company that only ever holds inside-IR35 engagements is administrative cost without the corresponding benefit. Where the mix is genuinely mixed, it usually still earns its keep.

Book a Free Consultation!

Daniel Okafor

leads contractor payroll operations at Promultis

Daniel Okafor runs the payroll operation that pays several thousand contractors every week, and he built most of it. He joined Promultis from a large umbrella provider, where he was responsible for RTI submissions and auto-enrolment across a book of forty agencies. Daniel works closely with recruitment partners on onboarding, same-day payments and the reporting hirers need for their own audits. He writes about the practical side of contractor engagement — the parts that decide whether a worker stays past their first assignment.