IR35 for limited companies

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.