As you will know, for some time it has been the case that if you are doing work for somebody through your Limited Company, and the terms and conditions of the work are such that it would be equivalent to employment, H M Revenue and Customs will not allow you to pay yourself dividends through your Company. Instead, all money that you take out of your Company would have to be accounted for as salary. You would also be very greatly restricted in the scope of expenses that you would be able to claim as a deduction from Company profit.
At the present time, if you are working in the Private Sector, it is up to you whether you fall within the IR35 Regulations or not, but if you are working in the Public Sector such as the BBC or the Local Authority, then it is up to the Organisation paying you to decide. From 6th April 2020, it will be up to the Organisation paying you to decide if you fall within the IR35 Regulations, whether you are working in the Public Sector or in the Private Sector. We have already noticed that some of our clients have had to go onto PAYE with people for whom they have been contracting.
We are advising all clients with limited companies that, if they have not done so already, they should refer any proposed draft Contract under which they may be working to ourselves for consideration. It may be possible to renegotiate the Contract such that it no longer becomes equivalent to employment.
Other options may be open to you including renegotiating the rate for the job if you have to be engaged under PAYE.
This Note is for general guidance only and advice should be sought from us relating to your specific situation if there are any questions of doubt.
Tape20february2020-sfh
– By Stephen Handley, FCCA