IR35 and dividends

Innys

Hi

Does anyone know the answer to this fairly technical question?

I have set up a limited company to provide a consultancy service to a single client. It is a fixed term contract for 5 months and I have been employed to complete a specific task.

I suspect the terms of the arrangement fall under the IR35 rules, though I intend to go to the local tax office and check.

I have been taking money out of the limited company as dividends rather than a salary. Does anyone know when I need to pay the extra Tax and NICs on these dividends?

The HMRC website is next to useless (as usual) in that it states it should be paid in accordance with the normal PAYE and NIC rules. As I have no PAYE arrangements (because no salary is being paid), I don't know if these rules aply.

Thanks very much

I

Pennywise

Innys wrote: »

I suspect the terms of the arrangement fall under the IR35 rules, though I intend to go to the local tax office and check.

Turkeys don't vote for christmas. Do you really think you'll get impartial advice by asking HMRC? Go to a specialist, i.e. an accountant well versed in IR35 or one of the specialist legal firms, such as QDOS, Accountax, Bouer & Cotterill, etc., most of whom do a contract review for under £100.

Tax and NIC on the "deemed" salary (paid under normal PAYE deductions) will be due on 19/5/09 for the 08/9 tax year. Don't know what you mean by the "extra" tax - you pay whatever tax/nic your Payroll program says is due on the deemed salary - it's nothing whatsoever to do with the dividend tax credit. You need to register as an employer and get a PAYE scheme set up if you havn't already done it.

It's not hard to understand why HMRC's website isn't very helpful - they're relying on people voluntarily paying too much tax by not understanding the underlying law. They aren't an advice service - that's what accountants and tax consultants are for. It's the law that matters, not what HMRC would like the law to be. To date, HMRC have lost the majority of IR35 cases and won very few. If you look at what the law actually says and then compare with how HMRC interpret the law - you'll see a massive difference.

Why not have a look on some specialist websites, such as www.contractoruk.com, www.pcg.or.uk or the websites of the firms mentioned above.