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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4087
Experience:  FCCA FCMA CGMA ACIS
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I am a director of Company A and am also a Director of Company

Customer Question

I am a director of Company A and am also a Director of Company B. Company A charges Company B for web development services. Whereas, previously Company A had a few clients that it did work for, now it's only client is Company B. My income comes from Company A only. There is no contract in place between the companies. Does Company A activities fall under IR35?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
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Customer: replied 1 year ago.
Company A also owns the intellectual property rights to a product sold by Company B. So, if Company A instead billed Company B for a licence to sell the product, would this get around any IR35 liability?
Customer: replied 1 year ago.
Tel. 07949 238384
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. As a Director any remuneration you receive from either company must be done through PAYE unless your monthly income is below the NI level (currently GBP 486 a month) in which case there is no requirement to operate RTI [monthly pay reporting], just an end of the tax year summary. Inter company billing is nothing to do with IR35 and may be operated with impunity. Don't forget VAT if company turnovers approach or reach the VAT Threshold, currently 82K. I do hope that I have shed some light on the situation. Phone calls are not that convenient as I am responding to your question from a time zone 7 hours ahead of GMT so it would be a tad pricey!
Customer: replied 1 year ago.
I currently operate PAYE via Company A, paying NIC and staynign under my tax allowance to issue payment dividends. As far as I can tell (and have been advised elsewhere) inter-company billing does fall under IR35 (https://www.gov.uk/guidance/ir35-find-out-if-it-applies), however, I can only relate this to a typical contractor situation whereby the contractor isn't an officer of the client company. In my case, I am an officer of both the client ad the intermediary company, but I can't see how the way I am paying myself would be any different than if Company B were paying my H.I. and dividends itself?
Expert:  bigduckontax replied 1 year ago.
I do not agree that inter company billing falls under IR35. IR35 applies to remuneration of individuals. Companies are separate legal entities from their shareholders and even their directors. IR35 is an anti avoidance measure which requires all remuneration to be paid under PAYE where it is made by companies to connected individuals.
Customer: replied 1 year ago.
So, does my situation not fall inside IR35, whereby my remuneration is via tax-avoidable PAYE and dividends via the intermediary?
Expert:  bigduckontax replied 1 year ago.
IR35 will apply when either company actually pays remuneration direct to an employee. Inter company machinations do not bring IR35 into play until moneys go outside the corporate envelope to an individual.
Customer: replied 1 year ago.
Right, so when I pay myself the basic salary + dividends via Company A, then does this fall within IR35?
Expert:  bigduckontax replied 1 year ago.
The salary must be paid under PAYE arrangements, but if it does not exceed GBP 486 per month then RTI doe not have to be operated and reporting can be made at the year end.
Dividends are out with IR35, but remember that dividends do not count against the company's Corporation Tex (CT) position and there must be free funds available for their distribution.