By Jonathan London on 29th March 2017

App Update: IR35-caught in the public sector

If your public sector contract is determined to fall within IR35, then the way that you enter information in the Boox app will change.

Your fee payer, (either the public sector client if you contract directly with them, your agency or a company you and your agency contract with to make the deemed payments), will be responsible for calculating the deemed payment on your invoice income, for paying the PAYE (Pay As You Earn tax) and NIC (National insurance Contribution) liabilities to HMRC and for reporting the deemed payment as salary through RTI (Real Time Information).

Therefore, what you need to do in the Boox app is record the details of the deemed payment that the fee payer provides to you as a manual salary record, and also make sure that all your other business expenses (such as accounting fees or insurances) are recorded.

Please note, even if you are able to report some expenses to the fee payer (eg. use of home office) to obtain tax relief on your deemed payment, you will also need to record these as expenses on the app to obtain corporation tax deductions.

Your pay breakdown will then advise you how much to pay yourself to cover your salary and expenses (assuming the business has sufficient profits to cover them).

Your pay breakdown will not generally include any other salary or dividend recommendations for the public sector invoice income.

To enter your deemed payment information into the app:

Firstly, make sure your customers have been identified on the app as having a contract that falls under public sector IR35 by going into Invoices > Customers > Open Customer Record

Then tick the Customer Settings > Contracts fall under IR35 check box and select the ‘Public Sector’ option from the drop down menu:

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Now you are ready to enter deemed payment details:

Select Pay > New Public Sector Salary

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The expense type will be selected for you, as will the ‘Public Sector Salary’ checkbox. If for any reason, you need to record a manual salary payment that is not related to your public sector contract then de-select this checkbox.

Enter details from the deemed payment advice that your fee payer has provided. These will normally be:

  • The net invoice income (i.e. the invoice amount less any VAT) that the deemed payment has been calculated against. This will make up the gross salary amount that the PAYE and NIC are calculated on
  • The PAYE amount
  • The Employee’s NIC amount

This will populate the ‘Amount’ field which is the net salary that you could theoretically pay yourself from the amount that the fee payer will be paying you, assuming the business has sufficient funds to cover this amount and there were no other business expenses (which is unlikely).

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Select Submit once the details are completed.

If there are insufficient funds in the business to cover the full salary payment then you will see this in the Pay Breakdown, and the difference will be created as a ‘Director’s Current Account’ entry, which is effectively an IOU from the business to you for the amount this is owed, and which will be repaid in future breakdowns as and when sufficient funds become available:

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PLEASE NOTE: It is really important that you enter your deemed payment information into the app BEFORE your pay breakdown is scheduled to run, otherwise it will not be possible to reflect an accurate picture of your current position in the breakdown, and you will not be meeting your responsibilities as company director to maintain accounting records.

If you have any questions, please get in touch and we can arrange for a member of the team to walk you through it.

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Jonathan London Written by Jonathan London

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