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Can company directors take net payment equally under an IR35 contract, without incurring further charge to income tax/NIC?

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  • Publish date: 01 June 2017
  • Archived on: 01 June 2018

Q: A husband and wife are directors and equal shareholders of a limited company, both are Locum GPs with the husband providing his services to a public sector client via a contract with the limited company. That contract is within IR35 and PAYE/NIC deductions applied. Can the two directors take the net payment made by the public sector client out of the company equally between them without further charge to Income Tax/NIC?

A: Salary or dividends matched to the net payment made by the public sector client can be taken from the limited company without further charge to income tax/NIC however:-

Finance Act 2017, Schedule 1(d) Paragraph 61W (prevention of double charge to tax) stipulates that the underlying chain payment can reasonably be taken to be for the same services of the payee to that public authority, therefore payments taken out of the limited company without further charge can only be matched to the husband who provided the service to the public sector. Any salary/dividend taken by the wife will be subject to income tax/NIC.