IR35 Tax Calculation and Analysis Assignment for Finance Students

This assignment provides a detailed calculation of IR35 tax implications for a personal service company. It includes the calculation of deemed employment income, considering factors like the standard deduction, actual salary, and National Insurance contributions. The assignment then calculates the employment income and income tax payable, along with the employer's National Insurance contributions. Finally, it calculates the corporation tax payable by the company, considering the total revenue, employment income, and National Insurance paid. The calculations are based on the UK tax system, providing a comprehensive analysis of the financial impact of IR35 regulations, with references to relevant online resources for tax calculations and guidance.

1. Answer
Calculation showing Deemed Employment Income
Particular Amount
Amount to be received by the Personal Service
company from Contact
70000
Less : 5% standard Deduction for Expense
(3500)
Less: Actual Salary paid by company
(25000)
Less : NIC already paid by company
(2330)
Deemed Employment Income
39170
1.
Calculation of Employment Income and Income tax
Actual Salary Paid (A) 25000
Deemed Employment (b) 39170
__________
Total Salary (A+B) 64170 (employment income)
Tax 11001 to 43000@20% 6400
Tax 43001 to 64170@40% 8467
___________________
Total Tax Payable 14867 Pound (income tax)
Employers income for NIC to be Assessed for 2016-2017 for Deemed Salary of - 39170 Pound
Rate in force for NIC - 13.8 %
NIC Payable = 39170*13.8% = 5405 GBP

2.
Calculate the corporation tax payable by ABC Ltd in year ending 31 March 2017, assuming
IR35 applies.
Total Revenue from Contract 70000
LessL Total employment income 61170
Less: NIC Paid by company 2330
: ____________
Net income for Personal Service Company 6500
Tax rate @ 20% 1300
Calculate the corporation tax payable 1300 Pound

Reference
Uktaxcalculators.co.uk , 2016, Calculate Corporate tax ,[online], Available at
http://www.uktaxcalculators.co.uk/tax-rates/2016-2017/ ,[reviewed on 17 January 2017]
tolley.co.uk/, 2014,Calculatign deemed Employment Income ,[online], Available at :
https://www.tolley.co.uk/__data/assets/file/0019/27082/calculating_the_deemed_employment_p
ayment_guidance_note.pdf [ Accessed on 17 January 2017]