Contractor accounting
Your client has determined the engagement inside IR35, so the fee-payer now runs PAYE and employee National Insurance on the money before it reaches your company, and pays employer National Insurance at 15% on top. The income arrives already taxed. Three routes are open and none is automatically right: keep the company trading for outside work, hold it dormant while you sit inside, or close it and take the reserves out. Which one wins turns on your reserves, what you intend to contract on next, and how long the engagement runs. The determination itself is also worth testing before you commit.
The specific challenges
A client who applies "inside" across a whole category of roles, without looking at the engagement itself, has probably failed the reasonable care test. Where that happens the Status Determination Statement is invalid and the client itself becomes the deemed employer for the PAYE and NIC. The same follows where the statement was never passed down the chain. What a valid statement looks like.
Medium and large clients sit under Chapter 10: the fee-payer operates PAYE and there is no 5% administrative expenses allowance. Where the client is small, or wholly overseas with no UK connection, responsibility stays with your own company under Chapter 8 and the 5% deduction survives. Two contractors on the same rate can keep different amounts. How the deemed payment works.
Home to client travel is generally not deductible on an inside engagement: each engagement counts as a separate employment, so that site is a permanent workplace for it. Subsistence on the journey goes with it. Outside engagements keep temporary workplace relief, subject to the 24 month and 40% expectation rule.
A dormant company costs almost nothing to hold and keeps the door open to outside work. Closing is the bigger step: a Members' Voluntary Liquidation can take reserves out as capital, potentially within Business Asset Disposal Relief at 18% from 6 April 2026, but the winding-up TAAR can recharacterise that as an income dividend where you carry on a same or similar trade within two years.
An umbrella becomes your legal employer and takes the admin away, but employer NIC at 15%, the Apprenticeship Levy and the umbrella's margin all come out of the assignment rate, so it is not comparable with a limited company day rate. From 6 April 2026 the agency contracting with the end client is jointly and severally liable for PAYE the umbrella fails to remit.
How we help
A specialist reads the statement against how the engagement actually runs: control, substitution, mutuality, and whether the reasons given are specific to you or lifted across a role type. Where it looks like a blanket call, the written representations are drafted and the 45 day window tracked. Challenging a determination.
The four routes are costed on your own figures: reserves in the company, the tax still to come on extracting them, the cost of holding a dormant company, and what an umbrella leaves after employer NIC, the levy and margin. Start with the inside IR35 take-home calculator.
Trading on, dormant or winding down, the filings continue: accounts, the CT600, confirmation statements, PAYE and VAT deregistration, and your self assessment. Inside-IR35 income is tracked so it is not taxed twice when you draw it.
If closing is the answer, the reserve position is set out, any director's loan cleared before the section 455 charge falls due, and the four TAAR conditions tested against what you plan next. The two year same or similar trade condition is the trap for anyone who expects to keep contracting. Closing a contractor company.
Many contractors hold one inside and one outside engagement in the same year. That mix moves the salary and dividend position, the expenses still available and the room left for an employer pension contribution, the largest lever open to you.
Free call
Book a free call. We will talk through your IR35 position, your structure and whether there is anything worth changing. No hard sell, no obligation.
Contractor work only, not a general practice sideline, so a contractor specialist reviews your enquiry. If you would rather write to us first, use the contact form.