Create a new IR35 nominal code
We recommend you create a new nominal code for IR35 deductions within the Current Liabilities area of your chart of accounts. You can check your chart of accounts categories in Nominal codes, Chart of accounts.
- Click Nominal codes then click New.
- Enter the new nominal code details as follows:
| N/C | Enter the number for the nominal code you want to create, for example, 2103. |
|---|
| Name | Enter the name for the new nominal code, for example IR35 deductions. |
|---|
- Click Save then click Close.
If you use nominal link
If you plan to manage your IR35 deductions within Sage 50 Payroll and you normally post your salary journals using the nominal link, there are some nominal link changes and additional postings you must make in Sage 50 Accounts to account for the IR35 deduction.
- To ensure your nominal link posting are correct, you must adjust your nominal link settings to account for the IR35 element.
- Once you've processed your payroll, run the nominal link as normal. Provided you've carried out the nominal link changes in step 1, this will post a debit amount to the IR35 deductions nominal code.
- In Sage 50 Accounts, post the invoice from your contractor as normal.
- In Sage 50 Accounts, post a credit note to the IR35 deductions nominal code. This reduces the amount due to the contractor and posts a credit to clear the IR35 deductions nominal code. For example:
| Type | A/C | Date | N/C | Details | Net | T/C | VAT |
|---|
| Purchase invoice (PI) | S001 | Invoice date | 5000 | Invoice | 1000.00 | T1 | 200.00 |
| Purchase credit (PC) | S001 | Same date as nominal link postings. | 2103 | IR35 deductions | 300.00 | T9 | 0.00 |
- When you pay the invoice, you can allocate the credit note and pay the difference to your contractor.
If you post manual salary journals
If you plan to manage your IR35 deductions as part of your payroll and you normally post manual salary journals in Sage 50 Accounts, for any deemed employees you must post the following four journals to account for IR35 deductions:
| N/C | Name | Debit | Credit |
|---|
| 7006 | Employers NI - The total employer NI contribution under IR35. | Debit |
|
| 2210 | PAYE - The total PAYE deducted under IR35. |
| Credit |
| 2211 | National Insurance - The total employer and employee NI contribution under IR35. |
| Credit |
| 2103 | IR35 deduction - The total amount withheld under IR35. | Debit |
|
For deemed employees no other journals are required, for example, for gross pay or net pay.
You should also post the invoice from your contractor as normal, plus a credit note to reduce the amount due by the IR35 deduction you've made. For example,
| Type | A/C | Date | N/C | Details | Net | T/C | VAT |
|---|
| Purchase invoice (PI) | S001 | Invoice date | 5000 | Invoice | 1000.00 | T1 | 200.00 |
| Purchase credit (PC) | S001 | Same date as salary journals. | 2103 | IR35 deductions | 300.00 | T9 | 0.00 |
When you pay the invoice, you can allocate the credit note and pay the difference to your contractor.
Manage deductions outside of your payroll
If you process IR35 deductions separately from your payroll, you should post the invoice from your contractor as normal, plus a credit note to reduce the amount due by the IR35 deduction.
| Type | A/C | Date | N/C | Details | Net | T/C | VAT |
|---|
| Purchase invoice (PI) | S001 | Invoice date | 5000 | Invoice | 1000.00 | T1 | 200.00 |
| Purchase credit (PC) | S001 | Same date as salary journals. | 2103 | IR35 deductions | 300.00 | T9 | 0.00 |
When you pay the invoice, you can allocate the credit note and pay the difference to your contractor.
When you pay the deduction to HMRC, post the bank payment to the IR35 nominal code to clear the liability.
If the IR35 deduction is to be offset rather than paid directly to HMRC, you can post further journals to move the balance as required.
[BCB:90:CIS - Sales:ECB]