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Set up IR35 in QuickBooks Advanced Payroll

by Intuit•1• Updated 1 month ago

IR35, also called off-payroll working, is a set of rules that determine how contractors are paid. These rules make sure contractors are taxed correctly and fairly. Learn how to set up IR35 in QuickBooks Online Advanced Payroll and add a deemed employee.

For more information, see HMRC IR35 guidance.


Turn on IR35 in QuickBooks

  1. Go to Payroll.
  2. Select Payroll Settings.
  3. Under Business settings, select HMRC Settings.
  4. Find IR35 contractors and select Yes.
  5. Select Save.

Add a deemed employee

Before adding a deemed employee, make sure they meet IR35 criteria. Check the employment contract to see if it falls under IR35 rules.

  1. Check the contract to see if the employee is a deemed employee under IR35.
  2. Add them to payroll like any other employee.
  3. In Tax and NI details, select IR35 legislation applies.
  4. The employee will now be marked as an IR35 contractor.
  5. Include them in a pay run to calculate tax and NICs.
  • IR35 applies on a contract basis. Some contracts with the same worker may fall under IR35, others may not.
  • Contractors classed as deemed employees are subject to income tax and National Insurance contributions on work-related invoices.
  • Deemed employees do not receive holiday, sickness, or parental pay, and student/post-grad loan deductions should not be made.
  • Employers do not need to offer pension scheme membership (including auto-enrolment), but must ensure adequate retirement provision if using an intermediary.
  • Employer NI is not included in employment allowance calculations.
  • Apprenticeship levy should still be applied to deemed employees.
  • When employment ends, deemed employees should receive a P45.
  • Deemed employees can also receive a P60.
  • The payment date determines the tax period.
  • Set up a separate location for deemed employees to report specifically on them.
  • Consider a separate pay schedule for deemed employees to keep pay runs separate from other employees.
  • Keep a copy of the CEST (Check Employment Status for Tax) result as a PDF in the employee’s documents section.
QuickBooks Online Payroll Advanced