CT600 for Contractors: Filing When You're Inside or Outside IR35
As a contractor operating through a Personal Service Company (PSC), your IR35 status fundamentally changes how money flows through your company — and therefore what your CT600 looks like.
Whether you're inside IR35, outside IR35, or dealing with mixed assignments, this guide explains exactly how to file your CT600.
Quick Summary: How IR35 Changes Your CT600
| Scenario | Company Income | Director's Pay | CT600 Complexity |
|---|---|---|---|
| Outside IR35 | Gross contract fees | Salary + dividends (you choose) | Standard |
| Inside IR35 (client determines) | Reduced (tax already deducted) | Mostly salary (deemed payment) | Some adjustments |
| Mixed | Both types | Mixed salary + dividends | Most complex |
Outside IR35: The Standard Contractor CT600
If your contracts are outside IR35, your PSC operates like any other trading company:
How the money flows
- Client pays your PSC the gross contract fee
- Your PSC deducts business expenses
- You take a small salary (usually £12,570 — the personal allowance)
- Company pays corporation tax on profits
- You take remaining profits as dividends
Your CT600 includes
- Box 1 (Trading profits): Gross fees minus allowable expenses minus salary
- Box 145 (Tax chargeable): Corporation tax on the taxable profit
- Standard capital allowances for equipment, software, etc.
- No special IR35 adjustments needed
Example: Outside IR35 contractor
- Annual contract fees: £120,000
- Business expenses: £8,000
- Director's salary: £12,570
- Employer's NI: £0 (below threshold with Employment Allowance)
CT600:
- Trading income: £120,000
- Less expenses: £8,000
- Less salary: £12,570
- Taxable profit: £99,430
- Corporation tax: ~£22,536 (marginal relief applies)
Key expenses to claim
- Professional indemnity insurance
- Accountancy fees
- Travel to client sites (if not a permanent workplace)
- Equipment: laptop, monitors, software (claim capital allowances)
- Training (if relevant to current contracts)
- Home office costs (proportion of utilities, insurance)
- Pension contributions (employer contributions are a deductible expense)
Inside IR35: What Changes
Since April 2021 (for medium/large clients), the client or agency determines your IR35 status and deducts PAYE tax and NI before paying your PSC.
How the money flows
- Client determines you're inside IR35
- Agency deducts PAYE tax + employee NI + employer NI
- Your PSC receives the net amount (much less than gross)
- Employer NI is also deducted from the fee (reducing what reaches your PSC)
- Your PSC pays you a salary from the remaining funds
Impact on your CT600
When inside IR35, your PSC receives significantly less income:
Example: Inside IR35 (£120,000 gross fee)
- Gross fee: £120,000
- Less employer NI (~13.8%): ~£14,400
- Less PAYE tax: ~£27,000
- Less employee NI: ~£5,500
- Amount paid to PSC: ~£73,100
Your CT600:
- Trading income: £73,100 (what PSC actually received)
- Less salary paid to you: ~£70,000
- Less business expenses: £3,000
- Taxable profit: ~£100
- Corporation tax: ~£19
The deemed payment
If your PSC is caught by IR35 (small client, or pre-April 2021 rules), your company must calculate a deemed employment payment at year-end. This is:
- PSC income from the relevant engagement
- Less 5% flat-rate expenses deduction
- Less actual salary already paid
- Less employer NI on the deemed payment
- = The deemed payment (subject to PAYE + NI)
The deemed payment ensures that most of the contract income is treated as salary, leaving little or no profit in the company.
CT600 for deemed payment
- The deemed payment is a salary expense on the CT600
- After the deemed payment, taxable profit should be near zero
- Employer NI on the deemed payment is also a deductible expense
Mixed Assignments: The Realistic Scenario
Most contractors have some contracts outside IR35 and some inside. This creates a more complex CT600.
How to handle mixed income
Your CT600 reports total company income and expenses regardless of IR35 status:
- Total trading income: Inside IR35 amounts (net received) + outside IR35 amounts (gross received)
- Total salary expense: Regular salary + any deemed payments for inside IR35 work
- Total expenses: All business expenses
- Taxable profit: Whatever remains after all deductions
Example: Mixed contractor
- Outside IR35 contracts: £80,000 gross
- Inside IR35 contracts: £40,000 (net received after deductions)
- Total PSC income: £120,000 (but mix of gross and net)
- Salary: £12,570 + deemed payment ~£38,000 = £50,570
- Business expenses: £6,000
- Taxable profit: £63,430
- Corporation tax: ~£13,236
Record-keeping for mixed assignments
Keep separate records for inside and outside IR35 engagements:
- Which contracts were determined inside IR35
- The Status Determination Statements (SDS) received
- Net payments received per engagement
- Any 5% expense deductions claimed on inside IR35 work
The 5% Expense Allowance
For contracts caught by IR35, your PSC can deduct 5% of gross fees as a flat-rate expense allowance. This is instead of claiming actual expenses against that specific engagement.
How it works
- Applies to contracts where IR35 applies
- 5% of the gross fee (before tax/NI deductions)
- Covers office costs, travel, and other overheads
- You can still claim actual expenses for outside IR35 work
On the CT600
The 5% deduction is included in your total expenses. There's no separate box for it — it's part of your overall expense claim.
Employer NI: The Hidden Cost
IR35's biggest financial impact is employer NI. When outside IR35, your PSC typically avoids most employer NI (because you take a low salary). When inside IR35, employer NI is deducted from your fees.
Outside IR35
- Salary: £12,570
- Employer NI: £0 (Employment Allowance covers it)
- Saving: employer NI on the remaining £100,000+ stays in the company
Inside IR35
- Deemed salary: ~£100,000+
- Employer NI: ~£12,000+
- This is deducted before the money even reaches your PSC
The employer NI difference alone can be £10,000-£15,000 per year for a typical contractor.
Pension Contributions: Tax Efficiency for IR35
Whether inside or outside IR35, employer pension contributions are:
- A deductible expense for corporation tax
- Not subject to NI (employer or employee)
- Not treated as a benefit in kind
For inside IR35 contractors, maximising employer pension contributions is one of the few remaining tax planning strategies:
Example:
- Company makes £40,000 employer pension contribution
- Corporation tax saving: £40,000 × 25% = £10,000
- NI saving: £40,000 × 13.8% = £5,520
- Total saving: £15,520
Include employer pension contributions as an expense on your CT600.
Filing Your CT600 as a Contractor
Step 1: Calculate total income
Add up all payments received by your PSC during the accounting period. If you need help with specific CT600 boxes, see our box-by-box CT600 guide. For inside IR35 contracts, this is the net amount after agency deductions.
Step 2: Calculate salary + deemed payments
- Regular salary you've paid yourself
- For inside IR35 contracts: calculate the deemed payment (if applicable)
- Include employer NI as a separate expense
Step 3: Total business expenses
- All allowable business expenses
- 5% flat-rate deduction for IR35 contracts (if applicable)
- Pension contributions
- Professional fees, insurance, equipment
Step 4: Calculate taxable profit
Income minus salary minus expenses = taxable profit.
Step 5: File with Taxpipe
Taxpipe's guided wizard walks you through every box. Enter your income, expenses, and salary — we calculate the corporation tax and file with HMRC. £59 per filing.
Common Contractor CT600 Mistakes
1. Treating inside IR35 income as gross
If the agency has already deducted tax and NI, your PSC income is the net amount received, not the gross contract rate.
2. Forgetting the deemed payment
If your company (not the client) is responsible for IR35 compliance, you must calculate and process the deemed payment. Failing to do so means your company underpays PAYE and NI.
3. Not claiming the 5% allowance
It's free money. If IR35 applies, claim the 5% flat-rate deduction.
4. Claiming travel as outside IR35 when inside
Travel to a workplace is only deductible if it's a temporary workplace. Inside IR35, the client's site is usually your permanent workplace — travel isn't deductible.
5. Missing pension contribution timing
Pension contributions must be paid (not just accrued) within the accounting period to be deductible on that year's CT600.
Frequently Asked Questions
Do I still need to file a CT600 if all my work is inside IR35?
Yes. Your PSC still exists and has income (even if reduced). You must file a CT600 for every accounting period.
Should I close my PSC if I'm always inside IR35?
Consider it. If all your work is inside IR35, the PSC adds admin cost with limited tax benefit. But keep it if you expect future outside IR35 work, want to claim employer pension contributions, or have trading losses to carry forward.
Can HMRC challenge my IR35 status through the CT600?
HMRC can open an enquiry into any aspect of your return, including whether contracts were correctly treated as inside or outside IR35. Keep your Status Determination Statements and contracts.
What about the flat-rate VAT scheme?
The flat-rate VAT scheme is separate from IR35 and your CT600. If you're on it, your VAT surplus or deficit appears in your accounts but doesn't change the CT600 calculation directly.
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Contractor filing your CT600? Use Taxpipe — handles inside IR35, outside IR35, and mixed assignments. Guided entry, HMRC filing, just £59.