Tax and contracting News
15 - 09 - 2010
What is HMRC doing? HMRC installed a new computer system in the summer 2009. The aim is to improve the operation of Pay As You Earn (PAYE) by bringing all a taxpayer’s records together and making sure that allowances and tax rates are operated correctly across all employment or pension income sources. The new system is performing automated end of year tax reconciliations. Previously HMRC have undertaken the reconciliation manually. The automated reconciliations are for the tax years 2008/09 and 2009/10.
The reconciliation is between the tax calculated as due from an individual and the income tax actually received from the individual. Accordingly, the calculations will show overpayments as well as underpayments.
Will you have to pay more tax?
This will depend on your circumstances. As a director of a company you will have completed an income tax self assessment form for each of the affected tax years. You should therefore have paid the correct personal taxation due. If you are with an Umbrella Company then the reconciliation may affect you, especially if you have not completed a self assessment form and or you have changed employer a number of times during the period. If you are a sole trader this reconciliation is irrelevant to you as you are not subject to PAYE.
How will HMRC notify individuals of any under or over payments?
HMRC are currently sending out P800 forms in the post to individuals. The P800 details the calculation and reconciliation of any under or over payment. The P800 is not a tax demand. A payment request will be sent separately. Unfortunately HMRC will not communicate by email or telephone. Any demands you receive by email or telephone will be scams and should not be replied to. Delete the email immediately. Do not visit the website contained within the email or disclose any personal or payment information
What should you do if you receive a P800?
HMRC will not be issuing copies of the P800 tax calculation forms to agents, so it is important for you to let us know if you receive a P800 if you wish us to deal with the matter even if you have appointed us as your personal tax agent. It is vital to check the P800 – even if it shows an overpayment and a refund due. Be aware that HMRC may not have full or up-to-date information about other income or about available allowances or reliefs. If there are errors HMRC should be informed as soon as possible. Do not assume the calculations are correct.
How will HMRC collect any underpayment of tax?
HMRC will include underpayments of less than £2,000 in the 2011/12 tax code and collect the tax via PAYE. This will be done automatically. If you want to pay directly you must tell HMRC. HMRC will allow the repayment by coding alteration to cover a longer period, if the extra deductions will cause hardship. Underpayments of £2,000 or more must be paid directly. HMRC will write, separately from the P800, and ask for payment. Taxpayers can request time to pay if they cannot pay in one sum.
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WEEKLY INCOME INFORMATION
Income For A Week
Pre Tax Income
Choose the Industry Sector that you work in. Use the drop down menu in the usual way.
The VAT Flat Rate Applied -
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RESULTS TABLES
COMPARISON TABLE FOR NET INCOME
RELATIVE INCOME BY STRUCTURE
Weekly by :-
Annually by :-
Weekly by :-
Annually by :-
Fixed Data
PAYE
Statutory rates
CIS
Corporation tax
National insurance
UMBRELLA COMPANY
AGENCY INFORMATION
Assumptions
General
- The user is over 21 and subject to tax in the UK
- The user wishes to minimise their tax liability
- The user is subject to national insurance i.e.he/she is not over retirement age
- Only current tax rates and limits are applied
- No tax mitigation payments are made e.g. pension contributions
- Only 3 digit letter 'L' tax codes shown in the drop down list can be entered
- The user does not have a turnover greater than £100,000 where fewer reliefs and or higher taxes may apply
Expenses
- All miles claimed as expenses are for business use using a personally owned car or van
- All other expenses claimed are wholly, necessarily and where appropriate exclusively for the benefit of the business
Foremans LLP Charges
- Foremans fees associated with Limited Company, Sole Trader or Umbrella are as per published rates
- Foremans current Service Costs are allowed for in all calculations.
Holiday Pay
- Holiday pay is accumulated week by week by Umbrella or Agency employer but paid out during the year
VAT
- Limited Company or Sole Trader will be VAT registered
- Limited Company or Sole Trader will take advantage of Flat rate VAT
- Flat rate applied includes the benefit of the additional 1% applicable to the first year of VAT registration
Limited Company Conditions
- One director / one shareholder in a Personal Service Company
- Director of Personal Service Company elects to vote for 100% dividend after salary, costs and expenses
- Director's salary is maximum salary to the primary threshold for NI
- The Limited Company is trading normally i.e it is not subject to IR35 and is not a Managed Service Company
NOTES
- The Current tax rates are taken from the Fixed Data Table
- The current Value Added Tax Rate is 20% and is applied to all invoices and expenses as appropriate
- The Director's Salary is fixed in relation to National Insurance thresholds. Higher Rate Taxpayers should consider the advantages and disadvantages of a larger annual salary or bonus
- Higher Rate Taxpayers may wish to consider the advantages and disadvantages of shared ownership of their business
- Users with a tax code other than three digits and letter "L" may telephone or email our Development Department to request a detailed calculation
- Generally the use of an Umbrella rather than an Agency payroll is only efficient if sufficient weekly expenses are allowable and claimed
- The expenses claimed under an Umbrella should not prevent the proper operation of National Minimum Wage
Dave Wilde, Foremans (UK) Limited
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