anyone willing to disclose how much of an APN was issued to you compared to what you had earned?
just to see what sort of a percentage HMRC are issuing.
Nervous Newbie
anyone willing to disclose how much of an APN was issued to you compared to what you had earned?
just to see what sort of a percentage HMRC are issuing.
bored now
I don't think anyone will say but the figures I've heard are that HMRC assumes you are paying tax on the money as if you received it after tax.
So assuming £25,000 in loans they won't be seeking £10,000 (£25,000*.4) but rather they will seek the £16,666 (£25,000/(1-0.4)-£25000) that you would have paid in tax to end up with an after tax amount of £25,000..
Now I'm not 100% sure that that figure is correct but I've now posted it a few times on here and no-one has provided any evidence that this is not how HMRC do the calculations...
Last edited by eek; 3rd June 2017 at 22:50.
merely at clientco for the entertainment
Nervous Newbie
Some things in Moderation
Eek's got his calculation slightly wrong.
Put this into Excel 0.4×(25000÷0.6) and you'll get £16,666.
So if you swap £25000 for £37000, you'll get £24,666.
Basically you are looking at £37000 before tax. HMRC considers your £37000 after tax (£37000 is 60% take home).
Which may not be what you want to hear...
bored now
I will add that the 40% figure is your worst case scenario and i used it because getting an actual figure that takes into account your personal allowance and the 20% band is too much of a faff. So it's possible, assuming that you had no other sources of income that year that the figure may be smaller.
However, that figure is just income tax and there will probably be both national insurance and interest added to the total demanded.
Which we know you won't want to hear at all.
Last edited by eek; 4th June 2017 at 06:13.
merely at clientco for the entertainment
Nervous Newbie
why the hell would they calculate it like that??
couldn't you get a re calculated amount by submitting bank statements etc? so you get your true amount of tax owed and not a ridiculous over calculated number? surely people would be able to stand a chance of what is owed to HMRC then rather than not being able to pay.
and is this the just on loans they calculate all this?
and what would you of had to earn for the year to hit the 40% bracket?
Last edited by Rogiebear; 4th June 2017 at 13:04.
Nervous Newbie
Contractor Among Contractors
The above is what we would call a grossing up calculation.
It says that to have £25,000 left after tax, you need to have started with £41,666 if your tax rate was 40%.
For periods after 2011, if the above was correct, then you would need to build in the NIC effect.
HMRC also insist these days that fees "paid" to a promoter should be regarded as income in some cases, adding to the net value you are deemed to have received.
Given that tax and NIC have different levels over which tax/NIC bites/increases, the calculation can get a little more complicated.
In reality, the several hundred APNs we've seen and dealt with are nowhere near as sophisticated.
Instead, if your return said
Salary received = £10,000.
Personal Allowance = £8,000
Taxable = £2,000
Tax at 20% = £400
And HMRC consider that you had £60,000 of loans, then the calculation becomes
Salary received = £10,000
Additional income = £60,000
Personal allowance = £8,000
Taxable = £62,000
Tax at 20% on say £30,000 = £6,000
Tax at 40% on £32,000 = £12,800
Total tax = £18,800
Tax paid = £400
APN Value = £18,400
Or 30.7% of the loans.
Bear in mind that the APN is an ESTIMATE of disputed liability.
If eventually a Court decides that the gross up calculation is better/correct, then expect to pay more.
(Obviously I've not used actual personal allowances, rate boundaries, NIC, interest, etc. above. These can be got from official sources and I'm sure that pretty much everybody here can make a spreadsheet).
Nervous Newbie
Some things in Moderation
Salary received = £11,000
Additional income = £31,000
(Minus) Personal allowance = £8,000
Taxable = £34,000
Tax at 20% on say £30, 000 = £6,000
Tax at 40% on £4,000 = £1,600
Total Tax = £7,600 minus any tax you've already paid.
And only you can decide whether to settle with HMRC or not.
And I would suggest sorting out a spreadsheet for this yourself - you need to start taking a bit of responsibility to understand the basic arithmetic of this.