Cash-basis of umbrella costing Tax-Free income

[bobbygee]

Hi
Nice to meet you all,

I've only been in the game for a short while, but I would like a few thoughts on whether Umbrella companies should or usually would use a cash-basis or an accrual-basis, for their accounts.

Basically, I have worked for 2 months in the Tax year 17-18, invoiced the client in 17-18, and have enough of my tax-free allowance left to negate the tax for 17-18, if the payment is included in that year. Payment will be received in the year 18-19.

However, the umbrella is working on a cash-basis, and refusing to budge, with no justification, even when I point out how much I stand to lose.

Why would a company make this choice?

Thanks in advance

[Lance]

They are your employer. What does your employment contract say?

[Lance]

And why are you invoicing the client?

What are not telling us?

[bobbygee]

Sorry, to clarify, I didnt invoice the client directly, the umbrella did, and no mention of Accountancy basis in the contract.

[VelcroPower]

The basis on which the umbrella company prepares their accounts is immaterial to your payments as an employee.

In an umbrella relationship as you are the employee your income is paid to you through PAYE, meaning whatever tax week that payments falls in that's the tax year the income will be allocated to, just as it would as an employee of any other company.

Gutting as it is, those 17/18 allowances will remain unused I'm afraid.

[malvolio]

Sorry, to clarify, I didnt invoice the client directly, the umbrella did, and no mention of Accountancy basis in the contract.

Still don't really understand the question. You are employed by the umbrella, as far as taxation is concerned. Your Annual SAR will sort out your end of year tax position and you will get back any overpaid taxes as a result of what is declared on there. Your umbrella will be deducting taxes based on your current tax code, since that's all they have to work with. How the gross translates to your net "salary" is irrelevant.

[bobbygee]

The basis on which the umbrella company prepares their accounts is immaterial to your payments as an employee.

In an umbrella relationship as you are the employee your income is paid to you through PAYE, meaning whatever tax week that payments falls in that's the tax year the income will be allocated to, just as it would as an employee of any other company.

Gutting as it is, those 17/18 allowances will remain unused I'm afraid.

Well, I was on the phone to HMRC yesterday, and they confirmed that its down to how the company processes their accounts, whether they take the invoice into account when its placed (Accrual) or when its filled (Cash-based), for the company's tax year, and would be irrelevant when I'm actually paid.
Is this not correct?

Edit: But thanks for the support

[bobbygee]

Still don't really understand the question. You are employed by the umbrella, as far as taxation is concerned. Your Annual SAR will sort out your end of year tax position and you will get back any overpaid taxes as a result of what is declared on there. Your umbrella will be deducting taxes based on your current tax code, since that's all they have to work with. How the gross translates to your net "salary" is irrelevant.

On a cash-basis:
Position as of 6Apr, does not include an invoice from 3Apr.

On an Accrual-basis:
Position on 6Apr, includes in Invoice on 3Apr.

[northernladuk]

What answer are you looking for?

[MrButton]

Why would a company make this choice?

Incase they don’t get paid?