P45 Self Assessment 2006-2007

[triwhdxk]

I left MSC on 30/03/2007 and started my own limited company (using nixon william)on 2nd April 2007. I got the agency to change contracts so the new contract starts on 2nd April 2007 with new company.

Now the MSC gave me a P60 and my dividend vouchers uptil february 2007.
They gave me a P45 which had end of date employment as 30/03/2007 but since the work done was in march and MSC processed the payroll in 2nd week of April the P45 has tax week as number 2. P45 contains my last payroll income and tax values.This payroll suffered tax penalities due to new law.

Now MSC is saying that since the payroll was processed in 2007-2008 tax year although the end date of employment is 30/03/2007 on P45 this P45 income should be declared in 2007-2008 tax year and not in 2006-2007.

Although it seems correct but in the self assessment of 2007-2008 would Date employment finished cause any issues as it will not be between 06/04/2007-05/04/2008. I know its not used for calculation.

I called nixon william and have spoken to the person there and he seems to insist that it should be shown in 2006-2007 tax year rather than 2007-2008 due to end of date being 30/03/2007. Also my tax code 2007-2008 is different from 2006-2007. MSC has processed the last payroll with 2007-2008 code.

i will call inland revenue to find out but does anyone has any idea which is the right tax year to show this payment.

[Lewis]

I had same situation with my old MSC ...

Last working day 5th April 2007 on old contract.
New contract with new Ltd started 6th April 2007.

Last pay day from MSC was 13th April 2007 (for work done up to 5th April)
Tax and NI paid on last payment at 2007/2008 rate (week 2 like you)

My P45 shows last day as 13th April 2007 though. Maybe yours should not be 30/3/2007 ???

I have just included the figures from my P45 into my 2007/2008 PAYE. My employment dates overlap, i.e. started new contract 6th April, finished with MSC on 13th April according to P45. But PAYE office say this is fine - I called to check.

[ASB]

Firstly Nixon Williams are probably right, but it can depend on a number of factors.

The relevant date is not the date paid or processed it is the date you are entitled to be paid. That is not necessarily the same date, and in the case of directors (were you a director of the MSC in the form of a composite or similar?) then the situation can be clouded by the presence or otherwise of a service agreement.

Ultimately, however, any difference it make will almost certainly be marginal. If you were a 40% taxpayer last year then the worst case is that you pay 40% on that slice of income in this tax year. If in this tax year you avoid being a 40% taxpayer this financial year you will gain.

Conversely if you were a lower rate taxpayer last year and end up being a 40% taxpayer this year you will suffer. If you were a standard rate taxpayer both years then you will suffer slightly (due to the increase in the basic rate).

HMRC will almost certainly accept the income as 2006/7 - but in this case you will need to ensure that you:-

- correctly complete your 06/07 tax return
- correctly carry forward the tax paid already into the return
- include an explanatory note

you will also need to ensure you deal with it correctly in your 2007/8 return. [Remembering that in the case they will have a P45 showing X in 06/07 and y in 07/08 from the P35 you will submit, however your tax return will only show y, so that explanation will be needed]

Here:

http://www.hmrc.gov.uk/manuals/eimanual/EIM42290.htm

And here directors:

http://www.hmrc.gov.uk/manuals/eimanual/EIM42300.htm

[Nixon Williams]

If the P45 shows a tax period at the start of the new tax year, so a week 1, 2 etc then this will be applicable to the new tax year, 2007/08.

The MSC should issue you with a P60 showing the income for the tax year 2006/07 and a P45 for the payments in the new tax year.

We would check on this if we were doing the tax return for you.

Alan

[triwhdxk]

Thanks for the replies.

MSC has issued a P60 for 2006-2007 and P45 for 2007-2008 (week 2)

So the dates on P45 shouldn't be an issue looks like.