BN66 - Time to fight back!!!

[BrilloPad]

Hi All,

long time lurker here, thanks for all the work you've all put into helping others understand all of this - I'm another ex scheme member (left 2003). The two main threads have been a big help though I must admit I haven't waded through every page of this one!

I had a question, or a thought, or point or sumfink! .

I've been getting demands to enter self assessment statements for a few years now. I went permie a while back so they're a doddle to fill out. I did notice on the (online) forms a reference to the reason why I was expected to fill out the assessment each year, namely that HMRC considered I owed back taxes. Yet this week I got a letter saying I'm not expected to have to fill them out anymore (unless circumstances change). Seems a bit strange if the reason they gave previously was related to tax "owed" from my contractor days. Nothing's changed on that score. Anyone else have experience of this?

Also, I keep reading people mention CTD's but can't find an explanation, google is no help (amazing how many things are called ctd's) and the forum search returned nothing (despite 'ctd' being in various places, how does that happen then?) Is there a quick reference for these things?

Cheers.

In addition to what poppy said, please see excellent post from DR :-

http://forums.contractoruk.com/544693-post257.html

Bearing in mind importance of this post - should t be a new thread?

[DonkeyRhubarb]

In addition to what poppy said, please see excellent post from DR :-

http://forums.contractoruk.com/544693-post257.html

Bearing in mind importance of this post - should t be a new thread?

Please note that the figures I gave for HMRC's interest penalties in the above post were too high as I had incorrectly assumed that they used compound interest whereas they actually use simple interest. Also, their average interest rate over the past 5 years has been more like 7.5% rather than 8.5%. Below is a more realistic comparison between their penalties and a 6% savings account for a basic and higher rate tax payer assuming a £100k tax liability.

Year.......7.5%......6%(basic).....6%(higher)
1...........107.5........104.8.............103.6
2...........115..........109.8.............107
3...........122.5........115................111
4...........130...........120...............115
5...........137.5........126................119

[BrilloPad]

Please note that the figures I gave for HMRC's interest penalties in the above post were too high as I had incorrectly assumed that they used compound interest whereas they actually use simple interest. Also, their average interest rate over the past 5 years has been more like 7.5% rather than 8.5%. Below is a more realistic comparison between their penalties and a 6% savings account for a basic and higher rate tax payer assuming a £100k tax liability.

Year.......7.5%......6%(basic).....6%(higher)
1...........107.5........104.8.............103.6
2...........115..........109.8.............107
3...........122.5........115................111
4...........130...........120...............115
5...........137.5........126................119

Another good reason for this to be a new thread.

[BrilloPad]

currently MTM are putting the Partnership Accounts together to be lodged with hector by the end of july...I am expecting Hector to be using these accounts to calculate the tax demands that we will be receiving shortly after...

my point is that, given these accounts are going to have a direct impact on me, will I have sight of these accounts BEFORE they go to hector?...I had some draft accounts raised on my first year in the scheme a few years ago and they were totally wrong...they bore no resemblance to the monies that I received...therefore, before they send them to hector and i get hit for a large sum of money, i would expect to see them first...

anyone else have a view on this...?

As discussed by PM, best to discuss this with montp. There are good reasons for this. quite complex.

[DonkeyRhubarb]

Another good reason for this to be a new thread.

Isn't that what this thread was for?
http://forums.contractoruk.com/accou...tml#post561929

[BrilloPad]

Isn't that what this thread was for?
http://forums.contractoruk.com/accou...tml#post561929

opps - you are quite right!

[Maddog]

there is another issue here as well...currently MTM are putting the Partnership Accounts together to be lodged with hector by the end of july...I am expecting Hector to be using these accounts to calculate the tax demands that we will be receiving shortly after...

my point is that, given these accounts are going to have a direct impact on me, will I have sight of these accounts BEFORE they go to hector?...I had some draft accounts raised on my first year in the scheme a few years ago and they were totally wrong...they bore no resemblance to the monies that I received...therefore, before they send them to hector and i get hit for a large sum of money, i would expect to see them first...

anyone else have a view on this...?

GM -Sadly I am in the same position. I recently received my potential liabilities statement from MTM and every year the contractor fees and trust money did not match my own records . I have requested MTM to review their records and get back to me with adjusted figures, as the current ones showing considerably more income than I actually received.

When working the figures out, note that the contractor fee payments fall under the tax year in which they were worked(i..e March pay, if paid mid April are judged to be in the March tax year), but trust money goes into the tax year it was actually paid. You may need to adjust you figures to reflect this.

Maddog

[DonkeyRhubarb]

GM -Sadly I am in the same position. I recently received my potential liabilities statement from MTM and every year the contractor fees and trust money did not match my own records . I have requested MTM to review their records and get back to me with adjusted figures, as the current ones showing considerably more income than I actually received.

When working the figures out, note that the contractor fee payments fall under the tax year in which they were worked(i..e March pay, if paid mid April are judged to be in the March tax year), but trust money goes into the tax year it was actually paid. You may need to adjust you figures to reflect this.

Maddog

It ain't going to look good if the accounts don't match what's on our tax returns ie. more ammo for HMRC to hit us with.

[BrilloPad]

GM -Sadly I am in the same position. I recently received my potential liabilities statement from MTM and every year the contractor fees and trust money did not match my own records . I have requested MTM to review their records and get back to me with adjusted figures, as the current ones showing considerably more income than I actually received.

When working the figures out, note that the contractor fee payments fall under the tax year in which they were worked(i..e March pay, if paid mid April are judged to be in the March tax year), but trust money goes into the tax year it was actually paid. You may need to adjust you figures to reflect this.

Maddog

Have you spoken to Montpelier about this? I am told there are good reasons - and they are quite complex.

[DonkeyRhubarb]

CTD Revisited

I've been doing some sums over the weekend and I reckon in my case it may work out better to keep the cash in the bank than get a CTD. Here is an illustration.

My total tax liability for 2001/2/3 is £105,000. I have estimated that the interest due would be approx £35,000, giving a total liability of £140,000 to date.

HMRC currently charge 7.5% p.a. but this is on the tax (105k) not on the compound figure (140k). Per year this works out at £7875.

Now if I stick the 140k in a top savings account paying 6.5%, then I can earn £9100 before tax. As I am a basic rate tax payer, I would get net £7280. In other words, I'm only £600 quid a year worse off and if we win then I get to keep the interest. The CTD only pays a miserly rate of interest so I would be basically looking at just getting the £140k back.

If you are a 40% tax payer, then it's not so good with a net return of £5460, which is almost £2500 shortfall every year. One way to avoid paying tax on the interest is to use an offset mortgage. I haven't done the calculations for this but I reckon this could stack up just as well as buying a CTD.

Therefore before you buy a CTD I think it's worth sitting down and doing the sums if:

1) you were in the scheme a few years ago
2) you are a basic rate tax payer
OR
3) you have got an offset mortgage