Overpayment from old contract

[MrMarkyMark]

Without being funny, its kind of tricky reading posts that have been deleted. But I get the drift. I will be doing that in June, but for the right reasons from what I can see.

Apologies if I've been moody. Thanks for the responses.

I had gone into an ER relief diatribe, which you then posted wasn't going to be relevant to you.

No probs. Good Luck

[WordIsBond]

Another day, another thread on CUK where we jump to all kinds of assumptions about what someone is doing, and why, get it wrong, spout a lot of stuff, and finally figure it out. And in this case, we also have the highlight of completely getting away from the original question. LOL.

I hope we've disposed of the idea that there is anything wrong with closing down his company and opening another. He's not taking any tax advantage, so there's nothing wrong with it.

It does have the advantage of closing the door on later IR35 investigations -- if HMRC never objected to the company closing, they'd have a hard time reopening an investigation. So it draws a line under matters earlier than the six years. HMRC would have to prove that he should have been inside IR35, that he closed the company just to beat the rap, and they may also have to prove that they were not negligent in failing to object to the closure of the company.

Back to the original question. OP, do you use cash basis or traditional accounting?
https://www.gov.uk/simpler-income-ta...use-cash-basis

I don't see how this happens if you are using traditional accounting and your record-keeping / accounts reconciliation even approaches competence. Invoices accrue as taxable income on the date they are billed. You should have booked income for the amount of the invoice, even if you didn't actually issue on invoice, on the date it became due. And the funds received should not have matched the amount of income you had booked, so this should have been screaming at you long ago.

And really, even if you are using cash accounting, you should be booking how much is due and when it comes in. If someone underpays you, do you even know it?

If you are just a disguised employee, a hired hand, fine, you can act like one, and I hope you are within IR35 in that case. But if you are running a business, you should be running a business. That means you should KNOW if invoices (whether you raised them or not) are being paid, underpaid, or overpaid.

I guess what I'm saying is I don't think you are as innocent in this as you think you are. It's their fault that they overpaid you, yes. But it is YOUR fault that you didn't catch it before paying taxes, etc. There's really little excuse for that.

You should:
1. Repay them the full amount.
2. Instruct your accountant to reclaim the overpaid taxes, you'll get most of it back, at least, though it may take some time, HMRC is notorious.
3. Learn to pay attention to your records, or hire someone to sort it out and handle it for you.

First rule of business -- treat others the way you want to be treated.
Second rule of business -- pay attention to your money and your record-keeping, or pay someone trustworthy to do it for you.