Settlement Opportunity

[centurian]

Disagree with both of you. If they treat 63K as a net income for 2006-2007 tax year then the total gross income will be circa 98k with tax only 31k. If you add couple of years interest and IHT on this then it will be well above 36K which lower than 28.5k from HMRC. I think we need to wait and see the breakdown calcs and how they calculated. Even with the figure i have given here I have calculated the 63K as total income (including salary part) so in reality the tax well over 31K as you are exceeding 100K and losing half of your tax allowance for every £2 over 100K.

And I also now disagree with myself. I got APN and settlement mixed up (one is just the tax demand - the other includes interest). The value demanded is close to the net-paid-grossed-up value for the tax alone, but not the interest as well.

Agreed - lets wait and see what the breakdown request comes back with

[AlCapone]

Can't follow that calculator but your conclusion is wrong.

I've seen HMRC written calcs for interest and it's only charged once.

But it's not MY conclusion is it. The figures are there in black and white in HRMC's own tool http://www.hmrc.gov.uk/campaigns/19years-calc.pdf.

[DonkeyRhubarb]

But it's not MY conclusion is it. The figures are there in black and white in HRMC's own tool http://www.hmrc.gov.uk/campaigns/19years-calc.pdf.

I can't fathom that calculator out but the conclusion that interest is charged twice is not correct.

In addition to seeing HMRC figures on paper, I know people who've settled.

There was only one lot of interest. But it was calculated from PoA dates, not the normal due date, so slightly more than they were expecting.

If you are still in doubt contact HMRC and ask for a figure.

[AlCapone]

I can't fathom that calculator out but the conclusion that interest is charged twice is not correct.

In addition to seeing HMRC figures on paper, I know people who've settled.

There was only one lot of interest. But it was calculated from PoA dates, not the normal due date, so slightly more than they were expecting.

If you are still in doubt contact HMRC and ask for a figure.

That's exactly what I said. They are charging interest once on a settlement figure (please re-read my post). The article states that HMRC may pursue overall interest PLUS interest due on the missed payments (that's where the calculator comes in) if you lose at tribunal. (The link to the article in the original post didn't work: http://www.contractorumbrella.com/ne...d_appeals.html)

[DonkeyRhubarb]

That's exactly what I said. They are charging interest once on a settlement figure (please re-read my post). The article states that HMRC may pursue overall interest PLUS interest due on the missed payments (that's where the calculator comes in) if you lose at tribunal. (The link to the article in the original post didn't work: Contractor Pay Schemes - Enquiries and Appeals | Contractor Umbrella)

The wording in that article is a bit ambiguous, so I'm not surprised you jumped to the wrong conclusion.

Interest can be calculated in one of two ways:

(1) from the original due date
OR
(2) from when payments on account would have been due, which is 6 and 12 months earlier

Note it is OR not both.

In all the cases I've come across HMRC are using (2) which leads to a slightly higher figure.

[AlCapone]

The wording in that article is a bit ambiguous, so I'm not surprised you jumped to the wrong conclusion.

Interest can be calculated in one of two ways:

(1) from the original due date
OR
(2) from when payments on account would have been due, which is 6 and 12 months earlier

Note it is OR not both.

In all the cases I've come across HMRC are using (2) which leads to a slightly higher figure.

Well of course I hope you're right. Still doesn't explain why HMRC's calculator adds both types of interest payments to the total though.

[AlCapone]

The wording in that article is a bit ambiguous, so I'm not surprised you jumped to the wrong conclusion.

Interest can be calculated in one of two ways:

(1) from the original due date
OR
(2) from when payments on account would have been due, which is 6 and 12 months earlier

Note it is OR not both.

In all the cases I've come across HMRC are using (2) which leads to a slightly higher figure.

By the way, when using the HMRC tool, option 2 is a slightly lower figure. Even more confusing.

[DonkeyRhubarb]

By the way, when using the HMRC tool, option 2 is a slightly lower figure. Even more confusing.

That makes no sense at all. PoA dates are 6 and 12 months before the normal due date, so accrued interest must be a few % higher.

[AlCapone]

That makes no sense at all. PoA dates are 6 and 12 months before the normal due date, so accrued interest must be a few % higher.

I'm lost - if you pay a debt before its due date would't you expect to pay less interest as you're paying it early?

[DonkeyRhubarb]

I'm lost - if you pay a debt before its due date would't you expect to pay less interest as you're paying it early?

Example

HMRC assess you for £10,000 tax for ebt scheme you used back in 2005/6

Normally the due date for the paying the tax would have been January 2007.

However, HMRC are saying you should have made earlier payments on account of £5,000 in January 2006 and £5,000 in July 2006.

Hence there are several more months interest accrued.