A year on, what happened?
Afternoon all.
Its been a year since I asked this question initially and thought I'd give an update in case anyone else is in a similar situation in the future.
To summarise the issue in the 2014/15 tax year I worked as a permie until December however from October I had been working as a LTD co contractor in the evenings. I used the contracting income to give me a bit of a war chest for going full time contracting in December.
Now, because there were only three months left in the year it seemed like more work than it was worth to set up payroll etc so I took a directors loan from the company to tide me over until the start of the 2015/16 tax year where we set up payroll etc.
Because my partner works part time our joint income was always a bit below average so she was claiming tax credits, the change of circumstances forms came through asking for income from the 14/15 tax year which for me was short by around 3 months wages... So my income looked very low for the year despite it being pretty much the same as the previous years income.
Because of the conflicting advice on here I spoke to my accountant in detail about it, He advised that the directors loan was not classed as income as it needed to be repaid so to leave it off and only declare the actual income that I received as shown on the p45 from my permie job.
I then spoke to HMRC who confirmed what the accountant said, I pointed out to them that this would mean that they would pay us tax credits during a year where I would be earning a considerable amount above the threshold, they told me that the cannot take expected earnings into account and that the best way to deal with it would be to save the money that we receive because it would probably be due back at some point.
So here we are, one year on, what happened?
Well as expected we continued to receive tax credits, we shoved them in a savings account.
This year the same forms arrived and I filled them in with last years earnings, Salary & Dividends... A week later we receive a letter back confirming that they have overpaid and we are now owe them £2400 for last tax year and £600 for this tax year.
I phoned up to arrange payment and they said they can only take payment for the last tax year as (again) they cannot take expected earnings into account for this year which is not yet complete, so we have paid the £2400 and have left £600 in the savings account for when we receive the next bill from them in April next year!
If anyone else is in a similar situation I would recommend speaking directly to HMRC about it - as long as your not trying the screw them they are quite reasonable about it.
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Reply to: Tax Credits (Another question)
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Previously on "Tax Credits (Another question)"
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Originally posted by tractor View PostIf you wanted qualified, unbiased advice you should have gone to an accountant/specialist lawyer/doctor for it and paid
In this case there is a lot of speculation on accountancy forums on how HMRC deal with it. As most people who phone HMRC don't have someone who knows the ins and outs of the legislation giving them advice, and most people are never inspected then they get away with it. (I was actually going to ask someone I think would have known.)
However as other threads on here attest to, HMRC can change it's mind if they think they can get more money out of a group of people.....
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Originally posted by eek View PostYep we skip the pretending to know what we talk about bit and go straight for the insults...
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Originally posted by northernladuk View PostSo are we Nothing wrong with all the banter and opinions. It's a discussion board. I think you had rather high expectations which were of course dashed.
I'd suggest posting anything else in General. You don't get these pretend to know everything about contracting types in there..
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Originally posted by Snarf View Post
I'm just glad that I'm not basing by decisions solely on the advice given on here!
I'd suggest posting anything else in General. You don't get these pretend to know everything about contracting types in there..Last edited by northernladuk; 18 June 2015, 17:26.
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Originally posted by tractor View PostYou should ask the mods for a refund
I appreciate it that everyone took the time to reply, it was good to get some other views on the matter.. even if they didn't completely tie in with what I was expecting/what the accountant says!
I'm just glad that I'm not basing by decisions solely on the advice given on here!
I'm off to open a savings account to put these tax credits in so that I can give it back when they get my next tax return and realise that it was too much!
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Originally posted by Snarf View PostYeah, I do have an accountant but I only got the forms when I got home last night so I thought Id ask on here while waiting for him to get back to me - assumed it would be good to get a second opinion/see if anyone else had the same issue... How wrong I was!
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Originally posted by northernladuk View PostWelcome to trying to run your business by relying on anonymous internet forums.
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Originally posted by Snarf View Post
What I am miffed about is the contradictory advice - based on peoples opinions of the situation rather than actual experience... What is interesting is the posts from people who have been through the same thing match up to what my accountant(s) and HMRC have now told me... everyone else is giving their opinion as if it was fact.
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Originally posted by Snarf View PostI'n not miffed in the slightest, it doesn't affect me either way, I didn't think that we would get anything anyway so there is no loss, if we do legitimately get something then its a bonus.
What I am miffed about is the contradictory advice - based on peoples opinions of the situation rather than actual experience... What is interesting is the posts from people who have been through the same thing match up to what my accountant(s) and HMRC have now told me... everyone else is giving their opinion as if it was fact.
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Originally posted by eek View PostSadly there are a lot of people who have posted in HMRC Scheme Enquiries who would disagree with you....
In this case the OP is saying he will be paying this back, the OP has taken a loan (what he uses it for is up to them) and If they pay back the loan then it cannot be seen as salary by HMRC. so he should just enter salary and dividends/other income on the form
If however he decides to not pay it back then yes this is going to be seen as salary and they are going to be in trouble and they should then put the amount down on the tax credit form
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Originally posted by tractor View PostWhat amazes me is that people come here for advice and when they get it, they are miffed because it doesn't correlate with their rosy, usually one-sided view of the world.
What I am miffed about is the contradictory advice - based on peoples opinions of the situation rather than actual experience... What is interesting is the posts from people who have been through the same thing match up to what my accountant(s) and HMRC have now told me... everyone else is giving their opinion as if it was fact.
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