Tax & Advanced pay between assignments

[Thompsk]

Hi
I am new to this forum as I am totally confused by my parasol payslip. I have been working for them for 14 months and despite sending several emails of which all I get back is cut and copied texts from their documents, I never really get full explanations so have just left as is i.e. why is my P45 showing different amount to my last payslip, the answer was your P45 is correct and not your payslip doesn't fill me with much confidence. Anyhow my question is regarding the fact that my contract finishes today. I have no intention of working for the remainder of this tax year and wondered about the advanced PBA assignments on my payslip. It appears that the amount that is currently on my payslip shows my full advance PBA for the entire year as it stays the same week in and week out. In regards to tax, will I be taxed for the full years advanced PBA? Looking at last years payslip it appears they 'give me' huge sums of PBA at the beginning of a new tax year which then tails off to much smaller amounts or no advance PBA as the year progresses. Also, I have a 4 week notice period with them, or the option of resigning, which am I better off doing, staying with them for the 4 weeks or actually resigning now? This is more from a tax perspective than anything else, or does it not make any difference.

[LisaContractorUmbrella]

Your earnings and tax paid will be notified to HMRC via the umbrella company's FPS submission so leaving dates and so on are, to a degree, irrelevant. The 'advance PBA' is just a label - a proportion of the contract value has been labelled as such rather than a payment being made to you when you were actually between assignments (Pay Between Assignments) - it's the same as rolled up holiday pay and both go against the spirit of the law. I have no idea why the amounts paid to you at the beginning of the year should be huge as opposed to those paid later in the year unless your earnings decreased from that point forward and the 'advance PBA' was paid as a percentage of your earnings.

It shows a real lack of customer service when you can't get a decent answer to your questions - have you tried emailing your umbrella company's MD?

[VelcroPower]

I have no idea why the amounts paid to you at the beginning of the year should be huge as opposed to those paid later in the year unless your earnings decreased from that point forward and the 'advance PBA' was paid as a percentage of your earnings.?

Basically the PBA "pot" fills up as early as possible in the employment so that the liability is covered. Anything above NMW / Expenses goes into the PBA pot rather than commission then once full it reverts back to commission.

It's all smoke and mirrors as it's taxed exactly the same way if it's "PBA" or commission (plus any relevant rolled up holiday pay).

To the OP the 4 week notice period is probably mandatory as they will stick you on "PBA" which essentially works off the 4 weeks worth of accrued PBA to cover them off from a legislation point of view.

[unixman]

I was with Parasol for a few years and found them generally good with a good website too. However the paylips were always baffling, reaching to 3 pages of A4 at one point. I often tried to figure them out but never managed it totally.

[Thompsk]

Your earnings and tax paid will be notified to HMRC via the umbrella company's FPS submission so leaving dates and so on are, to a degree, irrelevant. The 'advance PBA' is just a label - a proportion of the contract value has been labelled as such rather than a payment being made to you when you were actually between assignments (Pay Between Assignments) - it's the same as rolled up holiday pay and both go against the spirit of the law. I have no idea why the amounts paid to you at the beginning of the year should be huge as opposed to those paid later in the year unless your earnings decreased from that point forward and the 'advance PBA' was paid as a percentage of your earnings.

It shows a real lack of customer service when you can't get a decent answer to your questions - have you tried emailing your umbrella company's MD?

Hi
Thanks for the reply. I contracted with Parasol previously and did 6 months out of the 12 month tax year, the advance PBA did not show up on the P60 they provided. This year I have done a full tax year with them and it did show up for 2014/15 tax year so I am wondering as I have only worked 3 months in the 2015/2016 tax year and will only do the 3 months out of the 12 months in this tax year will PBA show up at all this time? I'm just trying to calculate the tax rebate I will receive and it makes a big difference whether advance PBA is on there or not. I can't see how they can say I've earned nearly £6,000 in advance PBA in 3 months when if I worked the entire year I still only receive £6,000 advance PBA, which is what I earned last year. My earnings have not changed at all and I have done the exact same hours each week.

[Thompsk]

Basically the PBA "pot" fills up as early as possible in the employment so that the liability is covered. Anything above NMW / Expenses goes into the PBA pot rather than commission then once full it reverts back to commission.

It's all smoke and mirrors as it's taxed exactly the same way if it's "PBA" or commission (plus any relevant rolled up holiday pay).

To the OP the 4 week notice period is probably mandatory as they will stick you on "PBA" which essentially works off the 4 weeks worth of accrued PBA to cover them off from a legislation point of view.

Hi
Thank you for replying that makes sense. What if I don't work the full year though? I'm only going to work 3 months out of this tax year, my advance PBA (pot) shows at the full £6,000 that it showed on my P60 in total for last tax year as earnings (I worked the full 12 months last year and my pot was £6,000). My earnings have not changed at all and it makes a huge difference to my tax rebate if the full PBA of £6,000 is applied to 3 months earnings. It is very confusing as I only ever end up with 50% or less of anything I actually earned, in a true PAYE scheme it wouldn't be much difference even using quite high expenses to offset tax I never got more than 50% of my weekly rate. So I'm a bit confused, if I take away the advance PBA then my money I actually took home from what I earned is peanuts

[VelcroPower]

Hi
Thank you for replying that makes sense. What if I don't work the full year though? I'm only going to work 3 months out of this tax year, my advance PBA (pot) shows at the full £6,000 that it showed on my P60 in total for last tax year as earnings (I worked the full 12 months last year and my pot was £6,000). My earnings have not changed at all and it makes a huge difference to my tax rebate if the full PBA of £6,000 is applied to 3 months earnings. It is very confusing as I only ever end up with 50% or less of anything I actually earned, in a true PAYE scheme it wouldn't be much difference even using quite high expenses to offset tax I never got more than 50% of my weekly rate. So I'm a bit confused, if I take away the advance PBA then my money I actually took home from what I earned is peanuts

It's effectively taxable pay in a different format so if it appeared on your 2014/15 P60 then it won't affect your tax for this tax year.

50% sounds low as a net take home but the P60 will just show your taxable pay to which you should add your re-reimbursed expenses to get your net payment. Remember your net pay is not your net payment. Net wages + expenses is the amount you get paid from the invoices raised for work you've done.

[LisaContractorUmbrella]

Basically the PBA "pot" fills up as early as possible in the employment so that the liability is covered. Anything above NMW / Expenses goes into the PBA pot rather than commission then once full it reverts back to commission.

It's all smoke and mirrors as it's taxed exactly the same way if it's "PBA" or commission (plus any relevant rolled up holiday pay).

To the OP the 4 week notice period is probably mandatory as they will stick you on "PBA" which essentially works off the 4 weeks worth of accrued PBA to cover them off from a legislation point of view.

So, is the 'PBA' retained by the umbrella company and then paid out should the contractor find themselves between assignments or is it just a label on the payslip? If payments aren't made when the contractor's between assignments then I don't see how it can realistically be called Pay Between Assignments

[LisaContractorUmbrella]

Hi
Thanks for the reply. I contracted with Parasol previously and did 6 months out of the 12 month tax year, the advance PBA did not show up on the P60 they provided. This year I have done a full tax year with them and it did show up for 2014/15 tax year so I am wondering as I have only worked 3 months in the 2015/2016 tax year and will only do the 3 months out of the 12 months in this tax year will PBA show up at all this time? I'm just trying to calculate the tax rebate I will receive and it makes a big difference whether advance PBA is on there or not. I can't see how they can say I've earned nearly £6,000 in advance PBA in 3 months when if I worked the entire year I still only receive £6,000 advance PBA, which is what I earned last year. My earnings have not changed at all and I have done the exact same hours each week.

Your P60 should show your taxable earnings and your tax paid so I can't understand why the PBA did not show up - is the advance PBA not considered taxable by the umbrella company? It sounds as though a proportion of your earnings are being labelled as 'PBA' in an attempt to comply with the requirements of HMRC (who state that an overarching contract must have mutuality of obligation for the entire duration of the contract with the umbrella company and not just when the worker is on assignment). However, this income, whatever label it is given is taxable and should appear on your P60

[LisaContractorUmbrella]

Hi
Thank you for replying that makes sense. What if I don't work the full year though? I'm only going to work 3 months out of this tax year, my advance PBA (pot) shows at the full £6,000 that it showed on my P60 in total for last tax year as earnings (I worked the full 12 months last year and my pot was £6,000). My earnings have not changed at all and it makes a huge difference to my tax rebate if the full PBA of £6,000 is applied to 3 months earnings. It is very confusing as I only ever end up with 50% or less of anything I actually earned, in a true PAYE scheme it wouldn't be much difference even using quite high expenses to offset tax I never got more than 50% of my weekly rate. So I'm a bit confused, if I take away the advance PBA then my money I actually took home from what I earned is peanuts

If you are on a standard tax code and unless you are earning over about £18,000 a month there's no way your take home pay should be only 50%. The only thing I can think is that your umbrella company are holding onto the PBA - is that the case?