Tax - Ghost from the past

[zuby]

Hello Guys,

Nightmare start yesterday, when I received the letter from HM revenue, about I owe £600 outstanding taxes, as per they saying my previous 2 employers hasn't deducted tax properly in year ending APR2010.
Second thing I need to pay penalty+ interests..
I don't know what I should do now; my Tier1- extension is due in July2012.

I appreciate all suggestion from you guys...

Thanks in advance
Zuby

[pgaitonde]

Hello Guys,

Nightmare start yesterday, when I received the letter from HM revenue, about I owe £600 outstanding taxes, as per they saying my previous 2 employers hasn't deducted tax properly in year ending APR2010.
Second thing I need to pay penalty+ interests..
I don't know what I should do now; my Tier1- extension is due in July2012.

I appreciate all suggestion from you guys...

Thanks in advance
Zuby

Dont cry..
If you pay your penalty charges and interests on time, you wont face any issues.

[rakeysh.patel]

You could not have known until the letter showed up. I did not until (wait, its opposite to yours before you get excited) I received a cheque for over £1400 for myself and the better half for 2007 tax year about a month ago, yap after 4 years!!!

There are things you can not control and good thing that works in your favour is that you were not Self Employed and tried to fraud the system. If I were you, at the time of extension, I would go with PEO appointment so that you have a chance to explain, should it get raised by CW. IF not, I wouldnt even bother pointing out.

Put your anxiety at rest and move on. You should be fine

Ta

Hello Guys,

Nightmare start yesterday, when I received the letter from HM revenue, about I owe £600 outstanding taxes, as per they saying my previous 2 employers hasn't deducted tax properly in year ending APR2010.
Second thing I need to pay penalty+ interests..
I don't know what I should do now; my Tier1- extension is due in July2012.

I appreciate all suggestion from you guys...

Thanks in advance
Zuby

[rakeysh.patel]

Oh, forgot to mention, please pay off the tax and any penalties imposed. Just speak with HMRC and if your case is as genuine as you portrayed in your post, i.e. you were never aware of it until yesterday and you were salaried employee, you might get away with penalty. Unless ofcourse, HMRC have wrote to you previously etc. Check with them to understand your findings are correct in terms of what the outstanding amount and penalties refer to.

Good luck

[AccountantMatthew]

I'd take a look at this in two parts zuby:

UKBA - It was all out of your control. As far as you were aware, you were paying the correct amount in tax & NI. The PAYE system is set up and run by your employer. You have done nothing wrong and have acted in good faith.

HMRC - It's difficult to know from the facts presented but this may have come about due to errors in how PAYE was calculated after HMRC 'trawled' through back records. It was widely reported in 2010 and to a lesser extent last year. Letters were then sent out to taxpayers either stating that a refund was due or that additional payments would have to be met.

Again without knowing the facts, it's hard to comment but I would certainly ring HMRC in the first instance to get the full facts and set the motions in place to appeal any penalty. I would also get some professional help on this. Whilst you should obviously get up to date with outstanding tax, the fact that penalties and interest have potentially been incorrectly applied should be challenged (again please note the word 'potentially')

All the best.

[zuby]

Thanks Guys for all your fantastic suggestions...
I spoke with HMRC 3 times and explain the situation and finally they agree to cancel the penalty but I need to pay tax plus 3% interest on the total amount.
Second question is if I want to submit my self assessment return, Do I need to add only Employer income or do I need to submit Employment income + company income?
(Note:- I already submitted my corporation tax returns and I am 100% shareholder of my company)

All your incredible ideas welcome!!!!
Zuby

[silverline]

Responsibility for tax/NI deduction is on employer not employee. I am not sure exactly what are your circumstances. If your previous employer simply made an error and it has come to HMRC knowledge, HMRC should have contacted your previous employers for explanation and may/may not have penalized them. If I would be in your situation, I would contact previous employer to see if they are happy to share the burden. I've paid thousands of pounds recently in cases where employees were not properly taxed and company paid taxes for employee following tax investigations. So it's worth trying your luck.

UKBA should not have much issue with this. If it would have been a case of self-employment than you could have been in trouble.

Your self assessment will show your earnings whether through employment, self-employment, dividend, interest etc. It doesn't include your company income.

Best of luck!!

[zuby]

Hi Silverline,

So as per your reply, Do I need to include dividend income with my Employments income (Salary) in my self assessment returns?

Thanks in Advance,
Zuby

[zuby]

Hello Guys,

Please put some lights on these tax matters for me...
I already submitted my corporation tax returns , Do I still need to include my dividend income in self assessment return, Problem is that I mention only my employment income not limited company account.

Thanks,
Zuby

[AccountantMatthew]

Self assessment income tax returns must include all income earned by you as an individual. So company profits are taken care of in the Corporation Tax return but all income you earned from your company (salary and dividends) will be included in your self assessment return.

Of course it isn't limited to just that - any other dividends you received, bank interest (not ISA but joint and individual accounts interest), rental income from properties, worldwide income (potentially - depends on residency status but that's another point for another thread), any capital gains etc etc etc should be included.

Without wishing to create some work for someone in my profession, if you are stuck then you should get help with your return; you can always take over in future years once you fully know what's going on.

[zuby]

Hello Matthew,

Thanks mate for your valuable reply,
But I already paid my corporation tax profit (All profit I took out as dividend for my Tier 1 initial visa application) , So if I declared my dividends in Self Assessment returns, Do I need to pay tax again

Thanks in Advance,
Zuby

[AccountantMatthew]

Potentially you may be liable for tax zuby.

The main thing to do here is to remember to separate what is company related to what is related to you as an individual.

As far as your company is concerned there will be no more tax to pay. Corporation Tax was paid on the company's taxable profits and then the company paid dividends out of that distributable profit.

However you as an individual received some income in the form of those dividends. Dividends are taxed at 10% in the basic rate tax band, at 32.5% in the higher rate band and 42.5% in the additional rate band.

You get a 10% tax credit against these so the effective rate of what tax you pay across to HMRC is 0% in the basic rate band, 25% higher rate and 36.1% in the additional rate.

So if your income is entirely in the basic rate there will be no additional tax to be paid; if it isn't then there will.

[silverline]

if your company made £100 profit and you withdraw all profits in form of dividends. then:

your company will pay £90 to you and £10 to taxman.

Now if your taxable income from employment is less than £42,475 then you don't pay anymore tax....if it's more than £42475 then simply pay 25% more of £90 i.e. 22.50 as tax to Taxman. (don't expect anyone making over 150k here). simplzzz.

for UKBA you will use £100 dividend income to claim points not £90.

hope that helps...

[zuby]

Hello Silverline & Matthew,

Thanks guys, for fantastic illustration about tax break down, really appreciate that