PAYE assistance please.

When I packed in my job and set up MLS in 2005, I was the same, top rate tax payer to then technically no income.

I didn't do anything, Inland revenue gave me a tax rebate after I filled in that years self assesment form. Rebate came about 3 - 4 weeks from sending the form in, and was a welcome surprise.

But would deffo contact your tax office in lieu of the date and in case things have changed.

Hi Mike

Sounds to me that you probably have about 4 months worth of personal allowances unused from you employment. After 5th April is the time to deal with these and how long after depends on how you deal with your self employment or if you want to make the claim to set full allowances against your period of employment in 2009/10, possibly giving you higher rate relief.

If you have not already done so you will need to notify HMRC of your self employment. This needs to be done by 5th October 2010. When you do so they will issue a self assessment tax return for you to fill in to cover the year to 5th April 2010. If you notify earlier you can get the return done and submitted and this will sort out your 2009/10 issue but you still need to decide how to deal with your self employment - a. guess until your 1st 12 months is up or b. work it out and return it from commencement to 5th April.

If you need more detailed help email me.

Barry

Many thanks for your time Barry. Yes I registered self employed 1st Dec 2009 the day my three months notice pay expired. revenue since then to April 5th is minimal.

Will I receive a SA form shortly do you feel?

Kind regards

Mike

It's kind of retroactive. You can't fill in your accounts for the financial year 6th April 2009 to 5th April 2010 until after 5th April 2010. You can't give them the numbers until the numbers exist.

So after April THIS year, 2010, you will fill in a self-assessment that has all the details of your PAYE earnings (April 2009 - August 2009), and all the details of your business expenditure and earnings up to 5th April 2010, and information about interest earned on savings and so on. You should also then start a file for the 2010/2011 year.

The good news is that most of this information for your 2009/2010 year is really simple to find. The relevant PAYE figures are on your P45; and your bank or building society will usually send you a summary of your bank account(s) at some point in April. If your business accounts are a little disorganised, it's only a few months of them and you have time to get it into order.

The even better news is that HMRC run free one-day courses for "how to fill in your self-assessment" where they cover all the bases and you can ask any questions you need to. I found it really useful.

Hi Mike

Yes you will receive a 2010 SA Return shortly after 5th April.

As already said most of your entries will be straight forward. Although your self employment may be minimal this is probably the most complex aspect. It may be that with a bit of thought a tax loss may be created that can be used against your previous 40% tax and since it may be a while before your new business produces results taxable at higher rates again it is probably worth keeping your powder dry for a while to see how things go to maximise the loss set off.

Choosing your accounting date, particularly the first one, which in your case could be up to 5th April or any length up to 18 months from commencement could have a significant bearing on your 2009/10 tax position and for future years. Your ultimate deadline for submitting your 2010 return is January 2011. If you do not have a basis period fixed and figures ready to put on a return at the time it is due or at the time you want to submit it you can put in a provisional return (this is what I meant by "guess"). If you do this you need to say in the additional information box that you will file a final return when you have the figures and it is usually good practice to indicate a time line for this although I have never known the Revenue to take anyone up on it if the time line is not met. Bear in mind taxable profits for a longer period allocated on a pro-rata basis back to 2009/10 will increase taxable income for that year but you will have 4 months worth of PAs to use up. Tax losses carried back will be relieved at 40%.

The main reason for delaying the final outcome for the 2009/10 year is that no one has a crystal ball and the delay will provide a choice of cutting off at 5th April or having your 2009/10 results assessed for tax on a pro-rata basis over a longer period and you can use the result that has the best tax repayment outcome for you. The cost of delay is no more than the timing of your rebate. The main reason for not delaying is to take cash in the form of a tax rebate earlier.

Things that you may need to consider will include the level of confidence that you may have in profit growth over the next few years. Being able to choose an accounting date of 30th April or 31st May will give you considerable cash flow advantages in terms of when tax will fall due for payment if you are confident of a growth pattern especially if it takes you back to higher rates. This benefit may outweigh the benefit of getting the tax rebate available to you now.

Whichever you choose do not forget:

1. The date of commencement of trading is not necessarily the date that you registered with the Revenue nor when you started looking for work. I would think that in your case the date will be on the first occasion you completed a paid assignment.
2. Pre-trading expenses - Any expenses that you may have incurred in the period prior to date of commencement of trading (up to 6 years) that are of the type that would be allowed against trading income in the normal course will be treated as incurred on the first day of trading. Capital items such as IT equipment etc. are also treated as incurred on the first day of trading but are excluded from qualification for first year capital allowances but may qualify for Annual Investment Allowance.
3. You may have brought items into use by your business that you had owned previously and bought out of net of tax income e.g. home office furniture, IT Kit etc. You should treat these as capital items on the first day of trade valued at a reasonable depreciated cost and this will include motor cars.
4. Your income figures need to be stated on an earnings basis. This means if you have any completed assignments where you have not been paid by your accounting date you will need to bring them in. For any assignments not completed or paid for you can value these at cost and exclude your own time.

Sorry to make a lengthy reply, I hope this helps but I cannot illustrate the position better without having some facts and figures to work with. If you would like to contact me privately or vice-versa then I will be happy to help.

Regards

Barry

What utterly wonderful people you are! I could not have asked for anymore. I frequently find as a registered mentor for my chartered body, that I spend quite a lot of time on papers, open exam assessments etc and seldom get a bee-bo, kiss my arm as thanks.

I am now sufficiently armed with excellent information to make the necessary steps after said TR ends up on my doormat...(need to make certain young Jack [Border Collie) does not rip it to shreds).

Again, I wish I could say more, other than thank you.

Mike