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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience:  FCCA FCMA CGMA ACIS
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I need a basic understanding of my tax bill supplied by my

Customer Question

I need a basic understanding of my tax bill supplied by my accountant. We are a two people partnership business with profits of 36k per year. neither partner has any additional income. Here is an extract of the email from our accountant -
The estimated tax figures for you both based on the draft accounts are as follows: -
• Partner 1 - £2,752.82 due on 31 January 2014 plus a payment on account of £1,376.41 towards next years liability meaning £4,129.23 due 31 January 2015. The same payment on account of £1,376.41 will be due on 31 July 2015 but this means that you will have paid £2,752.82 on account towards the 2014/15 profits so should hopefully reduce a large balance in 31 January 2016.
• Partner 2 - £6,308.51 due less payments on account of £3,344.04 (£1672.02 x 2) = £2,964.41 balance due on 31 January 2015 plus a payment on account of £3,154.25 towards 2014/15 meaning a total amount due of £6,118.66 due on 31 January 2015. The same payment on account of £3,154.25 will be due on 31 July 2015 but again this means that you will have paid £6,308.51 towards 2014/15 profits so should hopefully reduce a large balance in 31 January 2016.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Just to resolve what might be an area of confusion; you say the profits of the business are 36K, is that 36K each or 36K overall. Presumably profits are split 50/50 and the computations you offer are joint or individual; which please?
Otherwise self employment tax treatment is normally with an interim payment on estimated profits. On receipt of your information I can make a proper check.
Customer: replied 2 years ago.

Hi, thanks for your reply. 36k is the overall profits generated by 2 people so if splitting it 50/50 per partner it would be 18k each.

Expert:  bigduckontax replied 2 years ago.

Right; you have a self employment income for 13/14 tax year of GBP 19282.

Deduct your personal allowance of GBP 9440 gives 9842 quid taxable at 20% = 1968 tax due.

Thus the estimated figures given in your example appear very wrong and should be challenged. How can tax be computed be so high and why should such a large proportion be demanded as an interim payment?

You should go back to your accountant to justify his figures or, if you normally deal with HMRC direct, then make an appeal over their computations. I do hope I have pointed you in the right direction.

Customer: replied 2 years ago.

Hi Keith,

Thanks, ***** ***** let me know how I should move forward ?, appoint a new accountant or what questions I should ask ?. Please give me a steer on the email exchange below and if you could give me a basic idea if my question is justified ? -

Hi Neil,

Im shocked that we are facing a tax bill of £10,248 in January (it is almost all of our working capital). Forgive me but im going to have to take this quite high level to aid my understanding which is as follows . (I have stripped out payments on account in the first part of this).

Logo Co 2013 profits = £35,933 (profit generated by 2 people)

Personal allowances for both myself and Kim = (9.4k each) = £18,800

Profits £35,933 minus personal allowances of £18,800 = 17.13k for tax to be paid on at 20% = £3,426

In your email below the tax due is –

Darren - £2752.82

Kim - £6308.51

Total tax due (without payments on account) = £9061.33

So in summary I cant get my head around the differences here – according to my basic calculations the total tax bill based on profits minus personal allowances should be £3,426 . The actual amount we are saying to be paid is £9061.33 (more than double the basic calculation).

Could you please help me understand the above in the simplest possible terms.

……………………………………………………………………………………………………………………………………………………..

Payment on account.

our company has seen a small growth in profits so lets assume the 2015 earnings will be in the region of 40k profits.

40k total minus tax allowances of 20k = 20k taxable at 20% - The tax bill for Both me and Kim should be in the region of 4K . Why are we looking at paying £4530 on account ?, this is higher than the expected total tax due.

I appreciate that you are going away on holiday but I do need to get an understanding of the above ASAP for my own peace of mind and sanity !

I look forward to your reply.

Regards

Expert:  bigduckontax replied 2 years ago.
Perfect, however I, and maybe you, do not know Kim's exact tax position,, but on the face of it I can't see how Kim can be down the Swanee to that extent!
Professional etiquette debars me from commenting upon whether or not to appoint a new accountant for next year.
Customer: replied 2 years ago.

Hi Keith,

Kim has always paid tax on time and to our knowledge there are no back payment due at all, the amounts he is quoting are for the current position. So in summary, based on the information that I have provided, do you think that the figures my accountant has supplied may be wrong ? . We have no direct dealings with the HMRC and this is all done by our accountant. So on the face of the information that I have provided would you suggest the figures quoted by our accountant are too high ? .

Thanks and i'll rate and pay you upon your reply.

Expert:  bigduckontax replied 2 years ago.
Indeed I would be of that opinion, however, if they can be justified in some way I would have to consider my position as they say, but on the face of it they do not appear correct.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.

Have i paid you now ?, sorry its the first time using this so not sure if i need to take any further steps to ensure you are paid.


 


I was very happy with your service and answers

Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance. Yes, you have indeed paid me, that happens automatically when I am rated by the customer. It also triggered me to say 'Thank you for your support!'

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