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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4094
Experience:  FCCA FCMA CGMA ACIS
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We have been advised by HMRC that we have been paid £14000

Customer Question

We have been advised by HMRC that we have been paid £14000 too much in tax Credits and our award is now zero.
How do I a) Pay myself £800 pcm more (to give to my partner to make up for her loss) to cover the shortfall b) pay back the 14000
.....without having to pay myself 12 x 800 and 14000 and therefore incur income tax on it. I already pay myself £7500 + 30k dividends.
Thank you
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
I am at a slight loss ast to your exact position. However, it is clear that the Tax Credit Office (TCO) is under the impression that the amount of tax credits paid is incorrect. Tax credits as you know are estimated on claim an an interim assessment of entitlement made which is then finalised at the end of each tax year. It is your responsibility to advise the TCO of any changes to your income within a month of any change.
The next thing to do is to check whether the TCOs's calculations are actually correct. The TCO is not the brightest button in the HMRC box and frequently makes mistakes. Having made that check you can either appeal their advice or accept it. If the GBP 14K is indeed owning, and on the face of it it seems an awful lot, then you will have to negotiate some sort of settlement with them which is convenient to you both. The TCO would, of course, prefer the money as a lump sum, after all, in their eyes, you have had it so why can't you pay it back directly?
How you obtain the money is your affair. I can see what you are getting at; you will have to draw more income down and that will involve you in paying the income tax thereon, but as Benjamin Franklin once famously said, 'In life there are but two certainties, death and taxes!'
So, the way ahead is to check the TCO's computations and proceed from there.
I am so sorry I cannot bring better tidings.
Customer: replied 3 years ago.

Hi,

We have already ascertained the calculation is correct, and my question was really to ask what is the best way to get money out of the company bearing in mind I'm already at PAYE threshold and Dividend threshold.

Expert:  bigduckontax replied 3 years ago.
Well, apart from drawing more income which will inevitably attract more tax the only other way is for the company to loan you the sum involved. Beware, however, if you are a director etc then loans from the company are fraught with problems. Here is an extract from the HMRC information sheet on the matter:
'If your director's loan account is overdrawn, and you're a participator (or an associate of a participator) as well as a director, your company must pay tax on any amount you've not repaid to the company by 9 months after the end of your Corporation Tax accounting period.'
Benjamin Franklin's dictum strikes again; it's time to find the sugar daddy! I am so sorry not to be able to be more helpful; it may be time to bite the bullet. Are the TCO not prepared to accept some form of time settlement, so much a month? Just a suggestion.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.

Ok Thankyou. It's early days so just feeling the waters.

Expert:  bigduckontax replied 3 years ago.
Yes, you have to negotiate with the TCO.
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.