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Sam
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Category: Tax
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I am a Director and 49% shareholder of a company, I was included

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I am a Director and 49% shareholder of a company, I was included on the accounts in 2012. I have been working as an employee of the company since 2009. The majority share holder and accountant do not keep me in the loop with the accounts despite continuous requests.
I am concerned about my personal tax position, I have asked the majority share holder numerous times but to no avail and the accountant won't speak to me unless the majority shareholder is present.
I receive pay slips with around £675.00 per month but I receive £4,000 per month, it shows a tax code on the payslips but no tax monies deducted. It was my understanding originally that I was being paid one amount showing on my payslip and the rest were dividends.
However, just recently the majority share holder, when angry, tells me that I owe a lot of personal tax and that I am classified as self employed. I have tried to ask the accountant and the majority shareholder for clarification but they will not advise me.
Please could you give me some advice on my situation?
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
Can I ask why its only now that you are concerned that no tax has been deducted from the £4000 paid each month and what led you to believe that dividends were the amount shown on the payslips - for example does it state that these are dividends?
How much involvement do you have with financial matters within the business?
I can then advise the best way to proceed.
Thanks
Sam
Customer: replied 2 years ago.
I was actually led to believe that the amount on the payslip was the wage because it was on a payslip, much the same as when I was just an employee. And I was also led to believe that because the amount of £675 per month falls under a £10,000 per annum, that it wasn't liable for tax. Then the rest of the monies paid in was dividends which, because its a limited company falls into corporation tax. Please bear in mind that this is only what I've been led to believe, whether its true I am unsure now. As the majority shareholder seems to be using at some sort of weapon against when she gets angry that I owe personal tax because I'm self employed? I am not allowed to see the business financials or have dealings with them in any way i.e. Bank accounts etc, the only thing I am allowed to see are the company accounts.An important point to make is the majority shareholder is my mother, so I have believed the above was accurate, but now she is saying I owe a lot of personal taxes because I have been thinking of resigning because of the treatment I'm enduring.I hope that answers everything. Thanks
Expert:  Sam replied 2 years ago.
Hi Victoria
The position regarding the salary is correct - as the personal allowance is now £10,000 a year this allows up to £833 to be paid a month and there be no tax liability, as per year, that is below the threshold.
For 2013/2014 this was £828 a month and so on (as the personal allowance threshold changes
However if you are being paid £4000 a month - of which £675 is the salary - this means you are being paid £3325 net dividend (the company retains 10%) and therefore your total income for the year is £48,000 net and £
The problem here is not anything the company are doing wrong, but that your total income sees you in the 40% tax bracket (as the current threshold for this tax year is £41865) so some of the dividend money you are paid should have suffered some more tax (in fact approx. £52433 gross)
So you should have advised HMRC that you had this additional income so you could be issued with a self assessment tax return each year to fill in, to pay this additional tax.
I would be inclined to get in touch with HMRC as soon as possible and ask for them to issue you with a 2012/2013 and 2013/2014 self assessment tax return - and then you can sort out what tax you owe.
Let me know if you have any follow up questions
Thanks
Sam
Customer: replied 2 years ago.
I actually did go to HMRC and request a form, because I was just so unsure, the accountant asked for it, so I have it him and ever since I've not heard anything since. But I have had no further correspondence from HMRC.Can I ask how much you think roughly I will need to pay? At least I know and I can move forward more positively in sorting this out.Just a quick point, does it make any difference that I actually have a signed contract of employment, and its an employed contract, and is states within it that my salary is £4,000 per month.
Expert:  Sam replied 2 years ago.
Hi Victoria
Thanks for your response and apologies for the delay - I was on a call with a client.
When did you give this form to the accountant, is this your own accountant or the company accountant?
If your employment contract states £4000 salary - then you will owe considerably more tax - as this is what should have been included on the payslip each month.
I assume this was queried by you when you received your first pay - as the payslip did not match the money you received - do you have anything in writing to further support the fact that the money over and above the £675 was dividends??
Did you alert HMRC of this at the time? That dividends were to be received, what did the accountant/majority shareholder advise was happening, and why?
Its not up to HMRC to chase you for your self assessment tax return (although its unusual they haven't) However did you give authority to the accountant to act on your behalf, if so they may have the penalty notices for the late tax return.
I can advise a rough calculation of what you owe, if you can advise
1) What date you started in 2012
2) The total income you were paid in 2012 (from all sources)
3) What tax was deducted in 2012 from all sources
4) The total income paid in 2013
5) Any tax paid in 2013
6) What income you were paid in 2014
7) Any tax deducted 2014
8) Any company benefits provided, such as company car and the figures of those benefits
9) What year tax return you requested from HMRC
I can then advise approx. figures
Thanks
Sam
Customer: replied 2 years ago.
To be honest, my employment position never changed, my contract of employment is still effective and I am bound by it. I have take the ESI test on HMRC to confirm my employment position and I am classified as employed.
My contract states £4,000 net, so I do believe from HMRC and ACAS advice that I am still classified as employed, ACAS stated that even with becoming a director on the books and share holder does influence my employed or self employed status.
I think what has happened is when I wanted to take on a mortgage I asked for evidence of my pay and the accountant then requested a self assessment form because he said it would be the only way to provide evidence. This was 4-5 months ago, but in reality I believe they clearly haven't been putting my contributions aside and now trying to put it onto me personally. But to be honest if I was self employed I would not be bound by my contract of employment, I wouldn't receive paid holidays and I would be able to work for other companies, not just my mums on the set hours and location stated in my contract.
I have also never signed a new agreement to say that I've gone self-employed or to any of that nature.
What are your thoughts?
Expert:  Sam replied 2 years ago.

Hi

Thanks for your response

The fact you are an employee is not in dispute, and as a shareholder and/or director you are entitled to salary and dividends - as are directors on the company, so that is not an issue either.

I agree 100% that you are an employee, however you should have been declaring to HMRC the income that was over and above the payslipped salary - as you have not suffered any tax, and should have. I am trying to establish why your employment contract states salary of £4000 a month, and then this actually been paid (according to you) as just £625 salary and the rest as dividends, so, as this is not what the employment contract was suggesting. I am just trying to establish whether this queried by you with the company, as surely when you received the first payment, and this did not tally with the payslip you asked after this fact?

Self Assessment is also for employees (its not just for the self employed, which is what you appear to think) Aone who receives more than just a salary (for which you fall into this category) or other incomes along with salary - such as rental income, investment income etc (which does not appear to apply to you)has to complete an annual tax return, so that HMRC can review a total income position, and despite the fact you wanted to make a mortgage application, you should have been completing self assessment from the time this arrangement began.

And as you are now late with doing this for each tax year since this employment began. this needs to be rectified.

I can also advise this is NOT the accountants or the company's fault - this is down to you to have been advising HMRC (through the completion of self assessment tax returns) a full declaration of your income so any further tax (due to the fact you ARE a higher rate taxpayer) was calculated and paid over to HMRC

If you wish to discuss this further, and if it would help, Just Answer offers additional services. So, if you would like to discuss this on the telephone, (I am based in the UK) then I have sent an additional services request, which you can either accept, and call me, OR reject the request and I am happy to continue to communicate through this medium.

I am still happy to advise an approx. figure of what you owe HMRC, but would need the figures requested in my previous response

Thanks Sam

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