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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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1. I received a notice of underpayment of Tax 2013-2014 of

Customer Question

1. I received a notice of underpayment of Tax 2013-2014 of £2962.60 I had two incomes (occ pension and salary) It appears both applied PAYE code for full tax free allowances.
Do I have any re-address for this, as both incomes were paye and recored on my NI number.
2. I am currently employed by an umbrella company on a 24 month contract, this period ends in Sept 2015. But I have been advised that there is still work to be completed. I have also been advised by the umbrella company that at that time I will be subject to IR35. and will no longer be allowed to offset tax with expenses for travel and subsistance. Is this correct and if I change to a ltd company would this still apply.
3. My expenses are incurred predominantly by travel, as a result my umbrella company (EDEN OUTSOURCE) regularly carrys forward approx £1200 per month in expenses that have not been used to offset tax. Considering the my contract ends in Sept 2015, or If I continue working can I use the unclaimed expenses post september to off set my salary.
4. Or can I use the amount carried forward to offset the amount quoted in Para 1 above.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.
1. Not quite what happened; both payers would have used the codes provided by HMRC. In such cases there is always a danger that two tax offices included a personal allowance in each code. You must always check tax codes when they are notified to you and request amendments if they are wrong. I regret to have to inform you that you have no redress in this matter and must repay the underpaid tax to HMRC. However, it is under 3K so you can request that it be recovered through your 15/16 r=tax code which will spread the load.
2. It sounds as though the umbrella company has little knowledge of taxation. IR35 applies to a company where your connection therewith is one likely to attract PAYE attention which is what is happening anyway. Reasonable Travel and subsistence refunds are outside the scope of UK taxation in any event and should be paid without deduction of tax.
3. I am at a total loss as to what Eden Outsource is actually doing. Any payments due to you for employment should be subject to PAYE. Any travel and subsistence should be refunded gross, they are outside the UK taxation system.
4. I can see where Eden are going as your contract is over long it should be paid under PAYE, but from what you indicated in 1 it already is. Wages and Subsistence refunds are entirely separate streams; one is income and subject to UK Income Tax and the other is a pure refund of necessarily incurred expenses and outside the UK taxation system.
I do hope I have been able to shed some light on your position.
Customer: replied 1 year ago.

I am allowed to claim 10,000 mile at .45p and .26 after this.

Each month I submit travel expenses with supporting receipts, the travel is from my home address to the place of employment (340 mile round trip).

I am informed that the expenses are used to offset the tax on my salary.

I understand that this is different from the necessary expenses incurred whilst actually at work and using my own vehicle, which is what I presume you are referring too.

I do not understand why I have expenses carried forward each month. What happens to this amount after september. Is it written off, despite I actually incurred the expense.

I do not understand

Customer: replied 1 year ago.

I have reponded to your answer but not received a further answer

Expert:  bigduckontax replied 1 year ago.

The maximum you can claim over 10000 miles is only 25p per mile; presumably you have made a typo.

You have no entitlement to travel and subsistence expenses for what amounts to residence to place of duty activities. Any such refund is taxable at your marginal rate.

I am astounded at such a tax treatment. It is little wonder that HMRC view umbrella companies with the deepest suspicion. The residence to place of duty element should pass through the PAYE system as income.

You are correct in your surmise. As an employee you may only have one place of employment and any travel therefrom on business may be refunded outside the tax system.

I simply have no notion what the umbrella company is doing and I am not surprised that you do not understand; nor do I!

You must take the whole matter up with them, it appears to be accountancy of the Mickey Mouse and Donald Duck variety which should not be tolerated for a moment. You are in danger of tax under deductions and losing genuine travel and subsistence refunds into the bargain. The umbrella company may think they know what they are doing, but neither you or I have any idea. I would be inclined to sharply get this sorted out and if you continue to receive woolly responses then sue for the sums withheld in the Small Claims Court.

That should concentrate minds in the umbrella company somewhat as there are no costs awarded in such hearings and it will probably cost them 4 figures just to put in a defence. Actions for underpaid wages are invariable successful and all but incapable of defending. I know, I have done one once.

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