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Sam, Accountant
Category: Tax
Satisfied Customers: 14154
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i am a plastering contactor, in june this year i lost my hmrc

Customer Question

i am a plastering contactor, in june this year i lost my hmrc gross status and have had my payments deducted by contractors at 20%, since then my tax is right up to date ( as of yesterday my hmrc balnce due was £620, i have worked for 1 contactor who mow wants to deduct retrospectfully tax from me for payments made in june and july, even though i have pleaded with him that my tax is up to date. can the contractor deduct tax retrospectfully from previous payments, i have checked on hmrc website and it states they can only deduct off current payments.

this contractor owes me £9700 and wants to offset this against tax for p previous payments

i think this is wrong

please advise asap

Submitted: 4 years ago.
Category: Tax
Expert:  Sam replied 4 years ago.



Thanks for your question


A the gross status was removed in June, then the contractor should have made payments with deduction of tax for earnings from June onwards as per HMRCs letter that would have been issued when the gross status was first withdrawn.

However this usually applies 90 days after the status has been removed, giving you time to appeal and possibly have the gross status reinstated.


So what the contractor is proposing does not appear to be accurate, but did you appeal against the removal of gross status at the time and what was the outcome of that appeal, was gross status awarded back to you, or did HMRC refuse your appeal ?


Its not enough that you now have your tax up to date, its up to HMRC to await a further application for gross status (which can only be made one year after the date the status was removed) or a successful appeal (either as agreed by HMRC or through tribunal)


Please advise further






Customer: replied 4 years ago.



i didnt appeall against the gross status, i was more than happy to have tax deducted, but my tax is up to date and i have explained this to the contractor.


my question is


can the contractor retrospectfully deduct tax ?



Expert:  Sam replied 4 years ago.



No this is incorrect he CANNOT make deductions from retrospective payments, if they have already been made, only from payments made after the instruction to cease using gross status has been received.

This contractor would have received a letter detailing a set date (60 days from the date of the review so this would suggest any payments within/after Aug 2013) and I would insist that he shows you this letter and if unable to produce this, then phones HMRC for clarification of the effective date.

Link here for contact details



He cannot act as HMRC collector, its not within his remit to do so, the only time he would be permitted to do this, is when he failed to make a deduction that he should have, and this is discussed and agreed with you, that the additional tax position is rectified from the next x payments.



If you disagree (which you do), he cannot take any more than the required % against the payment due to be paid (so in this case 20%) and then its between you and HMRC to settle any bill after 5th April (if one arises after expenses, and Class 4 national Insurance has been taken into account)


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