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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi, I am just completing my tax return for 2012/13 which has

Customer Question

Hi, I am just completing my tax return for 2012/13 which has to be in by 31st January online.

I'm a paid employee, who receives an annual base salary but in addition commission payments for the sales role I perform. These are not paid at regular times, only once the client payment has cleared with my company. Often these are paid to me a number of months after the sale has been invoiced by my company. Thus commission payments received from previous tax year’s invoicing fall into the following tax year’s pay period.

My total pay over the last 4 years has never been over 100k but for 2012/13 a number of payments, that were actually invoiced during th2011/12 tax year got paid into the 2012/13 year, thus taking my pay over 100k. Total salary payments for the 2012/13 year amounted to £128k, which I believe removes my personal allowance?

My question is, can anything be done to recognise the fact that some of these payments that take the pay over the 100k threshold, actually relate to business activity for the previous tax year and thus reduce my earnings for 2012/13 so I keep my personal allowance?
Submitted: 4 years ago.
Category: Tax
Expert:  TonyTax replied 4 years ago.

Whilst I sympathise, I'm afraid that you have to be consistent in how the commission is disclosed by your employer in its year end payroll submissions and by you in your tax returns. Unfortunately, HMRC hate inconsistency and the tax rules cannot be made to measure to suit a particular agenda which may only apply for one tax year.

Normally, the tax point (the pay date) for salary and ancillary payments such as commission for example is when the payment becomes due to the employee. Since you appear to have an agreement in place that defers payment of your commission until your employer has been paid, it will open up a whole can of worms if you or your employer try to change what has already happened.

I realise that this is not what you wanted to read. Let me know if you have any further questions.
Customer: replied 4 years ago.



I kind of guessed that might be the case, so in this instance I have to just swallow loosing the personal allowance and hope for 2013/2014 the timing of payments of doesn't take me over this again?


In addition, is there anything I can do now that would allow me to reinstate the personal allowance, I pay into a private pension for example?



Expert:  TonyTax replied 4 years ago.

I'm afraid that you cannot backdate pension contributions. You can, however, use unused pension allowance for the three previous tax years in the current tax year. This might be useful if you are coming towards the end of the tax year and your earnings are over £100,000. You or your employer could make a one off contribution subject to the limit to reduce your "adjusted net earnings" which is the figure used for calculating eligibility for the personal allowance.

You can read about pension contribution relief here and here and about adjusted net income here.

Customer: replied 4 years ago.

Thanks, good point about the current year.



As I'm filling in my online form I'm noticing a discrepancy between the tax I’ve paid on my P60 and what the online computation is working out I should have paid, a difference of 3k I appear to owe.


I presume this might be due to an in-correct tax code, though I don’t recall receiving a notice of a change for 2012/13, would my employer have received one if it changed automatically to adjust this if it needed doing?


What are the implications now if via PAYE, I’ve underpaid to the tune of 3k

Expert:  TonyTax replied 4 years ago.
You will be underpaid because your tax code probably gave you the personal allowance for 2012/13 and that is worth £3,242 in tax terms (£8,105 x 40%). Whenever a tax code is changed both you and your employer should be notified.

As you did not submit your tax return by 30 December 2012, any underpayment is payable on 31 January 2014. Underpayments can only be collected over twelve months through a tax code if the return is submitted by 30 December following the end of the tax year and the underpayment is under £3,000.