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suri77
5th February 2011, 10:31
My umbrella company Parasol - has a 'helpful' guide about expenses, only I dont think it's that helpful. They advise 'locking' payroll and to avoid being paid twice in a tax period, this is the bit which is really confusing me! what are tax periods and why or how could I avoid being paid twice? I understand that locking my payroll would maximise my tax relief by using my expenses to increase take home pay but i really am confused about tax periods as have never heard of them before. Any advice appreciated.

Thanks

Waldorf
6th February 2011, 10:01
I guess that they are referring to the payroll tax periods, I assume they run a payroll each week and for some reason think you may be paid twice in a week? Never used an umbrella so not exactly sure how they work but give them a call and ask.

RichardCranium
6th February 2011, 13:05
If you submit your timesheet to Parasol before you get your expenses entered, they will run the payroll not allowing for those expenses. So you will get the expenses in the next pay run instead. Just like with any other employer.

As far as I could work it out, there are three reasons for 'locking' your payroll.

a) you are going on holiday and want to have as much money to take with you as possible. So, you apply the lock to stop them running the payroll, wait for month end, enter all your expenses for that month, send in the receipts, get the expenses approved, then release the lock to get the payroll run including all those expenses. This only works if you are going on holiday in about the 2nd week of the month. At any other time it just results in you not being paid before going on holiday.

b) when you are approaching the end of your contract, if you have lots of expenses, they may exceed you final pay's tax. If so, you will want to make sure you have enough weeks of pay held up to ensure the tax is greater than the expenses for that final month. To do this, lock the payroll a month or so before the end of the contract and release it once all your expenses are approved. Of course, if your contract ends early, you will end up with unclaimed expenses that will not be paid unless you take out another contract through Parasol.

c) Parasol will not allow you to claim expenses outside of the tax year they apply to. So, your expenses for 31st March MUST be applied to the relevant March period. To get your expenses in, approved and so on takes time. So it is worth locking the entire March period until the end of April so you get all those expenses entered and approved.

If you keep a healthy balance in your current account, and you are confident your contract will not be terminated early, then you only need to lock the payroll at financial year end and toward the end of the contract.

How many weeks you should lock depends on how much expenses you are claiming. If you are living out of hotels or doing lots of miles every day, then it is worth keeping a few weeks locked all the time. Is it a nuisance and a faff? Yes. Is there a better way? Go LtdCo.


Their documented explanation of why you should lock the account made no sense to me at all. The shorter definition under "Manage Account Locks" makes more sense, but gives no proper explanation:


A Lock is used to hold any payment being made to your account. Locks are typically used to hold your payroll until your business expenses have been submitted thereby ensuring that you get full benefits from your business expenses.

LisaContractorUmbrella
7th February 2011, 09:14
I think there are two different issues to address here:

The lock is used to ensure that any expenses you have in a period are processed with the payment of your invoice. Your expenses are a tax benefit and will reduce the amount of tax that you pay; saying that, you should only ever claim for those costs which are allowable under HMR&C rules.

The second issue seems to refer to more than one invoice being processed in the same payroll period. If your umbrella company receives payment from your agency on 7th of February, say, and then again on 15th February, and you are monthly paid, you will have received 2 payments in the same payroll period (which runs from 6th of one month to 5th of the next). In this instance, the only way of processing the two payments is to 'roll-back' the first payment i.e. delete it from the payroll system and then add it to the second payment and process the two together; you will receive the difference between the net of the first payment and the net of the second. The reason that your umbrella company may be advising a 'lock' is because a tax free allowance can only be applied once in any payroll period and therefore the tax paid on the second payment would be higher than that on the first. However, this would mean holding the second payment from 15th February to 6th March.

Steven@Parasol
8th February 2011, 10:21
My umbrella company Parasol - has a 'helpful' guide about expenses, only I dont think it's that helpful. They advise 'locking' payroll and to avoid being paid twice in a tax period, this is the bit which is really confusing me! what are tax periods and why or how could I avoid being paid twice? I understand that locking my payroll would maximise my tax relief by using my expenses to increase take home pay but i really am confused about tax periods as have never heard of them before. Any advice appreciated.

Thanks

Morning all

I can't really add to anything to the points above but if you have a question specific to yourself Suri77 you can PM me here or email me at steven.proud@parasolgroup.co.uk and I chase it up for you.

Steven@Parasol
8th February 2011, 10:33
I just wanted to add that we are currently adding the tax periods to our online portal. They don't always correspond with the calendar months so hopefully this will help make things clearer.

We always appreciate the feedback and try to act on it where we can.

LisaContractorUmbrella
8th February 2011, 11:07
I just wanted to add that we are currently adding the tax periods to our online portal. They don't always correspond with the calendar months so hopefully this will help make things clearer.

We always appreciate the feedback and try to act on it where we can.

Are you refering to payroll periods Steve?