Hi - I need some advice on how to tackle a situation I find myself in.
Background - I am an IT contractor and I have a Ltd co. with myself as the Director and spouse as 50% as shareholder. I also paid my spouse a salary of 6k in the year 2010-2011. The company was set up in March 2010, so till now no accounts, returns have been submitted.
My spouse received a letter from HMRC telling her that her tax code was being changed. The letter exactly as it is worded below
Your personal allowance 7475
employer benefits -2173
tax free amount 5302
If we have got this wrong, or if your circumstances have changed and you think it could affect the tax you pay, please tell us. Our phone number and address are above. We turn 5302 into tax code 530L to send to xxx ltd. They should use this code with the tables they receive from HM Revenue and Customs to take off the right amount of tax each time they pay you. We tell xxx what your tax code is but we do not tell them how it is worked out.
And then a note which got my attention
We have to see if anything should reduce your tax free amount. You have to pay tax on the value to you of benefits, or expenses, provided by your current or previous employer. If want to know precisely how we have worked out 2173, please contact us.
The reason I think this is fishy is - the company has not filed any returns so on what basis have the worked out 2173 as deductions from her personal allowance. Also, she has never claimed any benefits / nor she has any other source of income.
I called my accountant, but he is away on holidays and will be returning in 2 weeks time. I am not keen to start a conversation with HMRC where they will start asking all sorts of irrevelant question. I wonder if they are on a fishing trip to glean some information that they can use later i.e for S660A / IR35 etc.
Any opinions, comments, advice most appreciated.
Cheers
Background - I am an IT contractor and I have a Ltd co. with myself as the Director and spouse as 50% as shareholder. I also paid my spouse a salary of 6k in the year 2010-2011. The company was set up in March 2010, so till now no accounts, returns have been submitted.
My spouse received a letter from HMRC telling her that her tax code was being changed. The letter exactly as it is worded below
Your personal allowance 7475
employer benefits -2173
tax free amount 5302
If we have got this wrong, or if your circumstances have changed and you think it could affect the tax you pay, please tell us. Our phone number and address are above. We turn 5302 into tax code 530L to send to xxx ltd. They should use this code with the tables they receive from HM Revenue and Customs to take off the right amount of tax each time they pay you. We tell xxx what your tax code is but we do not tell them how it is worked out.
And then a note which got my attention
We have to see if anything should reduce your tax free amount. You have to pay tax on the value to you of benefits, or expenses, provided by your current or previous employer. If want to know precisely how we have worked out 2173, please contact us.
The reason I think this is fishy is - the company has not filed any returns so on what basis have the worked out 2173 as deductions from her personal allowance. Also, she has never claimed any benefits / nor she has any other source of income.
I called my accountant, but he is away on holidays and will be returning in 2 weeks time. I am not keen to start a conversation with HMRC where they will start asking all sorts of irrevelant question. I wonder if they are on a fishing trip to glean some information that they can use later i.e for S660A / IR35 etc.
Any opinions, comments, advice most appreciated.
Cheers
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