Limited company director - other earnings in the tax year

Limited company director - other earnings in...

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New client is a limited company director since the end of April 2015.

Her last day of employment with previous employer was 31/3/15. P45 issued. 

In April 2015, the previous employer paid her a substantial PILON which is taxable in 2015-16. They used tax code 0T M1 so significant tax has been overpaid. The employer provided a "statement of earnings" but would not issue a further P45, despite obviously having to put the employee back on the payroll.

I am now trying to set up the payroll for her limited company - would like to pay a small salary of £486 per month from May through to March 2016 to keep up the client's NI record. 

In doing so, I was hoping that the tax refund due from the April leaving payment would be generated through the payroll, but because the previous employer used tax code 0T M1, Moneysoft "greys out" the section where I can input the previous pay and tax details.

Would anyone have any suggestion of how I can get Moneysoft to recognise the April payment, and therefore generate the tax rebate through the future payroll submissions this year?

Replies (5)

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By ShirleyM
04th Jul 2015 11:52

I'm not up to date with payroll legislation

I thought you only used an earlier tax code if you had a P45 from the same tax year, otherwise you use the tax code as suggested by the new starter checklist/P46. If this is their only employment then they should be given the standard tax code, shouldn't they?

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Replying to DJKL:
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By sparkler
04th Jul 2015 14:46

Standard tax code

ShirleyM wrote:

I thought you only used an earlier tax code if you had a P45 from the same tax year, otherwise you use the tax code as suggested by the new starter checklist/P46. If this is their only employment then they should be given the standard tax code, shouldn't they?

I would agree Shirley, that the code resulting from the starter checklist would be the standard tax code, assuming that the client is not considered to have had any other employment during the tax year (even though she was paid by another employer during the tax year) but I would have thought that there would be some sort of mechanism through the payroll by which the overpaid tax in Month 1 can be rebated to the employee. 

Or does she have to wait until the end of the 2015-16 tax year, and reclaim the overpayment of tax via her self assessment tax return?

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By Marion Hayes
04th Jul 2015 14:49

You shouldn't even try

Late payments have their own set of rules.

She was not employed in April so you will not get a P45 but figures will have been reported.

You need to ring HMRC to ask for a cumulative code including previous pay and tax details to be issued

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By johngroganjga
05th Jul 2015 07:17

Careful what you wish for
Have you thought about where the cash to refund the overpayment will come from?

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Replying to pauljohnston:
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By sparkler
05th Jul 2015 15:01

HMRC rebate

johngroganjga wrote:
Have you thought about where the cash to refund the overpayment will come from?

Of course - I will apply to HMRC for advance funding of the overpayment. I have used this service successfully on many occasions - HMRC are normally very quick to send the rebate to the new employer. 

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