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Directors salary - tax credits conundrum

Directors Salary created as loss; now causing issues with tax credits as "salary" entered onto p60

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For the tax year 16-17, during my previous tenure employed as a ltd company director, a "salary" was declared for me and the other director. As I understand it, this was to create a loss to be carried forward against next years profit's. Unfortunately, "next year's profits" never happened, and I resigned in August 17.

All was well, until it came round to tax credits. I entered my income as Director for 16-17 as £0, because £0 was my income. It turns out that my P60, showing a "salary" of £8,064.00 means that I was overpaid tax credits for the 16-17 tax year and am to be charged £1300.

I am appealing this decision and have cobbled together the evidence I can. I have bank statements from my side (unfortunately not from the business side because of data protection and my former co-director being MIA since September). I also have a creditors note listing monies owed to me; a signed settlement agreement showing wages owed and Directors Loans Accounts statements from the other two years as a Director listing 'Wages owed...'. Unfortunately, after resigning, no company account info was submitted, so there is no Directors Loan Account statement for 16-17 showing 'Wages owed...'

In summary, is the evidence I have enough to overturn HMRC's decision? Is there anything I can do to increase my chances? Or, am I overcomplicating it and really there's a simpler way of getting the decision overturned?

A suitable direction from more suitable minds would be greatly appreciated.

Many thanks,

Hank

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By Tim Vane
17th Apr 2018 22:29

I'm not sure you understand what the word conundrum means.

You have no grounds for appeal that I can see.

The facts are that you received a salary from your employer, and this salary was credited to an account that the company held on your behalf. None of this is disputed, so what is there to appeal? The £8000 is money (earnings) that the company owes you, and this is a private matter between you and the company.

The exchequer wants back the money that you were wrongly overpaid, and you should forget the appeal and instead make a claim for the money that is owed you by the company.

The bank statements you mention will help prove that the company owes you money.

You might think about approaching the company with a proposal that you will allow them to pay you £1300 in full and final settlement of the £8,000 they owe you, which will allow them to clear the debt off their books for a reduced cost and at the same time will allow you to pay off the exchequer. If the company is not willing to do so you will presumably want to seek legal advice to recover what is owed. It looks like you are out of time to make a claim through an employment tribunal.

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