I’ve had a new client thrust upon me who is an associate dentist and I am unsure of the tax return treatment of the superannuation paid. I have read a couple of old threads on here but would be grateful if anyone could have a look at the following for me:
She received a monthly schedule from the practice. Her “associate fee” is 50% of the total taken and then superannuation and a small levy are deducted. She is paid the resulting net figure.
I have based the accounts on turnover being the 50% with superannuation and levy posted to drawings.
The superannuation figure deducted is 2195 and the levy 26.
Her SD86C form available on the Compass website shows employee pension contribution as 3579 and employers at 5504.
So this is where I get confused. I’ve read that two SD86C forms are issued – but surely the correct one is the latest available on the Compass website? Perhaps there is a variation for prior year adjustments which accounts for the difference?
Then on to the tax return … I’ve asked two accountants their view and they both say different things so hopefully someone here can clarify?
“Where the practitioner is an employee, they will make a superannuation contribution and the Primary Care Trust (PCT) will make a contribution”
And “Where a practitioner is self employed,they are responsible for making both the employee contribution and the employer’s contribution”
So my client must be classed as an employee and the PCT is paying the employer contribution as she does not seem to have been paying that share?
Then “As payments to registered pension schemes are made net of basic rate Income Tax, additional relief is provided by extension of the basic rate and higher rate band”
Presumably an entry on page TR4 – which box and what amount?
If Box 1, then (3579+5504) is grossed up at 20% so 11354 is shown in Box 1 – and resulting end tax calculation comes to 6001.36 (so basic rate limit is increased but as below higher rate tax band, there is no effect)
If Box 1, but only 3579 then grossed up to 4474 shown in Box 1 – resulting overall tax still 6001.36
If Box 3, 3579+5504 = 9083 added to allowances before tax is calculated so overall tax payable is 4184.76
If Box 3, 3579 only then tax payable is 5285.56
I have gone round in circles with this but hope someone is able to clarify. My reasoning is that the turnover/profit is shown gross (before superannuation is deducted) so no relief has been applied so far so it must be due somewhere! Box 3 seems the favourite but not sure if the 3579 or 3579+5504. Or should it be what was actually deducted 2195 rather than the figures on the SD86C?
Please somebody help! Apologies for the length of the post but just want to be clear about everything.
Thank you for reading.