Accounting for SMP of a self employed person

LynWest

I have a self employed person who received SMP ( well equivalent self employed benefit). This is my first year with the client and i am awaiting the records from her previous accountants. I have asked my client how much she has recieved in SMP and she had looked through her records and says that she cannot find out what it was. I have asked her to look at her private bank account where payment went into to see the amounts go in there. But she says she doesn't have these records.

She has just phoned her old accounts to ask them if they have the letter she recieved to say how much her SMP was. The accountant has made a note to say that it was not put on the last tax return as it wasn't taxable.

When i have had an employed persons tax return. Their P45 includes any maternity pay and therefore gets entered on their tax return. As i understood it SMP is a wage replacement and therefore is taxable, so i cannot see why the prior accounts would disccount the income. Am i missing something? if it isn't taxable then does it need to be declared for her tax credits too? Confused!:001_unsure:

groundy

SMP is taxable. I can't believe the accountant thinks otherwise. I had this with a client recently who was certain it wasn't, until I explained that when receiving SMP in employment the amount is below threshold and therefore no tax is taken, however it is still taxable.

The SMP needs to be declared on the TR and added to self employed income.

LynWest

Thanks Groundy. I was convinced it was taxable but then when the prior accountant said that it wasn't i thought there was some weird rule that i was unaware of if you were self employed it wasn't taxable! Should have had confidence in my knwledge and that HMRC wouldn't be a generous to let us have untaxable SMP

Thanks again

LynWest

When i get the paperwork from the accountant i am going to see that the SMP was not included. Would you go back to HMRC and advise them of the error on the prior year or would you just get it correct going forward?

Bluewednesday

Might it be Maternity allowance rather than SMP? That is received directly from the benefits office and is non taxable.

LynWest

I shall check with my client, thank you.

uknitty

If you receive Maternity Allowance then it is not a taxable benefit.

If your client is self employed then she would definitely have had MA as there would have been no employer to claim SMP from.

http://www.hmrc.gov.uk/incometax/taxable-income.htm#2

groundy

Well I must have been having a bad day, yesterday! Didnt read OP fully and didnt realise you were talking about MA. Sincere apologies for advising on SMP and thanks to all that corrected me.