Help please!

turbo_sammie

I've agreed to do my friends tax return, but it's looking far more complicated than I initially thought! Here's the situation :

Employed Apr-Sep
Self employed contractor Oct-Dec
Registered as LTD Jan-Mar

I can't work out how to calculate his tax owed for his SA. I've got his payslips and his invoices - do I calculate his gross income Apr-Dec and deduct his personal allowance and any tax/NI already paid when he was employed? I'm getting a negative figure for this so I'm sure I've done something wrong somewhere!

If anyone can help I'd greatly appreciate it!

turbo_sammie

Or am I making this too complicated and actually only need to calculate his tax and NI for Oct-Dec?!

MarieNoelle

You need to declare income from all sources on a SATR. The personal allowance applies to the total income received in the tax year.

you would need to fill in 2 employment pages from P60/P45 and P11D ( he was employed from April to September then employed by his Ltd co from January to March)
Then do his self employment accounts and fill in relevant pages.
Are you using your own software or HMRC SATR? In any case it should calculate the tax and class 2 and 4 NIC for the self employment part. Are you familiar with annual maxima?

If he has received dividends from his limited co they also need to go on the relevant pages.

If you don't feel confident with this you should probably decline to handle this yourself or at least have your work checked by someone with more experience. It's in your friend's best interest.

TreadStone

I'm seriously not meaning to be flippant but as a Licensed Member should you not know how to deal with this ?

turbo_sammie

Thanks for the advice everyone, I think I know where I'm going wrong now!

And thanks for your comment TreadStone, but this is my first tax return I'm doing as a licensed member so wanted to make sure I was doing it correctly. I came here for advice, not condescending remarks.

TreadStone

turbo_sammie said:

And thanks for your comment TreadStone, but this is my first tax return I'm doing as a licensed member so wanted to make sure I was doing it correctly. I came here for advice, not condescending remarks.

That's the response I expected.

You read the comment as condescending but actually it may prove helpful going forward. Before I even thought about applying to become a Licensed Member (or MIP at that time), I wanted to make sure I had the most of the basics covered. I also had over 20 years experience in practice just for good measure.

It's not about it being your very first self assessment, it's about having the basics in place to feel confident enough to be able to handle this scenario in the first place.

Sometimes I just feel, rightly or wrongly, that some want the letters first and look to obtain the knowledge later - and that's not aimed directly at you Turbo.

We are a friendly bunch though - honest

MarieNoelle

TreadStone said:

You read the comment as condescending but actually it may prove helpful going forward.

@turbo_sammie we appreciate you come here for help and this is what the forum is for. But please do take the advice given as constructive criticism. Just take a look as some other accountancy forum and you will realise there was nothing condescending in @TreadStone's comments.

burg

I must also echo the comments above.
We all start somewhere and still need advice and guidance as time goes on.
What we need to bare in mind is are we in a position to be able to advise the client (friend or not) professionally.
The circumstances of your friend are quite common in everyday clients and you need to be able to understand fully how this works. It may be the wording of your question but it comes accross that you are not aware of how to calculate income for a tax return from the various sources. If this is the case and you do not know what income to be looking out for then you could easily advise the client incorrectly.
Lets take an example. The client started a limited compnay in the tax year. You should straight away be thinking what types of income could he have from the company which could be taxable on him personally? Mainly salary and dividends but there could be others that have an affect such as pension contributions, use of home rental agreements or benefits in kind.
If you are advising the company then all of this becomes more important again as you need to know the pro's and con's of all the various options relating to running a company. It goes on in terms of should they be VAT registered and on what scheme. should they be operating a payroll for themselves and given their individual circusmtances what is the optimal level.

Now I'm not trying to say this is not something you can do but you have a duty by being a licensed member to act within the capacity of your knowledge or the support that can be given to you allow you to learn this. If you have a great mentor who has the time to overview this then you can learn.

If you are not close to 100% in respect of your knowledge of the likes of the above then you need to spend more time getting that experience. The qualification is very little without the experience that goes alongside it. Tax is a very fast moving environment and you need to have a very good grounding of the basics before advising people as they will throw quesitons at you and you need to be able to answer the majority of them without constantly needing to do research.

The number of years experience you need depends. My practice experience was only around 6 years but in small practices with lots of variation in the workload. I was sure of my understanding of the basiscs and as that has been tested my knowledge and experience has expanded further and my services are more far reaching than before.

I wish you every success in developing a successful practice but please ensure you do get plenty of experience in the type of scenario you asked about as you need to fully understand this in order to be able to make a long term success of things.