Anyone heard of this loop-hole?
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I've got a friend who moved to england about 7 years ago and since then has had many jobs and never got his tax affairs in order. He's overpaid tax most years due to wrong tax codes being used and I'm now trying to do repayment claims for him.
The problem is that for a few months in 2002 he worked through an agency, but I've not seen payslips like this before!
They're addressed to 'Mr Blogs, XYZ limited' to start with. My friend thought that 'XYZ Ltd' was a foreign company but I've had a look on companies house and it's showing as a british company with no foreign dealings, and has been registered since 1990.
The payslips detail hours worked and the rate of pay. There's no Tax or NI deducted, but in the 'year to date' section there's a small amount of VAT which has been added to his weekly pay :?
He's not had any P60/P45 or other summary statements, and can't find any other paperwork from them.
He said that it there was some loop-hole that's since been closed and knows that it caused a lot of confusion.
The thing is that the only other income he had for 2001/02 was from one employment and if all of this agency work should be declared as dividend income then he'll be able to claim back most of the tax suffered on the normal employment income.
So has anyone come accross this before and know what it is? does it sound like an off-shore scheme to you?
Any help appreciated
The problem is that for a few months in 2002 he worked through an agency, but I've not seen payslips like this before!
They're addressed to 'Mr Blogs, XYZ limited' to start with. My friend thought that 'XYZ Ltd' was a foreign company but I've had a look on companies house and it's showing as a british company with no foreign dealings, and has been registered since 1990.
The payslips detail hours worked and the rate of pay. There's no Tax or NI deducted, but in the 'year to date' section there's a small amount of VAT which has been added to his weekly pay :?
He's not had any P60/P45 or other summary statements, and can't find any other paperwork from them.
He said that it there was some loop-hole that's since been closed and knows that it caused a lot of confusion.
The thing is that the only other income he had for 2001/02 was from one employment and if all of this agency work should be declared as dividend income then he'll be able to claim back most of the tax suffered on the normal employment income.
So has anyone come accross this before and know what it is? does it sound like an off-shore scheme to you?
Any help appreciated
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Comments
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Re:Anyone heard of this loop-hole?
I've only seen "payslips" like this when the worker is set up as a limited company and doing temp/contract work via a recruitment agency.
This used to be a popular loophole before IR35.
Is Mr Blogs your friend? Was he listed as a director of XYZ Ltd on the Companies House records.
Another possibility is that your friend was placed by Agency A, to Agency B, to work at the premises of ABC Ltd. In this case, Agency A could be XYZ Ltd. However I don't think this could be the case with your friend because he would still have proper PAYE payslips from Agency A.
As you say the amount of VAT is small, I think you are saying it is a lot less than 17.5%.
I don't know much about this without lloking it up, but in some circumstances a recruitment agency is allowed to charge VAT on the profit margin only.
Sorry this is a bit vague, but it might help you to move forward.
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Re:Anyone heard of this loop-hole?
thanks,I've only seen "payslips" like this when the worker is set up as a limited company and doing temp/contract work via a recruitment agency.
This used to be a popular loophole before IR35.
what you say there does make sense, but was IR35 not around in 2002?
yes, 'Mr Blogs' is my friend - I didn't check the directors of the Ltd Company, even if he was he'll not be any more so would i be able to see his name?
and regarding the vat, i was being a bit silly there, it is at 17.5% of all 'wages', it's just that each week they've put that week's figure in the 'year to date' box, not the cumulative VAT figure.
thanks again
jodie0 -
Re:Anyone heard of this loop-hole?
Yes, IR35 was introduced in 2000.
It sounds like you need to ask Mr Blogs as few more questions about his connection with XYZ Ltd.
I don't really deal with personal taxation so I'm not going to say any more, though i am really curious so I'd love to ask loads of questions and I would be interested to hear the outcome.
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Re:Anyone heard of this loop-hole?
i know, I'm really curious too! he's trying to find old paperwork for it, but has just moved house so I don't know how sucessful that's going to be.
I have asked him lots of questions but he doesn't know/remember very much.
maybe i should phone the 'payroll helpline' number printed on the bottom of the payslips and ask them what it was all about
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Re:Anyone heard of this loop-hole?
Hi
If you look at Companies House website, you will be able to see all present and dissolved companies, but I’m not sure if the names of directors are displayed on line. You can get this information, but you will probably have to pay a charge.
If your friend as no idea about 'XYZ ltd' (I'm assuming you used that for anonymity and it isn’t the real name of the company!!) then I doubt he has ever been a director.
Other than PAYE, I don’t know much more than the basics of personal tax. However, on the surface it looks like the agency may have paid your friend as if he were a ltd company/supplier to avoid paying employers NIC. Perhaps this is why they added on the VAT. This brings up another dubious issue, were they claiming back VAT without being issued VAT invoices?
Neil
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Re:Anyone heard of this loop-hole?
Hi Jodie
I would definitely phone the number on the payslips - please keep us up to date with progress - sounds a fascinating one!
Claudia
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