P87 or Self assessment

clannnabanna

Hi,

Im a newbie & really need some help regarding HMRC money i am owed.
I worked for 17 weeks from 14th March 2011 - 8th July 2011 through a recruitment agency & an umbrella company (PayStream) who paid me for expenses every week (Mileage & food).
Anyway after the 4 months i left the job & had an "expenses pot" left to be collected (£1,900 or so). How do i go about getting that money back - do i fill in a P87 form or what?

You know how hard it is to get money outta the government, as they make you fill in mountains of paperwork - whereas if they want money of you its a simple case of an invoice & "pay before" !!!

Thank You

HappyMJ

You really should fill in a self assesment tax return for the tax year 2010-2011. It'll only cover 4 weeks of your employment so you won't get the full £1,910 back but if you paid tax last tax year then you will get 20% of the figure that you claim. So assuming your expenses were quite even over your employment you should get about £90 back last tax year and it will depend on what happens the remainder of this tax year as to what you get back next year.

Edit: That's quite high expenses. You would need to declare what paystream paid you taxed and untaxed and find receipts for all the food you bought and make sure your mileage diary is up to date and explains the purpose of each work related journey.

Notmyrealname

How do you end up with a cache of money? The umbrella company should be paying everything that is due. I think you misunderstand how it all works.

You submit receipts and mileage. These are used to reduce the tax you pay, not to refund you that amount on top of what you earn. You are then paid out your wage with the tax deducted that week based on the expenses you have claimed. You do not get any additional money, you merely pay no tax on that which you can claim as an expense. There is no pot of money which you are owed.

I will illustrate.

You work 40hrs a week on PAYE as a normal employee at £10/hr. You do 300 miles a week commuting.

Gross pay: £400
Gross pay for tax: £400
NI: £31.32
Tax: 51.25
Total Deductions: £82.57
Net take home pay: £317.43
Total amount payable: £317.43

How it works through an umbrella company. (Please note this is only a simple example. You would have meals and the umbrella company fee as well)

Gross Pay: £400
Mileage expenses : £135 (300 miles at 45p per mile HMRC rate)
Gross Pay for tax: £265 (£400 less £135 mileage)
NI: £15.12 (based on £265)
Tax: £24.25 (based on £265)
Total Deductions: £39.37 (based on £265)
Net pay: £255.63
Total amount payable £390.63 (net pay plus mileage expense)

And that is how you will have been paid every week. The expenses are not put in a pot for you to be paid out down the line, they are deducted from the gross pay to give you pay your tax and NI deductions are based on then the expenses claimed are added to the net pay to give you the amount you get paid into your bank every week.

clannnabanna

Yes that was it they said i had an "expenses pot" & that i wasnt doing enough hours a week to claim all the money i was owed & it kept building up (even though i was doing 39 hours a week)! The company was Paystream & they were supposed to pay me £10/day for food & 40p per mile (they pay for 20% of the fuel costs apparently). I was doing 350 mile per week & getting food twice a day (they allow you £10 per day as long as you are away from home for more than 10 hours per day).

But i was usally getting around £22 for food per week & £28 for mileage & the rest that i was owed was going into this expenses pot that stands at £1,910.

I would like to get this money back as quickly & easily as possible!

Do i need to fill in a P87 form or a self assessment form? Whichever it is could somebody please post it online here for me as an attachment?

Thank you very much

Notmyrealname

Can you post up the figures from a wageslip? I need to explain.

Ah, I've just checked. You got refunded £28 for 350 miles. That is correct. The 40p per mile is applied as an expense against tax so you don't actually get 40p in your hand, you get whatever the tax rate is that is applied to. So assuming normal 20% income tax, you only actually get back 8p per mile actual cash. So 350 miles at 8p per mile is £28.

The same applies to food as well. You don't get the actual full £10 but 20% of it so £20 a day claim over 5 days would see you getting £20 actually added onto your wage over what it would be on PAYE.

I think that how they have explained it to you and how it is laid out on your pay slip is confusing but from what you've posted about the mileage and the food, it appears you've been refunded what you should get.

Both the above are assuming you've earned enough money over the year to have a taxable portion of income enough to cover the expenses. If you don't you only get up to the amount you've paid in tax. If you have not even earned the tax free allowance in a year you get nothing no matter how much you submit. The umbrella company do not pay expenses the same as an employer would out of their own pocket. They are merely applied as a tax deductible expense.

I still think you are owed nothing and are misunderstanding what the agency is telling you. You may have a "pot" of £1910 worth of tax deductible expenses but this does not exist as a payable amount of money. It is merely "paper" accounting expenses you can offset against any other earnings over the year but even if you'd earned enough by April to pay tax over £1910, you would only see 20% of that amount. If you've earned less than £9385 taxable pay in 2011-2012 you'll see even less than 20% of that £1910. If you've earned less than £7475 you will see nothing at all. Any claim would need to be via a P87.

The reason they have not applied it is because if they had, it would have taken the hourly rate for your gross wage below the national minimum wage so they have deducted all the expenses they can whilst still keeping your gross wage at NMW. It isn't that you didn't work enough hours, its that you have not earned enough money. I will illustrate

You work 40 hrs a week at whatever.

NMW: £6.08 so for 40hrs that is £243.20

Now say you earn £400 a week for a 40hr week and doing 350 miles a week and with the meal allowance you have £240 of expenses.

Gross wage: £400
Expenses: £240
Gross wage for tax: £160
Divided over 40hrs = £4/hr.

As you can see by applying the full expenses it takes your hourly rate below NMW which they cannot pay as that is illegal. So what they have to do is use a portion of your claimable expenses to reduce it to the NMW. This means you will have an amount of expenses left over that are now unclaimed and it is this figure which goes into what they call a pot. The £1910 is the total amount of left over expenses they have not been able to apply without bringing your wage below NMW. It isn't a real amount of money but an accounting figure. They cannot legally apply them so you must claim them via P87. However as I said, you only get the tax relief back so you would get back what I said above - no more than 20% at best (assuming you're not a higher rate tax payer) dropping down to nothing at all depending on how much you've earned over the year.

HappyMJ

You have to be paid minimum wages though so Paystream are right. If you work for Paystream again you can claim the difference from them or claim the amount from HMRC but it's only 20% of whatever you have not claimed yet.....

I would if I were you speak to an accountant who can fill in a self assesment tax return for you they may be able to find other expenses that you can claim. Such as 45p per mile on mileage this tax year (rather than 40p) and other small things such as a £5 a day miscellaneous deduction for so working and staying away from home or even a £25 a night allowance for staying on a mates sofa.

You can only claim for 2010-2011 at this stage. You have to wait until next April to claim for 2011-2012. Anything could happen yet.

clannnabanna

So why id they tell me i would get paid £10/day for sustenance (they were just lying) i knew i shouldnt have trusted them as it was a scam. They would have been safer saying we pay you 8p/mile & give you £4/day instead of the big £10/day & 45p/ mile nonsense!!

So you are telling me that even though i have £1,910 waiting to be collected i cannot collect that amount in full?

Ps I really dislike all this hassle & endless paerwork to get money back you are owed - yet when they wasnt money of you it is so simple like!

Thanks for your help in this complicated ongoing matter.

clannnabanna

Also i was getting paid £10/hour & doing 40 hours per week. On top of that i was doing 350 miles per week & £50 worth of food every week (both out of my own pocket obviously).
Yet i never received a total pay (wage + mileage/food) of over £305...

They kept saying this extra money is going into your expenses pot & you are not doing enough hours per week to get it back lol

HappyMJ

clannnabanna wrote: »

Also i was getting paid £10/hour & doing 40 hours per week. On top of that i was doing 350 miles per week & £50 worth of food every week (both out of my own pocket obviously).
Yet i never received a total pay (wage + mileage/food) of over £305...

They kept saying this extra money is going into your expenses pot & you are not doing enough hours per week to get it back lol

That's right and Notmyrealname's edit explains it. I'll requote it for you.

NMW: £6.08 so for 40hrs that is £243.20

Now say you earn £400 a week for a 40hr week and doing 350 miles a week and with the meal allowance you have £240 of expenses.

Gross wage: £400
Expenses: £240
Gross wage for tax: £160
Divided over 40hrs = £4/hr. (this can't happen it must be £6.08 or more)

So you are paid £243.20 every week as wages less tax and ni and claim £156.80 in expenses and the remainder of £83.20 rolls over to the next week until you either earn more and/or spend less. Your pay is £305 as you have to pay Paystream's fees out of the £156.80 (you don't get that bit) and you also have to pay employers national insurance (also which you don't get) all out of the £10 per hour you are earning for paystream.

If you don't like it then set up a limited company and earn the entire amount gross. Save the tax money and pay an accountant to tell you how much to pay in tax and NI and wages to yourself. If you find that too much paperwork (it's loads more than an umbrella) then don't work as a contractor.

clannnabanna

Excluding my wage i never received anymore than £55 / week for sustenance & mileage combined..

I paid Paystream £27 per week out of my wage just, but they took TWO National Insurance's off me & a big chunk of tax.

I did 40 hours per week @ £10/hour and ended up with around £250 in wages after all the tax etc & about £45 / week in expenses just. So about £265 per week was an average weekly pay for me

Instead of 40 hours @ £10/hr = £400 x 0.8 (tax & NI etc) = £320 - £27 = £293 you would think but NOOOOOO chance did i ever get that much!!

So £293 + my expenses i was expecting at least £350/week all in. lol some chance!

Thanks for your reply by the way i'll have to look into this more.

HappyMJ

Yes some chance alright....

You have to pay TWO national insurances. The employer national insurance and the employee national insurance.

You are working to earn paystream £10 per hour. Out of that you pay for their NI, your NI, their fees, your fees, your expenses and your minimum wages....and don't forget VAT as well.... As a registered VAT supplier Paystream have to charge your client VAT and forward that to HMRC.

VAT is 20%
Employer NI is 13.8%
Employee NI is 12%
Employee Income tax is 20%
Holiday Pay 12.8% (edit thanks to nmrn)

You are not left with much.