HMRC let property campaign - Salary paid a different tax year causing problems!

Wobblydeb

I am hoping you might be able to point me in the right direction. I am helping my hubby prepare a disclosure under the let property campaign.

Working out the rental income is straightforward.

However, he's got a fairly uncommon problem in that he has a second job which paid him 4 years late! ( don't ask!!! :mad: )

He received a lump sum in 15/16 relating to work done in tax year 11/12. It was correctly taxed at 20%, and that amount would have been the same whichever year he was paid.

BUT....... it has pushed his P60 income in 15/16 [including rental income] into the 40% tax bracket. If the salary had been paid when due, the rental income would be taxed in 15/16 at 20%.

He hasn't sent the disclosure yet - any recommendations on how we proceed?

chrismac1

Presumably, excluding the rental profit (as opposed to income) your husband's tax liability for 2015-16 has been fully dealt with under PAYE.

So all you need to disclose is the rental profit - income less expenses - on the disclosure, in my view. HMRC will normally now ask him to file a self-assessment return for 2015-16 which will fully deal with all his worldwide taxable income.

jimmo

Wobblydeb wrote: »

he has a second job which paid him 4 years late! ( don't ask!!! :mad: )

He received a lump sum in 15/16 relating to work done in tax year 11/12.

BUT....... it has pushed his P60 income in 15/16 [including rental income] into the 40% tax bracket. If the salary had been paid when due, the rental income would be taxed in 15/16 at 20%.

- any recommendations on how we proceed?

I wrote this as a reply to another thread but it seems equally appropriate here.

The basic rule for employment income is that it is assessable when it is received but that is not necessarily when it is paid.
You will need to concentrate on when the person became entitled to payment.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42260

The simplest cases are where the arrears of payment arose because of Equal Pay or minimum wage legislation because those legislations establish entitlement.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42290

For anything else its a bit more complicated but if the person can establish that they were entitled to payment in earlier years the liability can be adjusted accordingly.
In the following link the Inland Revenue won the case but don't let that put you off. Its point is that establishing when entitlement actually occurred is important.
https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim42292

Wobblydeb

Fab - thank you jimmo

Wobblydeb

Just an update in case anyone has a similar issue. Computer says "no".

We sent all of the details of the late payment to HMRC and supporting documents, but they have not responded to it whatsoever. Hubby has just received a template letter which says he has not calculated income tax at 40% for tax year 15/16.

As the sum involved is small, we are giving up and just paying the higher figure. We'll try and get the difference back from the employer, but I'm not holding my breath. :mad: