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bigduckontax
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 3607
Experience:  FCCA FCMA CGMA ACIS
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I ceased self-employment 05/04/14 following losses years I

Customer Question

I ceased self-employment 05/04/14 following losses for 5 years
I have claimed bacxk the losses against earlier tax years but having ceased trading april 2014 I have a £38k overlap profit
I owe PAYE & VAT but am owed CIS borne which I could credit to the PAYE debt
Will HMRC pay out the Tax on that profit as a rebate which I could then pay off the VAT
Submitted: 1 year ago.
Category: UK Tax
Expert:  bigduckontax replied 1 year ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

The overlap profit is used to reduce your final year's profits, or in your case adds to your terminal losses. Terminal losses can be carried back against profits in the previous three years of trading. From the tenor of your question this you have appeared to done. Once these fields of relief are exhausted you may find yourself in a position where there are no more areas in which the losses may be used to offset.

If you have tax deducted under CIS then, if that results in an over payment of Income Tax, this will be refunded at the tax year end when you do your self assessment. HMRC may accept that you have retired and refund some earlier, but don't count on it. You might well find yourself having to pay out both PAYE and VAT debt and find your overlap relief effectively lost. You may have to negotiate with HMRC an affordable recovery schedule for moneys owing.

I am sorry to have to tell you that you may well be out of pocket following the cessation of your self employment and with losses effectively loose your personal allowance due to lack of income into the bargain.

I am so sorry to have to rain on your parade.

Customer: replied 1 year ago.
I owe VAT and PAYECan I not offset the CIS borne against the PAYE debt as I finished with a loss on self assessment
Expert:  bigduckontax replied 1 year ago.

You will receive any over paid Income Tax through CIS as I explained. This can then be used to settle your VAT and PAYE liabilities, but you may have to negotiate with HMRC as to the repayment schedule for these debts.

Customer: replied 1 year ago.
I understand completely about the setoff of CIS against my self assessment but I think I have used up all my past profits with recent losses depending on how far they will agree to carry back ?
The question is will HMRC allow me to offset the rebate they owe me for self assessment against a PAYE debt
after all both fall under the umbrella of Income tax ????The Paye debt arose because HMRC wrongly paid me a rebate twice and I just accepted it and banked it!!!
Expert:  bigduckontax replied 1 year ago.

HMRC might accept the approach you are considering, however, they will generally take the view that as you have had the money albeit incorrectly so why can you not pay it back immediately. I am old enough to remember the postal strike in the early 70s when some traders refused to make PAYE payments as they were owed Income Tax elsewhere. It finished up in the High Court and the Inland Revenue's case received short shrift, the judge ruling that it was all tax owed to or from and could not be penny packeted as the Revenue wanted.

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