employer bust, unpaid wages and tax

[Londonlancs]

Hello

first up, apologies if this isn't the right place for this question - I'll delete and move it if need be.

A few years ago my long-term employer went bust. They had me on a freelance contract for several years. The result was that I was left with 6 months unpaid wages when they went under. The company I used for invoicing paid me a nominal sum for my lost wages but nowhere near what I was owed - I felt sorry for them as it wasn't really their fault.

I know that when a company goes under, HMRC gets paid first. I'm now wondering if I can deduct my substantial lost earnings against current tax liabilities? Any thoughts or advice greatly appreciated.

All the best

Londonlancs

[wales01man]

Re: employer bust, unpaid wages and tax

Excuse my ignorance! tax is paid on income not non income?
A vat element of the invoice if there was one is different does your accountant not offer help

[PAWS]

Re: employer bust, unpaid wages and tax

You will only pay income tax on money paid. If you owe income tax on other income from other payments you received you will have to pay and any loss from this company cannot be offset against that. If there are administrators ‘winding down’ the company then I would get my claim in sharpish. You say you got a small amount from the company (I presume 3^rd party) that normally paid you. Was this an administrator’s offer such as 10p in the pound? If it was then they company’s assets and capital have already been divvied up and you will be unlikely to get any more. Sorry but it happens and many small companies have bitten the dust thanks to bigger ones going under.

[Londonlancs]

Re: employer bust, unpaid wages and tax

Excuse my ignorance! tax is paid on income not non income?
A vat element of the invoice if there was one is different does your accountant not offer help

Thanks for your reply Wales01Man. I wasn't clear in my question. As HMRC was the primary creditor and I did not receive my payment, I was wondering if it was at all possible to offset this loss against future earnings. I thought it was optimistic, and it does indeed seem like that's not possible.

[Londonlancs]

Re: employer bust, unpaid wages and tax

Thanks for your reply PAWS. I suspected that might be the case, but given the unending capacity of tax rules to surprise me I thought it worth asking the question. Thanks for your advise - it looks like I should kill this off as an avenue of enquiry. I've thought before about it and as I'm currently paying off a PAYE tax bill from being put on an incorrect tax code, I thought I'd ask! Thanks again

[PAWS]

Re: employer bust, unpaid wages and tax

Afraid you and the HMRC’s relationship with the company and are completely unrelated. When a place goes into administration the HMRC do get first dabs on the carcass. This does not mean they get all their money nor does it mean no one else gets anything but the percentage that you get of what you are owed slides up or down depending on how much they owed HMRC. The good news is you can offset the viable costs of doing this job against any monies you owe for VAT or PAYE and naturally as wales mentioned you are not liable to pay VAT or PAYE on unpaid invoices. Your personal income and VAT only apply to receipts not invoices.
I would also suggest you see an accountant for a brief visit if you can afford it. Remember PAYE is only payable on your INCOME and not turnover. If it is a small one person operation then naturally the HMRC assume all turnover is profit and therefore income so you have to prove otherwise so keep receipts for everything from the cost of your vehicle (if needed for work then it could be classed as a company vehicle) right down to sticky tape and paperclips. It all adds up and you only pay PAYE on the difference. It really might be worth seeing a professional accountant as you might not owe all that PAYE and a few quid in accountant’s fees could save you thousands.