Direct Payment Scheme and Tax Relief?

Question

Hello wise owls of tax matters, hope you can help. I live in UK work from home for a company based in US. I am employed with a monthly salary and no real contract and could be classed as subcontrator and probably easily register as S/Employed. However instead tax office put me on a Direct Payment Scheme, They sent me a CDROM, I fill in P11d P60 P35 and pay tax/insurance online monthly. I fill in forms as employer and employee but with a covering note to explain I am on DPScheme. My question is can I deduct any of my salary before tax. My employers said they want to allow me expenses for my broadband ect, does this get taxed? do I get a certain amount? Should I ditch DPS and go self employed, perhaps I may save more money. I am only income earner 19k as hubs is disabled but we do not get all the DLA benefits so money is very tight. Any help on what I can claim back or deduct from salary before tax would be appreciated.

Answer 1

There are no other responses as yet, so I'll try, although it is many years since I have dealt with this type of scheme, and I may be rusty and out of date.

From what I remember, this sort of scheme is usually reserved for domestic employees, where the employer is elderly, and couldn't reasonally be expected to operate PAYE. When I was involved with this, payments had to be made quarterly, but no doubt Gordon Brown can't wait for his money now. I never came across anyone who claimed expenses in a DP scheme, but I don't see why you couldn't claim like any other employee. You can't claim by reducing gross pay, I would suggest you complete an annual form P87. Tax office may be agreeable to increase your code number to accommodate any expenses you wish to claim, that way you would get benefit throughout the year, the annual form P87 confirming at end of year.

If your broadband is essential to enable you to perform your duties, ask HMRC if extra can be treated as assess/allow. This means that you would have to show broadband extra pay on form P11D to counteract your form P87. Figures may or may not be shown in your code number. If they are it would be shown as expenses and benefits, but would cancel each other out.

Do you claim expenses for working from home? You may be able to claim percentage of heating/lighting/council tax etc. Talk to your tax office about it, it will depend on your circumstances, the size of your house, and how much space you need for work.

I think, personally, I would stay with the scheme you are on. Don't get embroiled with self assessment unless you have to. It's a right pain. I don't think you would be able to claim any other expenses than what I have suggested.