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Client not made Employer return but PAYE/NIC is zero

A new client has set up a company, and in the first year their bookkeeper went down the dividend/salary route, and they paid a £20k dividend plus a £5k Salary,  however they did not submit employer year end returns for the first year,  they made no submission as they didnt think they had to as they were paying below the threshold and no paye/nic was due.  In fact I dont think they registered with HMRC as an employer until year 2.

They have now registered as an employer,  the only employee is the director.

Where they hadnt registered they did not recieve the filing reminders,  Im trying to find out what the penaltys/fines will be with a zero liability.

Can anyone confirm.

Thanks in advance.

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Are you sure?

The requirement to register for PAYE and submit forms P35 & P14 only applies if someone is paid at or above the NI Lower Earnings Limit, which was £5,304 in 2011/12, £5,044 in 2010/11 and £4,940 in 2009/10.  If by £5k you mean £5,000, there was no requirement to register for PAYE unless your year 1 was 2009/10 or earlier.

Even if the company should have registered in a particular year but did not, the best way forward would be to forget about it and move on.  The director will not be credited with free NI contributions, so it will not count as a qualifying year for his state pension, but so what?  We only have to notch up 30 qualifying years in our entire working life to get the full pension.

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Thanks Euan,  I thought they

Thanks Euan,  I thought they had to register even if below,  thats good news.

 

I believe the amount actually paid was £5,400 in 2010/11.  Just a thought though they will have (I presume- but waiting for the documentation) completed a self assessment return showing the £5400 salary plus the dividend, which will not give rise to any tax liability,  however I presume it will look a little odd from HMRCs perspective if a non registered employer, is shown as an employer on a self assessment return.  Do you think there is an issue there?

 

Thanks again

 

 

 

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It doesn't follow ...

... that just because he is a director (presumably) of his company, he will be required to file a tax return.  Indeed, if he has not registered for PAYE, HMRC may well not even know that he is a director, which is what tends to prompt them to issue a return.  If his only income is the £5k salary and £25k (net) dividends, he is not going to be a higher rate taxpayer, so no need for him to notify HMRC for that reason.

As far as I am aware, it is not possible to file a tax return online showing employment income without quoting a PAYE reference.  However, if he submitted a paper return, I doubt that HMRC would even look at it.

This is all guesswork.  I suggest you wait until you have established the facts.

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Thanks Euan,

Speaking to the client it doesnt look like he did do a self assessment return for 2010/11.

I guess he now needs to notify HMRC that a self assessment was due as he was a director,  from my understanding he'll get a late notification penalty of zero as no income tax is due,  but he may well get a late filing penalty for late filing the P14s/P35s etc, despite the fact that no PAYE or NIC was due.

 

Although from what you say theres a chance he might be lucky!

Thanks again

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Don't rush your client into a self assessment fine...

davegooding123 wrote:
I guess he now needs to notify HMRC that a self assessment was due as he was a director

Being a director in and of itself does not REQUIRE a self assessment tax return to be requested or submitted as there is no statutory basis for this.

The director only needs to request and submit a self assessment tax return if he has income, savings, dividends, etc. which should be subject to additional taxation not deducted at source.

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I dont think hes going to get a self assessment fine providing he submits the return within 3 months,  he will get a late notification penalty but as thats a % of the tax owed, it will be zero.

 

The penalty from what I can see will possibly be for late submission of PAYE/NIC year end returns.

 

As he did receive a dividend he will need to complete a self assessment which will not result in a fine.

 

But this may cause problems for the late registration as an employer, even though the PAYE/NIC liability was zero.

 

Do you agree?

 

Thanks

 

 

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