A new client received £500 per week for labouring away in London. He states that he undertook the position on the understanding that the £500 each week was his weekly net pay. However he never received any payslips or P45. He knows the blokes name but cannot supply me with an address, PAYE reference or any other useful information. He has heard from a 3rd party that the bloke is now under HMRC investigation. It sounds like everybody this guy took on is in the same boat. My instinct tells me that the client is being straight with me. He never registered as self employed at this stage (as he didnt think he was). He did however register 6 months later when he did start self employment.
He worked for him for 13 weeks in total receiving £6500. Would you treat this as:
1) £6500 net pay from an employer and enter on the employment pages (lack of info = red rag to HMRC)
2) £6500 turnover from self employment
3) £9286 turnover from self employment with 30% CIS deduction gives £6500 net
Either 2) or 3) would give him a potential problem with regard to late notification of self employment.
Any thoughts greatly appreciated
Replies (10)
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If you do SA on line
you can't use (1) without a PAYE reference which you don't have.
If he is already registered as self employed and the labouring income is in this tax year, just put in the actual start date on the return - even if it's prior to the date of notification.
I've never known HMRC raise late registration as an issue once the SA status is 'live'
Not self-employment
He shouldn't declare this as self employment if it wasn't. He was told it was net, so it's either PAYE or CIS, but he didn't think he was self employed, so it's likely PAYE.
In previous years, I've filed Employment pages online with a PAYE ref of 123/TBC with a name and address for the employer and its gone through (in identical cases to this). I don't know if that's changed in recent years.
If he completes the employment pages and thinks it was Net income, part of me thinks he should gross up his £500 a week and show tax deducted, even though he hasn't got any documents, because the onus is on the employer to pay the tax, and he was under the impression he was being paid net (as opposed to my recent person who was told they were self employed).
Oh, and it might not flag up anything to HMRC - I've done it before and they didn't do anything about it. Tsk.
HMRC
Tell HMRC the situation and ask them for advice.
It's illegal to not be given a payslip. Whether anybody cares is another matter.
Declare the situation he thought that he was in
He was under the impression that he was an employee - presumably in the working conditions that matched that status - so the £500 is net of tax and nic. Gross it backwards, and if you want to file online put it into boxes 16 and 18 with the explanation that no payslips received so references not known. Unless paid cash presumably could trace back through bank details?.
Was it net?
How common is it for a new employee to be told what their net pay will be but not their gross? I only ask because it is not my experience.
Maybe I am an old cynic, but I would be suspicious. The client has either been extremely naive or was happy to go along with an arrangement that he knew was not above board.
After all, is £35k per annum really the going rate for a labourer?
PAYE Ref & SA Online
Hi
You can definitely get around having no PAYE ref in the SA online return.
Just use 000/00000 or something similar.
Just done this very recently for a number of clients.
Regards
a_m
Employed?
I'd be wary of treating somebody as employed if they don't get payslips or P60/P45.
Proof
In cases like this, the "employee" has to demonstrate he had a reasonable expectation that deductions were being made on his behalf. Usually, this would mean the payslip which means your client is already on the back foot.
In his favour, he only worked for 13 weeks which meant he possibly only missed out on as few as three actual payslips. If we were taking about 3 years then the situation may be different but here at least, it could be argued that he left when he found out the employer was dodgy.
Unfortunately, I would imagine HMRC will have little interest in pursuing the "employer" and even if they do, it want stop them trying to get the tax from your client as well.