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No PAYE Scheme

A new client thought they were paying themselves wages in the 2010/11 tax year, but hadn't set up a PAYE scheme, they were paying below the tax threshold so no tax would have been due. Is it possible to set up a PAYE scheme for the 2010/11 tax year now?

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Yes - it is possible

... but you would have late filing penalties when you submit the long overdue 2010/11 P35 & P14.

The tax threshold (£6,475 in 2010/11) is irrelevant as it is above the NI threshold (£5,715) at which NIC would become payable and indeed, both are irrelevant because you need a PAYE scheme for salaries above the NI Lower Earnings Limit of £5,044 in order to claim the free NIC by submitting the P35 & P14 at the end of the year.

I would suggest that you restrict the wages to (say) £5,000 and treat any excess as a loan, perhaps covered by a dividend.

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Could be possible.

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