Yearly Pay and EPS

Yearly Pay and EPS

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1 employee on payroll until last March when sole director paid a yearly amount.

From April this year director has not been paid anything, but employee has been. I have just realised I haven't sent any notification to HMRC that director hasn't been paid anything yet (that will be in March 2017). I haven't notified HMRC that director is paid just once a year.

Am I right in thinking I do need to contact HMRC separately re annual salary for director? Should I submit EPS for him for periods from April 16 to date?

Replies (9)

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By craig preece
30th Aug 2016 10:05

If you are using Moneysoft there is a line on the FPS "Not Paid" that lists active employees with no pay for that period. Not sure about other software but would assume there is something in the information they submit to HMRC.

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Euan's picture
By Euan MacLennan
30th Aug 2016 10:29

No - you cannot have an Annual Scheme if anyone on the payroll is being paid more frequently.

No - You do not submit EPSs for individuals - you submit them for the PAYE scheme in total.

Presumably, you have been filing FPSs at least monthly for the employee's pay. You should set up the director on the payroll, but pay him nothing (until Month 12). The (monthly) FPSs in future will then report pay for the employee and that nothing has been paid to the director.

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Replying to Euan MacLennan:
By Moonbeam
30th Aug 2016 10:43

Thank you Euan. I think if someone who was on the payroll does not show up on an FPS he will get taken off HMRC's system after a few months- Is that right? (For example director's pay was last reported on an FPS in March 2016 but not since as he hasn't had any.)

It's in the periods April to July where I have a problem.

Should I go back right to April, with director set for monthly pay, and submit adjusting FPS's?

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Replying to Moonbeam:
Euan's picture
By Euan MacLennan
30th Aug 2016 11:08

I wouldn't.

I would file amended FPSs for July (now late, but tick the box for correcting an error) and August, if you have already filed the FPS. Each FPS contains YTD information so it will show nil pay and nil tax for the director. I doubt that HMRC would take anyone out of a PAYE scheme for just 3 months of unreported nil pay, but at least you will be telling them every month from July onwards, so if they don't react, you will be OK.

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By timothyvogel
30th Aug 2016 11:01

Euan is right, but also do not forget that there will be a need for an auto enrollment pension from, probably, next year

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By Hugo Fair
31st Aug 2016 12:31

One thing to add to Euan's FPS guidance ... you should (if your software doesn't do this for you automatically) ensure the "Irregular Employment Payment Pattern Indicator" in each FPS is set to Y for the Director when you report his zero earnings.
Otherwise, as per HMRC's guidance, they "will check if employees have not been paid for a period of three months or more and will treat them as having left that employment. To avoid that happening for employees who do not get paid regularly, we ask that you use the irregular payment pattern indicator on every FPS submitted for that employee".

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By Hugo Fair
31st Aug 2016 12:33

One thing to add to Euan's FPS guidance ... you should (if your software doesn't do this for you automatically) ensure the "Irregular Employment Payment Pattern Indicator" in each FPS is set to Y for the Director when you report his zero earnings.
Otherwise, as per HMRC's guidance, they "will check if employees have not been paid for a period of three months or more and will treat them as having left that employment. To avoid that happening for employees who do not get paid regularly, we ask that you use the irregular payment pattern indicator on every FPS submitted for that employee".

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By Moonbeam
31st Aug 2016 12:44

What a nightmare! Thank you for all your comments. I just hope someone else can learn from them as well.

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Replying to Moonbeam:
RLI
By lionofludesch
02nd Sep 2016 21:10

Moonbeam wrote:

What a nightmare! Thank you for all your comments. I just hope someone else can learn from them as well.

There are dozens of threads on here about Annual Earnings schemes. I've no idea why folk still see them as labour saving.

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