Can you backdate employee wages for previous tax year?

Can you backdate employee wages for previous...

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Hi,

Hope someone can help with my tax question, any advice would be great.

A friend helped me launch my business in 2011/2012 and put in a considerable amount of hours, mainly doing copywriting for the eccomerce site and replying to customer emails.

I was not able to pay him any wages, he was just a friend helping out. BUT due to successful year so far 2012/2013 I'm considering giving him some money for the work he did.

Is it possible to account for his wages in the 2011/2012 tax year, and withdraw the cash out of my bank this? We aren't talking huge sums here, £1,500.

Cheers, Sim

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By simonl88
23rd Oct 2012 09:28

re

Anyone read this?

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By Eve 2206
23rd Oct 2012 11:15

Hi

Read the post below which I put up - I think it might cover what you want to do with your accounts.  However, it's more about tangible items, not wages.  So if it's not applicable, someone on here will steer you in the right direction.

 

https://www.accountingweb.co.uk/anyanswers/question/transfer-assets-sole-trader-business

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By simonl88
23rd Oct 2012 12:08

thanks eve, hmm i just had a read, dont think its what im looking for.

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By Euan MacLennan
23rd Oct 2012 12:45

Clarify the facts

"Is it possible to account for his wages in the 2011/2012 tax year"

Yes - you could accrue for a bonus in your accounts to be paid subsequently within 9 months of your accounting date.  You imply that you are preparing accounts for the tax year - are you a sole trader, rather than a company?

When you make the payment, it will be subject to PAYE as £1,500 exceeds the NI contribution thresholds for a month and if he has another job, he will be subject to income tax at 20%.  Have you set up a PAYE scheme?  I would certainly not try backdating the payment to the 2011/12 tax year, because you will be laying yourself open to penalties for failing to file the annual PAYE return in time.

Or perhaps, you could treat him as a self-employed sub-contractor, which would avoid the PAYE problems, but put the onus on him to file a personal tax return for 2012/13.  The problem with treating him as self-employed is that "replying to customer emails" sounds rather like an employment.  The decision between employment and self-employment is your responsibility.  Get it wrong and the Revenue could be after you for the PAYE you should have deducted but didn't.

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By simonl88
23rd Oct 2012 13:23

Hi Euan,

Thanks for you advice, most helpful.

Yes I'm a sold trader.

Putting him as a sub contractor would be best I suppose, this would avoid me messing with the PAYE which would leave the NI/TAX for him to sort via his own self assessment.

I haven't filed the self assessment stuff for 11/12 yet so I could still could I add it to that period and pay him by BAC ?

What I don't want to happen is an inspection x amount of years down the line asking why I backdated  and accounted for it in a previous year, it looks rather fishy, but it's a legitimate reason i suppose. Would this go in the white space?

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By Euan MacLennan
23rd Oct 2012 13:41

White space

... is a grey area!  Some say that HMRC never looks at it.  Others that it is like waving a red flag.  I don't like entering anything in the white space.

Nor do I think there is any need for you to do it in this case.  If your friend did the work in 2011/12, it is quite correct that the charge should be made in 2011/12.  There is nothing unusual for you to disclose.

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