Client has cocked-up their payroll

Client has cocked-up their payroll

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An otherwise intelligent client has completely misunderstood PAYE.

He, using HMRC PAYE tools, has processed the payroll for himself and his co-director. Unfortunately in making salary payments he has made no distinction between gross and net pay in the sense that the company has made payments of gross pay and not net pay. The company has made payment of the calculated deductions to HMRC, but after the payroll journals have been done there is a debit against net pay control.

So, to the remedy . . . is it

a) transfer the debit to the directors' accounts. End of, or

b) treat the payments received as net, gross up and file RTI adjustments

The pragmatist in me gravitates to a), but I guess there must be a point at which b) is more appropriate, but when might that be?     

Replies (10)

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By petersaxton
15th Apr 2015 15:19

My view

I would go for (a) as it is a lot less hassle. If the director's loan looks like going over £10k overdrawn then the company can charge interest.

One reason for this is that most likely the payroll submitted is what they intended to pay.

I suppose the only problem would be if the client cannot repay the overdrawn balance within nine months.

Thanks (1)
By johngroganjga
15th Apr 2015 15:30

Not your call

But it's for the clients to decide not you!

So just run through the pros and cons of each option and take their instructions.

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Replying to memyself-eye:
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By andy.partridge
15th Apr 2015 15:33

Quite right, John

johngroganjga wrote:

But it's for the clients to decide not you!

So just run through the pros and cons of each option and take their instructions.


But I'm already anticipating the question from them, 'so what would you advise?'
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By andy.partridge
15th Apr 2015 15:31

Thanks Peter

Yes, expediency is nearly always welcomed by the client.

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By johngroganjga
15th Apr 2015 15:47

For simplicity's sake, if I were you I would hope they would go for option (a), but would not expect them to do so unless the consequences of the debits to the loan accounts were manageable.

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By andy.partridge
15th Apr 2015 15:53

Interesting

You would agree, then, that both are equally acceptable and the option to take would depend on the circumstances more favourable to the client.

I was expecting someone to say, 'The RTI submissions must be wrong because they were actually paid more than was reported.'.

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By HeavyMetalMike
15th Apr 2015 16:16

Really, Andy, you would say that - RTI is wrong?

I don't even think a PAYE Inspector would say that in a PAYE visit.  A salary has been paid, t RTI agrees to salary, ie gross salary taxed properly.

Director has just made a mistake surely?

 

Put it another way. If it was normal employees rather than the bosses, would the company expect to collect the overpayment back from the employees? Almost certainly, because their gross salary was their gross salary full stop?

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Replying to JD:
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By andy.partridge
15th Apr 2015 16:34

Hello Mike

HeavyMetalMike wrote:

Really, Andy, you would say that - RTI is wrong?

Hello Mike, I'm asking the question not answering it. But now you are making me think . .

What was the original intent. Was it to receive the amount that they did receive? If it was, then could it mean their RTI is wrong? As for the notion that it was a 'mistake', I don't disagree, but mistakes can be costly.

I wouldn't want to prejudge what an HMRC official might say. I've heard them assert some outrageous things, as I expect you have too.

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RLI
By lionofludesch
15th Apr 2015 16:32

Agree with Peter and John

As John says, not for you to decide, Andy, but I'd recommend option (a) to them, as Peter says.

Honest error.  Put right as soon as they realised.

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By Jekyll and Hyde
15th Apr 2015 17:40

payment error and easily corrected (a)
I have had exactly the same issue whilst taking on a new client recently.

Old accountant advised £250 per week (he did payroll from April 2014 - June 14, after which client took over). Payroll is £250 per week gross and net is £238. Client paid £250 and processed RTI as £250 gross.

On discussion with client they have agreed it is their error and we are treating the overpayment as a directors loan.

I am assuming HMRC could challenge this, in the same way as I would be happy to take their challenge to tribunal if necessary.

In an error like this, there is always more than one option and we have to use our judgement accordingly.

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