Am just doing the March 2014 accounts for a new client who set up their company in March 2013.
It seems he has done “most” things well having followed DIY online guides but there is one small issue!
Each month he has been drawing £640 and calling it wages and £2,500 and calling it “dividend” so I was suitably impressed with his attention to detail, however on preparing the accounts (I was appointed 4 weeks ago to do the statutory compliance and check everything – he tried but wanted to use an accountant as a safety blanket) it seems he never set up a PAYE scheme.
This was because (as he put it) “I dint need to as I am paying myself below the deductions thresholds”. I have pointed out the LEL issue for NIC and the need to do the payroll (which we have now applied for and got a reference) but I have an issue over the 2013/14 wages that I would be grateful for a second opinion on;
1) The £7,680 he drew as wages will need to be declared on the tax return he has to do, BUT there was no PAYE scheme for 2013/14. I could put the new PAYE scheme reference on but I imagine HMRC computers will notice the anomaly and ask for retrospective returns
2) When this £7,680 is entered on his SATR should we use the 000/N reference ? If yes do readers have any thoughts on whether HMRC might retrospectively issue penalties
3) Should we instead just claim wages of £109per week or £5668 pa so as to be below the NI thresholds altogether and forgo the £400 CT saving of the higher £7680 salary
Any thoughts would be welcomed! – or am I worrying too much??
Replies (4)
Please login or register to join the discussion.
What's the problem?
You now have a PAYE scheme reference, so use it when you enter the £7,680 on the 2014 Tax Return.
To report the PAYE figures (and get him his entitlement to the state pension), file an RTI Earlier Year Update. You can do it with HMRC's Basic PAYE Tools - it works on the basis of entering what has previously been submitted (nothing in your case) and then, entering what the figures should be. The software works out the "adjustment" and you submit the result by internet from the software.
As a one-man band, there will be no penalties for late filing of his monthly returns until March 2015. Just set up the payroll for 2014/15 and file an FPS for November and each subsequent month - the FPS includes the YTD figures.
This has come up before
Firstly, you cannot now submit an FPS for 2013/14. The only mechanism is an EYU (which Moneysoft cannot do).
The HMRC guidance is not correct. You can file an EYU for 2013/14 without having filed an FPS for 2013/14. The Basic PAYE Tools EYU is for one employee at a time. I have had to use it for clients who have omitted employees from their payroll and for whom no FPS had therefore ever been filed. As I said before, you enter nothing or zeroes in the first screen asking for details of the YTD figures which had been posted previously for the employee.
Just have a go.