I'd like to amend payroll for a few employees for 2018/19. The current situation is that payslips from Mar 18 to Feb 19 have been 0 net pay, with gross pay of about £100 per month (to cover £100 pension deduction). We're a micro business and this was by mutual agreement!
I'd like to amend these salaries to £10,800 taxable gross pay. If this is spread evenly across all 12 months, then it would be £12,000 gross pay for the year (due to extra £100 pension deduction per month).
The question is: are we liable for a penalty for this? I've checked out this factsheet:
It says that you are liable for a penalty if the original mistake "results in tax being unpaid, understated or over-claimed".
In this case, no tax will be paid anyway, since the taxable gross pay is within the Personal Allowance. But NICs will be paid. The guidance here is not clear whether unpaid NICs is enough for a penalty, or whether it's only income tax.
If this would trigger a penalty, then I see two other ways to handle the amendment:
- Instead of a taxable gross pay of £10,800 (£900 per month), go for a taxable gross pay of £700 per month. This way it will be below the NI Primary Threshold, and so no NICs will be due as well as tax.
- Pay the entire £10,800 taxable gross pay in one month (Mar 19). This unfortunately will result in NICs being significantly higher than if spread over the 12 months.
Thanks in advance - any advice would be much appreciated! The guidance I can find on the HMRC is not quite clear enough.