BPT - add historical salary, closing BPT

adding a salary payment I forgot about, changing dividend to salary and closing BPT account

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Hello,

Some context, company formed in April 2020, started invoicing in Jan 2021 (didn't invoice for the first 10 months). And given the awful functionality of the BPT, I did not invest enough time to make sure I fully understood it before I launched into using it and as a result, I have made some frustrating errors that can be summarised by the following:

1) declared a period with no payments to employees ( 6th Jan 2021- 5th Feb 2021) but then paid from my bank a "salary" on the 8th of January. I didn't add this as an employee payment - Basically, I naively assumed I could just go and override the no payment submission. But I then forgot about this.
2) I made a successful submission on the 17th Feb 21 and the 29th March 21
3) I paid myself a dividend on the 23rd March 21, but I would like to now reclassify that as a salary to deduce from corp tax (I haven't submitted accounts/return yet)
4) I then worked abroad and it had issues using BPT but paid myself on the 3rd of April 21 and did not submit it using BPT.
5) I then was able to use BPT again and made some submissions in the next tax year 21/22.
So I have several problems, first issue is because my last submission was on the 5th of December 2021, I can't seem to add a miss-timed payment as I just get a message saying "The date you have entered is not valid. The payment date must be after the date of the last payment to this employee. Please amend your entry.". 
Is there a way to go back in time and amend the errors, clear the "period with no payments", and convert some dividends into salary?
Lastly, I very much would like to stop using BPT because it just seems so unfriendly and would much prefer to use an alternative (e.g. FreeAgent etc). What are the required steps to exit from BPT?
Thank you in advance and I appreciate any advice.
JM.

*Edited at OP's request. Original post had incorrect dates, stating: company formed in Apr 2021, started invoicing in Jan 2021.

Replies (27)

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By the_drookit_dug
25th Dec 2021 21:50

Engage an accountant as soon as possible.

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Replying to the_drookit_dug:
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By Paul Crowley
25th Dec 2021 23:38

+1
This is beyond your operational methods

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By williams lester accountants
25th Dec 2021 23:12

Sounds like you have made a complete mess of it all and have very little idea what you are doing, so get an accounting professional on board to sort it out asap.

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panda ketteringUK
By ketteringUK
25th Dec 2021 23:31

There is a useful tool in HMRC website to rewrite the history:
https://www.tax.service.gov.uk/shortforms/form/TEH_IRF

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Replying to ketteringUK:
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By Paul Crowley
25th Dec 2021 23:39

Good one
assuming all dates are correct

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By Paul Crowley
25th Dec 2021 23:40

This I would have expected on 1 April

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By JD
26th Dec 2021 10:34

Just in case you have not got the HINT to engage an accountant, a Company would find it a little difficult to have a paye scheme, issue invoices, dividends or anything else before it existed in April 21.

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Replying to JD:
RLI
By lionofludesch
26th Dec 2021 15:55

JD wrote:

Just in case you have not got the HINT to engage an accountant, a Company would find it a little difficult to have a paye scheme, issue invoices, dividends or anything else before it existed in April 21.

To be fair, that is a good point. Which the OP may have originally overlooked.

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RLI
By lionofludesch
26th Dec 2021 15:52

Give the lad a break.

I like the OP's doggedness in that, having made a complete blocks of the job, he is content to soldier on in the belief that he now knows everything.

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By jmoken
26th Dec 2021 18:37

Thanks for the helpful advice...
To clarify, I will be engaging an accountant but getting as familiar with the situation as possible is a prudent exercise. Plus given fact it is Christmas, reaching out on here whilst awaiting for accountants to return from Christmas isn't exactly a bad idea.
Compartmentalising the issue, it really comes down to a timing issue. I am the director and sole employee and I invoice and get paid on a very adhoc basis so setting up payroll in the very formal manner isn't ideal. I also work away in areas where I don't have internet for a long period so sometimes all that was feasible was to use satellite internet to make a bank transfer from my business account to my personal account to ensure I could make certain responsibilities at home, and logging into to BPT and dotting all the i's and crossing all the t's was something I expected would be possible when I had more time. I have no problems accepting that his was an ill-conceived assumption.
What I take from the responses on here is that some people like to pretend they know what they are talking about when they don't and simply prefer to chastise people when they make an oversight. Usually people take pride in providing constructive input, so far at least, here it seems quite the opposite.

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Replying to jmoken:
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By the_drookit_dug
26th Dec 2021 18:52

I don't think you're best placed to judge whether folk here know what they're talking about or not. For the avoidance of doubt, let me assure you that they do. The best advice we can give you in this scenario really is to appoint an accountant.

Although what you're proposing may seem like a mere timing issue to you, to us it appears to be false accounting.

A good accountant will be able to go through everything in detail with you and keep you right.

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Replying to jmoken:
RLI
By lionofludesch
26th Dec 2021 19:09

Jasper Mowatt wrote:

Thanks for the helpful advice...
To clarify, I will be engaging an accountant but getting as familiar with the situation as possible is a prudent exercise. Plus given fact it is Christmas, reaching out on here whilst awaiting for accountants to return from Christmas isn't exactly a bad idea.
Compartmentalising the issue, it really comes down to a timing issue. I am the director and sole employee and I invoice and get paid on a very adhoc basis so setting up payroll in the very formal manner isn't ideal. I also work away in areas where I don't have internet for a long period so sometimes all that was feasible was to use satellite internet to make a bank transfer from my business account to my personal account to ensure I could make certain responsibilities at home, and logging into to BPT and dotting all the i's and crossing all the t's was something I expected would be possible when I had more time. I have no problems accepting that his was an ill-conceived assumption.
What I take from the responses on here is that some people like to pretend they know what they are talking about when they don't and simply prefer to chastise people when they make an oversight. Usually people take pride in providing constructive input, so far at least, here it seems quite the opposite.

Starting trading before actually forming your company is a bit more than an oversight, fella. It's difficult to come up with something constructive for something so fundamentally wrong.

The best you can do is admit you've traded as a sole trader up to the date of incorporation and take the consequences as a lesson learned.

Meanwhile, a bit of humility on your part wouldn't be out of place.

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By jmoken
27th Dec 2021 06:58

So I see the issue and it's entirely my fault with a mistake in the original post. I formed the company in April 2020 not 21! I was essentially dormant until Jan 21.
I would like to apologise for being rash, but I just took some offence for the inferences made that I was trying to be fraudulent.

[original post has now been corrected to show the true situation]

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Replying to jmoken:
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By lionofludesch
27th Dec 2021 09:31

OK - well that makes a bit more sense. But your problem is still your desire to rewrite history. You claim it's just an oversight but then you say that it'll save you tax (I'm not sure that it will, but that's another issue). HMRC don't like it and one of the reasons for introducing RTI ten years ago was to prevent folk doing exactly what you propose.

What I would suggest in your case is change the company's ARD to the end of the month before you started trading, which looks like December 2020. You can then submit dormant accounts to December 2020 which will probably have only a dozen or so transactions and can be knocked together in ten minutes. It'll buy you time to consider the deeper issues but, be warned, the time limit for changing your ARD is very close.

You then need to consider whether your original dividend was properly declared. Were there enough profits ? Moreover, you've considered the Corporation Tax issues but have you considered the Income Tax and National Insurance on your salary ? The usual salary strategy is to keep it small and take dividends instead. You seem to be doing the opposite. You need to discuss this with your new accountant. You don't give enough information for us to make sensible comments on this

If you do decide on a salary, there's no problem for you, as a director, in paying and reporting back pay for the whole year on 31 December 2021. That will get you your Corporation Tax relief, although from an Income Tax point of view, it will be taxable in 2021/22. Again, discuss this with your accountant.

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Replying to lionofludesch:
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By jmoken
28th Dec 2021 15:40

Thank you Lionofludesch, I appreciate you taking the time to provide your thoughts. So yes the re-write history was badly worded on my behalf. And from the saving tax perspective, it's mainly because from april 20 to dec 20, I was out of the country with no earnings which meant I had my entire income tax free allowance to use up. So until apr 21, in hindsight it probably makes sense not pay dividends and instead just take a salary (to use up my personal allowance) and this would also reduce my taxable profits (for reference, jan-apr21 the company's income was only 6k).

With reference to your last paragraph, do you mean I could pay 'salary' at infrequent intervals throughout the year and then just summarise it at year end so do not need to use payroll software to tell HMRC before every payment?

Thank you very much again, and I am waiting on a reply from the accountant I am hoping to engage.

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Replying to jmoken:
RLI
By lionofludesch
28th Dec 2021 15:57

Jasper Mowatt wrote:
So until apr 21, in hindsight it probably makes sense not pay dividends and instead just take a salary (to use up my personal allowance) and this would also reduce my taxable profits (for reference, jan-apr21 the company's income was only 6k).

If only you'd thought of that at the time. Or, more practically, had an accountant who could've advised you.

Quote:

With reference to your last paragraph, do you mean I could pay 'salary' at infrequent intervals throughout the year and then just summarise it at year end so do not need to use payroll software to tell HMRC before every payment?

No - if you pay a salary you must report it to HMRC and pay the appropriate PAYE and NI at the time. You can withdraw money as loans - many directors do - and pay an annual salary at the end of the year but there are snags. Firstly, until the salary is declared, the money is never yours. You owe it to the company and there may be tax consequences of that. Secondly, HMRC generally expect a RTI return every month, even if nothing's paid, and there are penalties for not filing one. You can arrange to have an annual return period but that would have to be ending 5th April and judging by the number of threads on annual RTI returns, you'd be swapping one problem for a dozen others.

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By SXGuy
27th Dec 2021 08:49

With regards to question number 2.

If I were to refrase the sentence slightly, and you can see what answer you come up with, you can use that answer to answer your own question as it will be identical.

If I finish eating a ham sandwich my wife made, can I later decide it was cheese because I didn't want ham?

Please see an accountant who will likely fix your issues quicker than we could explain them to you.

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Replying to SXGuy:
By williams lester accountants
27th Dec 2021 11:53

Given it is only two days past Christmas, why was it not a turkey sandwich?

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Replying to williams lester accountants:
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By SXGuy
28th Dec 2021 08:22

More of a goose guy this year!

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the sea otter
By memyself-eye
27th Dec 2021 13:08

BPT?

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Replying to memyself-eye:
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By Hugo Fair
27th Dec 2021 13:17

Basic PAYE Tools (BPT) is free payroll software from HM Revenue and Customs (HMRC ) for businesses with fewer than 10 employees.

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Replying to Hugo Fair:
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By Paul Crowley
27th Dec 2021 14:51

Do you and your clients use the initials?

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Replying to Paul Crowley:
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By Hugo Fair
27th Dec 2021 15:53

No, but that's probably because I wouldn't touch it with the proverbial bargepole ... so it doesn't come up in conversation in the first place. It's clunky and encourages those without knowledge of Payroll to think they know what they're doing.

But HMRC do ... and so, therefore, do many of the other software providers and associated Payroll groups (such as the CIPP). It's jargon but reasonably common.

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Replying to memyself-eye:
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By Paul Crowley
27th Dec 2021 14:50

I thought the same and came up with alternative answers.

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Replying to Paul Crowley:
the sea otter
By memyself-eye
28th Dec 2021 15:39

I too never call 'Basic tools' 'BPT'

But I do know what it is - it's not that bad for my son's one man payroll business!

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By Hugo Fair
27th Dec 2021 13:18

For the avoidance of doubt, I wholeheartedly agree with everyone that suggests you appoint an accountant - and with haste.

However, to answer your specific questions (in reverse order):
* "What are the required steps to exit from BPT?"
None. BPT is just a piece of software for performing (simple) payroll calculations and then submitting RTI returns to HMRC. Like any such software you can cease using it without penalty.
The consequential issues you will face on dong so are:
(a) Penalties if you fail to submit returns (using any other software) that HMRC's systems are expecting - such as FPS for remaining months of Tax Year;
(b) Loading all the necessary year-to-date figures (that you've managed to submit so far) into your selected 'other' software, so that it calculates PAYE correctly.

* "Is there a way to go back in time and amend the errors, clear the "period with no payments", and convert some dividends into salary?"
As SXGuy has mentioned (via an analogy), your question can stop after the first 9 words - in that No you can't 'go back in time' in any of the ways you seem to have in mind. Specifically:
(a) You either did or didn't pay yourself a salary on a given date (and this must be reflected in the FPS submitted on/before that date) - you can't change your mind retrospectively on this (in either direction). So if you took money that wasn't processed as (and reported as) Salary at the time, then it wasn't salary - so it must have been something else.
(b) You also can't simply decide after the event that money extracted was a Dividend, if it wasn't properly declared as such at the time (and it was legal to do so). Again, if it wasn't a Dividend then it must have been something else.

I'm well aware that none is this is providing you with the kind of guidance that you seek ... but it does answer your specific questions - and provides fairly strong hints as to why you need to appoint an accountant ASAP.
You won't get more detailed answers on this forum - because you couldn't provide all the detailed info necessary for an adviser on a public forum, but also because it would break the rules of this site to offer specific actionable advice (other than to seek that advice from an appointed professional).

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Replying to Hugo Fair:
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By jmoken
28th Dec 2021 15:59

Thank you Hugo Fair, and no quite the opposite, the guidance you have given is entirely what I sought. Accountant engagement email sent but reading your helpful comments lets me appreciate the situation better and can articulate to my accountant better.

Okay that's helpful to know regarding exiting Basic tools, although now I've spent time understanding it, it does the job when used correctly (lesson learned).

Yes so my wording in the initial post was poor. It's not that I am trying to anything dubious, it's more that it I clearly managed things badly and just want to ensure I pay the right tax whilst making use of the means at my disposal to not pay more than I need to.
With regards to how I declared the dividends, it was basic (and likely amusing to some of the audience of this post) in the sense I just transferred money from my business account to my personal account. The only thing that identifies it as a dividend is the reference in the bank transfer and the fact it's not related to a RTI. Which, I am aware isn't what is required to formally declare a dividend and was something I anticipated formalising at year end but is clearly now something I'll be working with my accountant to rectify.

Thank you again, it's very helpful advice.

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