We've just met with a new client. He runs a small business self-employed and has an apprentice. We asked if he'd like us to take care of his payroll for him and he said he doesn't run a payroll scheme as he contacted HMRC and was told by them that he isn't required to have a PAYE scheme set up or submit payroll because his apprentice is on a low wage.
He says that without a doubt, this is what HMRC told him and therefore he's sticking to it.
Before we discuss it further with him, I'd like to know if anyone else has heard of this situation arising before? As far as we are aware, this could cause issues if the apprentice has other income, and due to HMRC not knowing about this job, he's being taxed incorrectly. It could also affect things like Universal Credit.
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Might be worth making sure the apprentice really does earn below the LEL. The apprentice minimum wage is £3.90 per hour so if they work 31 hours a week or more, they earn above the LEL and PAYE applies.
Also, if your client decides to employ someone who is required to be part of a PAYE scheme, then he will also need to include this person as well.
the employer still needs to keep a proper wages record and provide payslips to the employee.
"...he contacted HMRC and was told by them ..."
Does he have this in writing from HMRC?
If not then what he 'was told by them' is worth less than diddly-squat.
Even a written statement is only worth diddly-squat since they have no duty of care to the taxpayer in regard to anything and will be delighted to have his late-payment surcharge and fine when they eventually inform you that it should have been clear their advice must be wrong.
If the apprentice and indeed any subsequent staff that are employed fall below the LEL then there is no requirement to operate a payroll scheme.
However, if a subsequent employee does earn enough, or has a pension / other job, then ALL employees need to be recorded in a payroll scheme.
I was under the impression that since RTI, all employees had to be payrolled.
Also, how could the employer cover their AE duties? I know they may not have to contribute into the scheme but the employee wouldn't have an opportunity if no PAYE scheme is set up.
Do the same rules apply i.e. the requirement to payroll a young person only working school holidays/weekends when the amount paid on an annual basis is below both LEL and their personal allowance, further if they were under 22 the requirement for the employer to provide pension contributions, is also mitigated. Some clear un-refutable advice would be most welcomed
Employee's NI is calculated per pay period, in which case the annualised amounts is irrelevant.
Unless they are also a director.
Is there not a lower age that one does not need to start contributing to NI, as is at the other end of the stage?
Any 16 or over up to state retirement age is liable to NI credits/deductions from salary above the LEL, and an RTI obligation is created for the employer.
Much appreciated for this clarification, since the person concerned is only 14 yrs old, I am still left and unsure as to whether or not she needs to be payrolled, either for RTI reporting or just peace of mind for any subsequent HMRC requirements
Direct from HMRC website: https://www.gov.uk/paye-for-employers
You do not need to register for PAYE if none of your employees are paid £118 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.
:-)