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Can an employer be exempt from running PAYE?

A client says he is exempt from running payroll due to his employees low salary

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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. 

 

Replies (21)

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By lincolnartist
05th Dec 2019 10:26

If the employee declares on a new starter form this is their only job and they are paid below the Lower Earnings Limit then it's correct

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Replying to lincolnartist:
nsa newquay
By adam kay
05th Dec 2019 10:47

What happens if, for example, 6 months later they get a second job, but HMRC are completely unaware of this first job? Or if they later sign up for Universal Credit but HMRC aren't receiving RTI information from this job? Seems like there's a lot of potential for problems.

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Replying to lincolnartist:
nsa newquay
By adam kay
05th Dec 2019 10:47

What happens if, for example, 6 months later they get a second job, but HMRC are completely unaware of this first job? Or if they later sign up for Universal Credit but HMRC aren't receiving RTI information from this job? Seems like there's a lot of potential for problems.

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Replying to adam kay:
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By Wanderer
05th Dec 2019 10:56

They employee 'should' declare to the second employer that he has another job.

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Replying to Wanderer:
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By adam kay
05th Dec 2019 12:34

Feels like a situation that could easily lead to potential problems for the employee but if HMRC allows it then that's fine. Thanks for your input.

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Replying to Wanderer:
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By JDBENJAMIN
05th Dec 2019 14:52

Should he? Is there any legal obligation to do that? He should declare another job to the employer when he starts, but I'm not aware of any ongoing obligation if he gets another job later.

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Replying to JDBENJAMIN:
Stepurhan
By stepurhan
05th Dec 2019 15:04

If he gets another job, it is the new employer he has to declare to, not the existing employer.

I believe that is what Wanderer meant.

Thanks (1)
By SteLacca
05th Dec 2019 10:31

To add to lincolnartist's reply, it isn't an exemption, it is simply not a requirement.

Thanks (3)
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By neiltonks
05th Dec 2019 11:19

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.

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Replying to neiltonks:
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By adam kay
05th Dec 2019 12:30

That's exactly what I've been thinking. Thanks.

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By SXGuy
05th Dec 2019 11:45

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.

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By geoffmw1
11th Dec 2019 10:36

the employer still needs to keep a proper wages record and provide payslips to the employee.

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By dgilmour51
11th Dec 2019 11:53

"...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.

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By Cathy Milligan
11th Dec 2019 14:26

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.

Thanks (1)
By djn24
11th Dec 2019 14:28

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.

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By Andrew1946
12th Dec 2019 10:04

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

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Replying to Andrew1946:
By SteLacca
12th Dec 2019 08:54

Employee's NI is calculated per pay period, in which case the annualised amounts is irrelevant.

Unless they are also a director.

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By Andrew1946
12th Dec 2019 10:10

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?

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Replying to Andrew1946:
By SteLacca
12th Dec 2019 10:25

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.

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Replying to SteLacca:
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By Andrew1946
12th Dec 2019 16:59

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

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By SBS33
12th Dec 2019 17:47

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.
:-)

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