Dodgy ex employer's payroll

Dodgy ex employer's payroll

Didn't find your answer?

I have prepared a SA return for a new client who left employment during the tax year.  He never received a P45 so I have used the cumulative figures from the last payslip.

There is no PAYE reference on the payslip and the client has called the ex employer for the PAYE reference and the P45 with no success.

I spoke to HMRC and no pay has been allocated to the client's NI number for the last 2 years - does this mean no RTI submissions made?

Last year the client filed a paper return themselves and left the PAYE ref blank.  I cannot do this on electronic filing nor do I want to file the return while this is unresolved.

The employer is a property company with a website - I am going to request permission to call them directly.

However could something fishy be going on so that they were providing payslips but not filing RTI and handing over the tax and what can I do about it?

Thanks

Replies (12)

Please login or register to join the discussion.

David Winch
By David Winch
05th Nov 2015 09:03

At risk of stating the obvious

It could be the case that the employer appears to operate PAYE but in fact retains the deductions from employees' wages either in respect of certain individuals or in respect of the entire workforce (and either makes incomplete PAYE returns to HMRC or no returns at all).  Such frauds come to light from time to time.

Of course if you have reasonable grounds to suspect a fraud (& hence money laundering by the employer) as a result of information which has come to you in the course of your professional work then you have a statutory obligation under MLR 2007 / s330 Proceeds of Crime Act 2002 to report your suspicion to your firm's MLRO or to the National Crime Agency, unless one of the exceptions applies.

David

Thanks (1)
avatar
By Matrix
05th Nov 2015 09:49

Thanks David.

I have no reasonable grounds as yet to suspect fraud but I have advised my client that he is missing 2 years' NI record and HMRC have no record of the income tax paid on his earnings.  

I asked him to put me in touch with their accountants so we will see what happens next.

In addition to sorting out the client's tax, I will consider my AML obligations.

Any idea whether HMRC could charge the client for the tax if it was not paid over?  Would he then have to recover it from the employer?

Thanks (0)
By Tim Vane
05th Nov 2015 09:53

David is absolutely right that you should consider making a report. But beyond that I do not think it is your job to chase the employer for information. Your client has a payslip presumably indicating that PAYE and NIC have been deducted, so enter them into his return on that basis. Use a PAYE code of 000/N to indicate that no PAYE reference has been provided. When HMRC discover the discrepancy between the return and their PAYE records they will most likely contact you, so keep a copy of the payslips and provide them to HMRC. Stumping up the PAYE and NIC will then be the employer's responsibility, not your client's, and you can leave the chasing to HMRC.

Thanks (3)
avatar
By landscaper
05th Nov 2015 09:59

Please report them....

I have seen this a few times over the last few years and feel so sorry for the employees who usually have no idea and may not find out for years that their NI contributions have not made it in to "their pot"....I get so angry about this.  Rant over.

Thanks (4)
avatar
By Matrix
05th Nov 2015 10:01

Thanks Tim, I will use that code if nothing is forthcoming and then make an AML report.

However the client is now panicking, they have lost 2 years' NI which they have paid.  How do you know that HMRC would not come after the client for the unpaid tax - do you think the payslips will be sufficient to protect the client?

There was a discrepancy last year which was not picked up.

Thanks (0)
the sea otter
By memyself-eye
05th Nov 2015 11:44

your client's payslip

will be evidence enough (of his innocence) for HMRC. The employee (any employee) will have  a reasonable expectation that his employer has made the correct deductions and would not be held liable for any failure to do so.

Thanks (0)
avatar
By pauljohnston
06th Nov 2015 12:39

@Matrix

I had a simalar problem.  Do as suggested above and a white box entry on the tax return will cover your employee client.

In our case HMRC opened an enquiry into the company's paye (and other taxes) but told our client his Tax Return figures would be taken as 100% accurate, whether or not they actually were.

 

Thanks (0)
avatar
By paywatch
06th Nov 2015 14:03

P45/Starter Checklist

I would be wary of using cumulative figures from the last payslip. Without a P45, how do you know it was the final payslip? There is no basis in the PAYE Income Tax (Pay as You Earn) Regulations 2003 (SI 2003/2682) for accepting a final payslip to perform a future PAYE calculation. I would use the starter checklist procedure to gather relevant personal information and employee declaration, to determine a tax code and basis for first payment and FPS report to HMRC. Let HMRC issue a P6 to notify of any relevant figures to use or change of tax code or basis. Payslips will however be vital in such circumstances, as the only evidence as an employee that tax has been paid on your behalf, is likely to be the payslip.

FA 2011 s 85 amended ITEPA 2003 s 684 to enable HMRC to require the paying of financial security (cash deposit from the business or director) from employers where there is serious risk that they won’t pay over their PAYE tax deductions or Class 1 NICs. Hopefully, if what you think might have happened, is proven HMRC will use this power on the errant property company.

 

Thanks (0)
Replying to SteveHa:
avatar
By rjoconnor81
06th Nov 2015 14:20

Tax return

paywatch wrote:

I would be wary of using cumulative figures from the last payslip. Without a P45, how do you know it was the final payslip? There is no basis in the PAYE Income Tax (Pay as You Earn) Regulations 2003 (SI 2003/2682) for accepting a final payslip to perform a future PAYE calculation. I would use the starter checklist procedure to gather relevant personal information and employee declaration, to determine a tax code and basis for first payment and FPS report to HMRC. Let HMRC issue a P6 to notify of any relevant figures to use or change of tax code or basis. Payslips will however be vital in such circumstances, as the only evidence as an employee that tax has been paid on your behalf, is likely to be the payslip.

FA 2011 s 85 amended ITEPA 2003 s 684 to enable HMRC to require the paying of financial security (cash deposit from the business or director) from employers where there is serious risk that they won’t pay over their PAYE tax deductions or Class 1 NICs. Hopefully, if what you think might have happened, is proven HMRC will use this power on the errant property company.

 

 

I might have mis-read the OP, but isn't the OP talking about completing a tax return, not putting the person onto a payroll, although I do agree with you if it is putting them onto a payroll.  

Thanks (0)
avatar
By pauljohnston
06th Nov 2015 14:14

@paywatch

Matrix has used what he has got ie payslips.  THe suggestions above will cover his client and put HMRC on notice that the employee has done the best that he can.  I guess Matrix does not have the employer as a client

Thanks (0)
avatar
By Younis
06th Nov 2015 17:51

Is the employer PAYE-registered?

Was your client's salary, from this employer, less than LEL?

Thanks (0)
avatar
By Matrix
06th Nov 2015 19:48

No he did not earn below the LEL and he did not go back into employment therefore the lack of P45 was not an issue until I started to complete the tax return and HMRC told me there was no pay against his NI record.

Thanks (0)