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Is a PAYE scheme needed?

Is a PAYE scheme needed?

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Hi, if there is 1 employee and they're paid under the LEL I know that if starter checklist c is chosen (another job or pension) then a PAYE scheme is needed.

I've been advised by 2 tax helplines and HMRC employer helpline that also if b is chosen (Now my only job but since 6th April I've had another job or received taxable JSA, ESA or Incapacity benefit) then a PAYE scheme will also be needed.

Could anybody please point me to any legislation or guidance which supports this? (I know that expenses or benefits trigger a PAYE scheme, but I think this means benefits in kind).

If this is correct, are only the 3 taxable benefits mentioned on the form relevant, and no other taxable benefits? - I can't find any guidance on the need for a PAYE scheme which mentions them.

Replies (17)

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blue sheep
By NH
27th Feb 2020 06:14

you have been told by 3 reliable (well 2 reliable and HMRC) that you need a scheme so why are you questioning it?
Of course it makes sense that a PAYE scheme would be needed otherwise an individual could have multiple employers in any one tax year earning well over the PA with HMRC being none the wiser.

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Replying to NH:
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By sunshine
27th Feb 2020 12:00

Having spoken to HMRC again, they now say that only current circumstances are relevant, and any previous job or taxable state benefits are irrelevant and would not trigger the requirement for a PAYE scheme.
(Also, on a previous occasion, my tax helpline also said that only a current job or pension triggered a PAYE scheme, and to ignore taxable state benefits completely).
I don't doubt your knowledge here, but as you were kind enough to reply, could you also share why you think a scheme is needed due to previous employment history or taxable state benefits? Is there any legislation or manual guidance that you could point me to?

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By sunshine
27th Feb 2020 08:35

Thanks for your reply NH, all 3 helplines didn't really seem to know and HMRC's online guidance states 'you don't need to register for PAYE if none of your employees are paid (LEL) or more a week, get expenses and benefits, have another job or get a pension' and this has always been my understanding.

The above indicates that if she had claimed eg ESA or Carer's allowance earlier in the year, a PAYE scheme would not be needed.

If the helplines are correct, previous ESA would make a scheme necessary.

But can I assume that current Carer's allowance would not? (both are taxable)

All the helplines have given me incorrect advice in the past.

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Replying to sunshine:
blue sheep
By NH
27th Feb 2020 14:16

My reply was not based on any legislation but on logic - imagine for example that I was working under PAYE for the first 6 months of the year earning 20k, and then I went into a part time job earning much less, lower than the LEL - HMRC would need to know about that second job wouldn't they in order to tax me correctly for the whole tax year? How else would they know about my second part time job?
Why would you not just run a PAYE scheme?

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Replying to NH:
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By sunshine
27th Feb 2020 15:03

As per my crossed post below, this is a wife doing a small amount of work for her husband and she is already in self-assessment due to self-employment, so weekly RTI would be an unnecessary problem for them.
As she currently receives Carer's Allowance HMRC say there is a requirement - but I sort of dispute that, although I can find no evidence to support my position.
(Re: your other point though, they did also state that previous jobs were not in fact relevant, I did mention a scenario where somebody gave their new employer a p45 showing £30,000 previous job income - and they advised that this could be disregarded - so logic can't be applied).
I would appreciate your thoughts on current taxable benefits triggering a scheme though - if it isn't actually required (as per all online available HMRC guidance, all AWeb historical queries etc) then my client would rather not set one up.

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Replying to NH:
By SteveHa
28th Feb 2020 14:40

NH wrote:

My reply was not based on any legislation but on logic - imagine for example that I was working under PAYE for the first 6 months of the year earning 20k, and then I went into a part time job earning much less, lower than the LEL - HMRC would need to know about that second job wouldn't they in order to tax me correctly for the whole tax year? How else would they know about my second part time job?

While not commenting on the accuracy of your reply, surely S.7 TMA would kick in to ensure that it is, ultimately, taxed correctly.

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By sunshine
27th Feb 2020 14:09

HMRC have now said that a current claim for any taxable benefit, (as well as the other 3 mentioned), would trigger a scheme.
There is no requirement for this that I can find anywhere - is there anybody out there that has come across this? opinions very welcome!
It might be relevant to many husband and wife situations.
(The employee/wife is already in self-assessment due to self-employment and a PAYE scheme is completely unnecessary).

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By sunshine
27th Feb 2020 17:23

2nd call to tax helpline produces the advice that previous jobs in the tax year do not trigger a PAYE scheme and that taxable state benefits never trigger it whether current or previous, and whether these are the 3 specified on the starter checklist point b or those not mentioned there.
Well, I guess there are as many answers as there are advisers and as this one accords with my own opinion, I'll take that one!

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Replying to sunshine:
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By legerman
28th Feb 2020 10:08

sunshine wrote:

2nd call to tax helpline produces the advice that previous jobs in the tax year do not trigger a PAYE scheme and that taxable state benefits never trigger it whether current or previous, and whether these are the 3 specified on the starter checklist point b or those not mentioned there.
Well, I guess there are as many answers as there are advisers and as this one accords with my own opinion, I'll take that one!

I would have simply gone off the starter form. As far as I'm aware only box c triggers the need for a paye scheme, assuming all employee are under the LEL.

However it's long been my contention that all employees should be in a paye scheme, regardless of the LEL. Employer A may not have a paye scheme as all employees are under the LEL. An employee then goes to work with Employer B as well, which means Employer A should now have a PAYE scheme, but is blissfully unaware.

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Replying to legerman:
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By sunshine
28th Feb 2020 12:49

Thankyou for replying.
I don't think A needs to set up a scheme in that situation though, (if a 2nd job is taken after the starter checklist has been filled in).
I agree only c should trigger a scheme - but I have now received a confirmatory email from HMRC stating that a current taxable state benefit definitely does also trigger a scheme.
Do you think it's safe to bin it? it seems like the wrong advice.

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blue sheep
By NH
27th Feb 2020 21:00

And in all that time you have spent faffing about you could have done the paye 10 times over lol

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Replying to NH:
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By sunshine
27th Feb 2020 23:23

Welcome to my world!

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My photo
By Matrix
28th Feb 2020 13:07

Does she receive an NI credit as a carer or from child benefit? If not then why is she being paid below LEL? Just because the employer doesn’t want to set up a scheme?

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Replying to Matrix:
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By sunshine
28th Feb 2020 13:53

Thanks, she pays Class 2 NI due to self-employment.

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Replying to Matrix:
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By sunshine
28th Feb 2020 16:27

What do you think about HMRC's claim that receiving any state taxable benefit triggers a PAYE scheme Matrix? (which they've now confirmed in writing).
I'd appreciate your thoughts on that - (I don't think it's right and that I can safely ignore it).

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Replying to sunshine:
My photo
By Matrix
28th Feb 2020 17:17

I agree with the other posters that you would usually only set up a scheme if they had another job. However I can also see that insufficient tax could be collected and HMRC wouldn’t know.

Since this employee is in self assessment due to the self employment then I wouldn’t spend any more time on this. Interesting discussion though and probably best to set up schemes where possible (since the starter forms are invariably not completed correctly).

Why is the Director not paying himself above the LEL (sorry for being lazy and not reading your OP, it is Friday afternoon though and I can’t see the whole thread when replying to an indented reply).

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Replying to Matrix:
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By sunshine
28th Feb 2020 17:49

Both husband and wife are self-employed and pay Class 2 NI, so pensions are covered (this is a side job for the wife).

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