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PAYE

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A client company started trading in October and the sole director (no other income) has been paid £500 a month salary since then. As she has been under the limit, no PAYE scheme has so far been set up. She is now increasing her salary so I am applying for a PAYE scheme to be set up. 

The first question when applying is when was the first pay day. Should I answer October when the first £500 was paid or January when the first payment over the limit is paid?

Also, when I deal with the submission for the January payment (I will be using Basic PAYE Tools),  do I need to account for the October to December salary payments, or just enter the January payment? If I enter the October to December payments on the dates when they were made, will HMRC penalise the company for a late submission?

Many thanks for any help.

 

 

 

 

Replies (11)

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By Catherine Newman
18th Jan 2022 11:12

There was a similar thread a couple of weeks ago. I would generate FPSs for each month and tick "Reasonable Excuse". I have never had any come back when I have done it. The director should be put on the Annual NI scheme but as she is a sole director the Employers NI allowance doesn't apply. As you will be showing directors remuneration in the accounts it is better to show that a PAYE scheme exists.

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By Hugo Fair
18th Jan 2022 13:44

Q1: when was the first pay day. Should I answer October when the first £500 was paid or January when the first payment over the limit is paid?
A1: October (otherwise you'll fail to report YTD figures correctly)

Q2: when I deal with the submission for the January payment .. , do I need to account for the October to December salary payments, or just enter the January payment?
A2: all payments in tax year (so the 'missing' Oct to Dec ones, as well as the Jan one).

Q3: If I enter the October to December payments on the dates when they were made, will HMRC penalise the company for a late submission?
A3: By default yes; but not if you select the relevant 'reason for late filing' on each of the Oct to Dec FPS files.

Note: as Catherine says (and without any knowledge of how BPT works), you should aim to create individual FPS submissions for each month (with the Oct one showing Start Date - and each subsequent one showing relevant YTD earnings figures even where there's no Tax due).

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By Matrix
18th Jan 2022 13:50

A Director’s pay can be set as cumulative so start the scheme this month and just put the whole amount in January. Enter the employee start date as the date they became a Director.

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Replying to Matrix:
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By Catherine Newman
18th Jan 2022 14:02

Only for NI and not tax.

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By Matrix
18th Jan 2022 14:16

Income tax is cumulative though under a standard code so no income tax if £2,000 pay in January.

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Replying to Matrix:
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By Hugo Fair
18th Jan 2022 15:41

Can almost certainly 'get away' with this (and in these specific circumstances it's unlikely to affect Tax - although we know nothing of taxpayer's possible other income sources, or indeed her tax code or basis).
But it's not 'correct' is it? And could have repercussions in the future if the wrong start date comes into play for all sorts of statutory entitlements (from holidays to redundancy and all points in between) ... or if for instance she was claiming UC between Oct to Dec.

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By Matrix
18th Jan 2022 16:09

How is it incorrect if the earnings were below the LEL and no scheme was required?

I am going by the facts in the OP. It is a Director with no other income. Book drawings to DLA and offset with salary this month if you want your RTI to agree to your books. There are much worse messes out there.

I would use Moneysoft though and not basic tools. You may be able to put the figures in the prior months and not submit them and then just submit the cumulative to Jan.

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Replying to Matrix:
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By Hugo Fair
18th Jan 2022 18:00

We seem to be butting heads despite, once again, not being in disagreement on anything important.

You ask "How is it incorrect if the earnings were below the LEL and no scheme was required?" ... but I made no reference to correctness in those two areas.
My claim of lack of correctness referred to your "Enter the employee start date as the date they became a Director" - although the garbled layout of this forum has managed to separate your post and my response!

My point (which is why I placed "correct" within apostrophes) was I hope made clear when I referenced "repercussions in the future if the wrong start date comes into play". In other words the values submitted via RTI are increasingly used in other areas outside of your immediate payroll processing liabilities, so doing things the right way is always preferable (even if tax would've been OK anyway).

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By Matrix
18th Jan 2022 19:30

Sorry my delivery is not great at the moment.

I defer to you since you are hot on payroll. I usually use the date of appointment of a Director as the start date since I thought that they are automatically an employee. This also maximises the months for NI purposes.

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Replying to Matrix:
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By Hugo Fair
18th Jan 2022 20:04

No problem ... I've had less stressful Januaries myself!

FWIW a Director is not automatically an employee, although the two roles usually coincide - and I'm just being pedantic.

The (potential) problem is caused by HMRC being less pedantic ... in that although they call it 'employment start date' that's only because it's the start date that they record for what is their primary record of 'Employments' on their database.
However they interpret this as indicating the date from when payments (for this employment) started to be earned ... which may have nothing to do with the legal start of employment (vis a vis employment rights) and therefore causes much confusion in other areas such as IR35!

I could rant on but I'm sure we've both got better calls on our time ... and your approach is unlikely to cause problems in the real world.

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By sirp2000
18th Jan 2022 17:58

Thank you all very much for your replies.

They have been most helpful.

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