PAYE/CIS scheme not set up for 2017/18

Preparing accts to 5/4/18,client paid wages but didn't set a PAYE scheme up-what's the best approach

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Just started doing the 2017/18 accounts and in the records the client has put a list of wages paid for the year. No PAYE scheme has been set up. The employees were only working for a short space of time and by the looks of it none were paid above the NIC earnings threshold (in fact probably below the LEL) but obviously this means that HMRC are unaware of their earnings. I assume he just holds his hands up, explains to HMRC he wasn't aware of his obligations and notifies them of the amounts? He wouldn't have had any PAYE/NIC to pay over (no excuse I know).

However there is also a CIS issue as he paid someone £5280 (which is £6600 less 20% CIS tax) - he has kept the 20% to one side but as he isnt registered for PAYE or CIS we don't know how to pay this over. Again, do I approach HMRC explain what has happened and ask to pay the amount. Is there likely to be a penalty for this? I know there may be unavoidable interest.

He is now a Limited Company and I have set up a PAYE scheme for 2 employees he is about to start using so going forward he is doing everything correctly.

Many thanks

Chicka

Replies (2)

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RLI
By lionofludesch
13th Oct 2018 17:00

If the employees had no other income, he's no obligation to report the PAYE if no-one was paid more than £112.99 a week. If they did, or he couldn't be bothered to get a starter declaration signed, he'll probably need to stand the tax he should've deducted.

The CIS is different though. I suggest you register for 2017/18, submit the single CIS return and close the scheme. The subcontractor will be claiming the £1320 tax on his 2017/18 return so there's no skirting round this one.

Thanks (1)
Tom McClelland
By TomMcClelland
13th Oct 2018 17:02

If all the employees earned less than the NI threshold in each week/month that they were paid, and none of them have another job, then there is no requirement to start a PAYE scheme or report their wages to HMRC.

If any of them had another job, or if even once someone got more than the NI threshold in a period, then a PAYE scheme must be started, and all payments to all employees from that point on should be reported to HMRC under RTI.

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