I've just taken on a new client. Limited company, 1 director and no employees.
The old accountant included £8,500 per year in the accounts for directors salary (above the LEL) but never opened a PAYE scheme and submitted nothing.
The salary was included on the self assesment tax return.
I've never come across this ever as it should be submitted under RTI.
My question is, will the director still have these years as qualifying years towards his state pension as there isn't a PAYE scheme?
I doubt it but I'm clutching at straws. If not is there anything I can do? It's been going on for years
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No he won't have them as qualifying years as HMRC will know nothing about this salary. The only way to get the salary recognised would be to open a very backdated PAYE scheme, but the penalties on that would probably not make it worth doing. Would probably be cheaper to make voluntary NI contributions for the missing years (depending on time limits).
Thanks, I was living in hope more than anything else.
Next step is to inform the client and hopefully he has enough qualifying years without these. Wish me luck!
Already found another issue just as bad as this :(
2 so far, I'm hoping that's the end of them.
The accountancy firm is regulated by ACCA by the look of it so it's not even an unregulated accountancy practice, you'd expect them to know what they were doing
You would, but it doesn't seem to work like that. I've taken over some horrific messes from ACCA's
Isn't there a question over the legitimacy of those wages expenses in the company accounts?
Yes, I'm concerned about everything to do with this to be honest. It's going through a full review of what should have been done and what has actually been done
How many years?
Client should check his state pension projection.
Does client have a personal tax account?
6 years as far as I know. He might just about be OK but it will be close.
I've asked him to sign up to the personal tax account to check
I've had exactly the same issue as you've described in the opening post, perhaps it's the same firm!
I thought I was the only one! haha most likely the same firm. I couldn't imagine there are many more out there that would do this
I would say this goes back to introduction of RTI
Wages was once a year job
Does your client really not know that wages go through a PAYE scheme?
Any wages fees being paid to anybody?
Does client show wages in the company records or are they invented by accountant?
If invented then I do not think they are wages. Just badly described dividends.
Or are the dividends really wages.
For the avoidance of doubt an insolvency practitioner would probably see all payments as directors loan, repayable to company.
Your client cannot really shove responsibility for this all onto the accountant. He approved the accounts.
Trouble is idiot accounts standards setting results is no longer showing dividends as a real entry, now just one of the differences in the hole between P & L and Balance sheet
I'm guessing he hired and paid for an accountant for their expertise and advice so why doubt them? They told him he had wages and wages were shown in the accounts. The wages amount was then shown as employment income on his tax return. What is there to question from his point of view? He paid an all in fee apparently.
If I hired an electrician I would trust them if they said I didn't need to connect an earth cable, or likely they wouldn't even tell me that. They would just do what was best as they are the expert. Then if it turned out to be wrong I'd be annoyed just like my client currently is.
If I hired an electrician I would trust them if they said I didn't need to connect an earth cable, or likely they wouldn't even tell me that. They would just do what was best as they are the expert. Then if it turned out to be wrong I'd be annoyed just like my client currently is.
It's not really analogous though as you haven't been appointed to a role where you have a legal responsibility to ensure the treatment of the earth wire is correct.
Directors can rely on accounting advice to an extent but this is quite a simple point on which they could and possibly should have sought clarification. If you google "do I need a PAYE scheme" they would have discovered in the first result that they do.
Of course, I still blame the former accountant, however I'm not sure HMRC would be sympathetic to that when considering potential penalties, which could well be imposed if there should have been £8,500 through a PAYE scheme for six years.
Have seen the same (not a client), however the £8500 which the sole director/shareholder was calling wages, was on the 'Other income not on supplementary pages' section of his tax return. Suggesting that the same could very well have been the case pre-RTI regime.
No PAYE scheme operated by the company
Commented on the lack of PAYE scheme, NI record implications, to the taxpayer - whose response was simply 'My accountant is doing these for me'
I envy those who find bliss with such ease...
Odd how clients still think a company is really self-employment.
Most employees expect to be paid their wages and the wages to agree with the payslip
