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Self-employed proprietor and paye

Why is a self-employed owner not allowed to pay himself through a paye scheme?

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Can a self-employed business owner with no other employees pay himself through a paye scheme submitting monthly RTI returns and then declare any excess profit from the business as self-employed income on his self-assessment tax return

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By pauld
30th Nov 2020 14:28

yes, go for it. Sounds a great idea.

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By SXGuy
30th Nov 2020 14:32

No. Self employed kinda gives you a clue as to why.

Effectively your asking why can't someone who employ themselves be employed again by themselves to receive income via employment of themselves.

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Replying to SXGuy:
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By Graham Ashman
30th Nov 2020 14:36

But surely there is only one "self-employment", which is either paid and declared on a tax return at the end of the year or through a paye scheme that submits monthly return. One or two of my clients have suggested this would help them budget throughout the year?

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Replying to Graham Ashman:
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By Paul Crowley
30th Nov 2020 16:37

Graham Ashman wrote:

But surely there is only one "self-employment", which is either paid and declared on a tax return at the end of the year or through a paye scheme that submits monthly return. One or two of my clients have suggested this would help them budget throughout the year?

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Replying to Graham Ashman:
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By SXGuy
30th Nov 2020 16:50

No. Your client is self employed regardless of how you want to word it. There is only one person self employed, your client. If they want to budget they can do so in many other ways without the need for a paye scheme.

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Replying to Graham Ashman:
RLI
By lionofludesch
30th Nov 2020 18:08

Graham Ashman wrote:

But surely there is only one "self-employment", which is either paid and declared on a tax return at the end of the year or through a paye scheme that submits monthly return. One or two of my clients have suggested this would help them budget throughout the year?

Jaysus - that's a shocker.

You have clients ???

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By Paul Crowley
30th Nov 2020 14:32

Graham Ashman wrote:

Can a self-employed business owner with no other employees pay himself through a paye scheme submitting monthly RTI returns and then declare any excess profit from the business as self-employed income on his self-assessment tax return

Thanks (2)
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By Paul Crowley
30th Nov 2020 14:34

Why?
Is it because you want to pay both EENIC and ERNIC

Or is it really because you want a mortgage

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Replying to Paul Crowley:
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By Graham Ashman
30th Nov 2020 14:40

No, not at all. I am not suggesting it is the best system but can't work out why it is not possible. I have had differing replies from HMRC employees at various times - the latest saying it was not allowed - it seems more beneficial financially for HMRC than for the client!

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Replying to Graham Ashman:
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By Wanderer
30th Nov 2020 15:42

Graham Ashman wrote:

No, not at all. I am not suggesting it is the best system but can't work out why it is not possible. I have had differing replies from HMRC employees at various times - the latest saying it was not allowed - it seems more beneficial financially for HMRC than for the client!

Are you seriously saying that:-
a) an earlier HMRC employee said it was allowed?
b) more to the point you have posed this question to HMRC even once, let alone multiple times!
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By GW
30th Nov 2020 14:40

s.683 ITEPA 2003:
(1) For the purposes of this Act and any other enactment (whenever passed) “PAYE income” for a tax year consists of—

(a) any PAYE employment income for the year,

(b) any PAYE pension income for the year, and

(c) any PAYE social security income for the year.

Why would you want to pretend a self employed individual is employed?

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Replying to GW:
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By Graham Ashman
30th Nov 2020 14:42

Thanks but that doesn't really answer the question of why it wouldn't be allowed. I am not saying it is the best idea but not sure why it is not done.

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Replying to Graham Ashman:
By ireallyshouldknowthisbut
30th Nov 2020 14:54

Its the same reason that you don't pay corporation tax.

or French income taxes

Or SDLT on it.

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Replying to ireallyshouldknowthisbut:
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By Graham Ashman
30th Nov 2020 15:09

Well, that was extremely helpful!

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Replying to Graham Ashman:
By ireallyshouldknowthisbut
30th Nov 2020 15:25

Glad to be of service.

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Replying to Graham Ashman:
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By GW
30th Nov 2020 15:49

It does answer the question - It isn't allowed because self-employment income isn't a) employment income or b) Pension income or c) social security income

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By Cheshire
30th Nov 2020 15:07

Oh dear.

Perhaps you should re-consider the type of clients you look after.

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Replying to Cheshire:
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By Graham Ashman
30th Nov 2020 15:10

Another helpful reply!

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Replying to Graham Ashman:
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By Cheshire
30th Nov 2020 15:52

You need to read answers more carefully, but come on man, this is pretty damned basic stuff.

From your profile its clear you have given lots of help to folk on here, not. Just saying!

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Replying to Graham Ashman:
By ireallyshouldknowthisbut
30th Nov 2020 16:10

@Chesire, wait, this is an agent?

LMAO

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Replying to ireallyshouldknowthisbut:
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By Paul Crowley
30th Nov 2020 16:40

Claims to be, but IMHO unlikely

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Replying to Graham Ashman:
RLI
By lionofludesch
30th Nov 2020 18:09

Graham Ashman wrote:

Another helpful reply!

Actually, you should seriously consider it.

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By Tax Dragon
30th Nov 2020 15:18

Just take a step back.

Maybe an analogy will help. Say Jim owns a house. Can he rent it from himself?

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Replying to Tax Dragon:
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By Graham Ashman
30th Nov 2020 15:31

Thanks, I understand what you are saying and can see the logic. The scenario I had from my client was whether he could have a paye system so that he could keep on top of his payments to HMRC with maybe a balancing payment at the end of the year. My advice was to put his tax aside or create a monthly payment to HMRC but he wanted to know if the paye system was allowable so that he didn't spend his "savings". It certainly would not be the best option financially but I thought I would put the query out there.

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Replying to Graham Ashman:
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By SXGuy
30th Nov 2020 17:24

Yes. It's called paying on account.

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My photo
By Matrix
30th Nov 2020 15:50

I think your client’s question is whether there is a scheme to deduct tax at source from drawings taken by a sole trader similar to a PAYE scheme.

No there isn’t and sole traders’ due dates are bi-annual in arrears. You have already advised the client to either save the tax or pay HMRC monthly.

I can’t answer the “why not”.

Maybe that will come with MTD. Be careful what you wish for.

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By I'msorryIhaven'taclue
30th Nov 2020 15:54

Hey, why not pay his wife and teenage kids instead?

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By thomas34
30th Nov 2020 15:57

"Clients?" - Scary.

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By memyself-eye
30th Nov 2020 16:33

why doesn't his client put money aside every month. Maybe using a post office savings book.....ten shillings a week, like granny taught us to do.

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Replying to memyself-eye:
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By Tax Dragon
30th Nov 2020 16:43

He (the client) doesn't want to risk spending it in a weak moment.

It's a fair enough concern for some. And, while the question may seem laughable, there are times when we all get stuck in the trees and lose sight of the wood. So well done the OP I say for asking (no doubt knowing the replies would include a large element of mockery).

(That it's been an ongoing issue involving multiple calls to HMRC... hmmm, not so well done.)

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By whitevanman
30th Nov 2020 16:45

To state the blindingly obvious, the courts have held that, generally speaking, the difference between an employment and self-employment is that the former involves a master/servant relationship. You cannot have such a relationship with yourself. So, the client either works for his/her clients as an employee (so they must operate PAYE) or as a principal (in which case no PAYE).
If it is just a matter of budgeting, they could perhaps use a separate bank account or does HMRC accept payments on account?

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Replying to whitevanman:
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By Truthsayer
30th Nov 2020 16:56

er...nothing...reply deleted.....

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By Paul Crowley
30th Nov 2020 16:45

Would not recommend it at all
BUT get the 'cannot be trusted with my own money' client to send money to your client account.
And then say no when he wants it back

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By Graham Ashman
30th Nov 2020 16:57

Can I thank everyone for their kind contributions, even the dismissive ones. I am indeed a little long in the tooth and realised my folly soon after posting. I have asked accountingweb to remove the post so as not to cause any further offence to your sensibilities. I shall toddle off to retire. Mery Christmas, one and all.

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Replying to Graham Ashman:
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By memyself-eye
30th Nov 2020 17:02

retire?
You and me both....soon.

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Replying to Graham Ashman:
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By Tax Dragon
30th Nov 2020 22:29

Graham Ashman wrote:

I have asked accountingweb to remove the post

I hope they don't. People have put effort into their replies. That should be recognised. Those replies need the context of your question to make sense. So let the thread stand.

(And FWIW this is not the only time I have come across the question that your client(s) asked you, so I reckon leaving this thread in place will help others. And I reckon that's a good outcome for others as well as you. I hope you agree.)

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By AC71
30th Nov 2020 22:22

If you genuinely have clients then stop. RIGHT NOW.

It's not just your life you're affecting when you have no grasp of even basic principles.

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Universe
By SteveOH
01st Dec 2020 10:29

Your client can set up a "budget payment plan" and make monthly direct debits to HMRC.

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By FCExtraordinaire
03rd Dec 2020 10:47

If it was legal to do that, we'd all be doing it.....

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Replying to FCExtraordinaire:
RLI
By lionofludesch
03rd Dec 2020 12:35

No - I wouldn't.

Along with many more, I would imagine.

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