I took on a client who is Director of own Ltd Co. No employees. Previous accountant did the standard thing from around 2014 of declaring a salary above LEL but below Secondary Threshold, with remainder as dividends.
However, previous accountant never registers Company as an employer, hence no RTI reports ever. He did include the “salary” on Director’s personal tax return standard as employment income from the company.
I need to register Company as an employer, but I will need to put the first pay date. This is in 2014. If I put this, I assume there will be fines for late RTI submissions.
The question is, as the Director would have been on an annual pay scheme, would this mean one late RTI report per tax year or would HMRC insist on there being 12 late reports for each year. The difference seems to be penalties of either £100 (annual scheme) or £1,200 per tax year.
I also assume that the client has not been getting any credit for State Pensions for these years?
Anyone know what to expect from HMRC on this?
Thanks.
Replies (5)
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Voluntary class 3 might be cheaper
With client reclaiming from prior accounting idiot
BUT one side of story
Did client pay for wages and RTI to be done?
Problem is that clients can 'forget' conversations.
Assumed that directors rem was just below contribution level
In reverse order of questions ...
* No idea what to expect from HMRC (having never encountered this scenario).
* The easy part ... client will indeed not have been getting any credit for State Pension for these years (if only because the contributions were not reported via RTI) - which however raises the more important point of did client not notice that NI payments weren't being made?
* As already stated, no idea how HMRC will react in terms of penalties - but their default expectation is to receive an FPS every month.
[This expectation can be changed by using the EPS to notify payment frequency and/or that there is no need for an FPS for a specified start/end period - but by definition in order to achieve that your client would have had to register a PAYE scheme and then submitted the various EPS files *prior* to HMRC noticing that there were 'missing' FPS files!]
So the phrase completely screwed springs to mind. Or you could simply get on with setting up the PAYE scheme from 6th April this year - and operate RTI correctly moving forwards.
After all there wasn't a PAYE scheme in existence during the 7 years in question, so why try to create it retrospectively? That might mean some accounting adjustments (depending on how payments were recorded in company's accounts previously) - and your client may wish to consider Paul's suggestion regarding voluntary contributions (depending on her/his overall contribution history).