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Very Late Registration of Employer

What are likely to be the fines for late registration of employer if only "employee" is Director?

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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?


Replies (5)

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By Paul Crowley
17th May 2021 11:52

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?

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Replying to Paul Crowley:
By ChrisKM
17th May 2021 12:09

Client would have had no clue; he would have paid accountant to just do what was required. But client is a nightmare and my guess is accountant couldn't get him to register as an employer or agree to it, although I don't know why he didn't just register him anyway.

I understand your point on Class 3; it would be cheaper but salaries were declared in the accounts and reported in self assessment returns for years so can I just ignore that and register the co as an employer from now? Doesn't feel right.

Thanks for responding.

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Replying to ChrisKM:
By Paul Crowley
17th May 2021 12:40

Problem is that clients can 'forget' conversations.
Assumed that directors rem was just below contribution level

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By Hugo Fair
17th May 2021 12:28

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).

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Replying to Hugo Fair:
By ChrisKM
17th May 2021 12:44

Thank you for that reply. All very valid points.

The client really deserves to i) pay the class 3 contributions and then ii) still get clobbered with RTI fines when HMRC wake up; he is a nightmare but can't bin him as is a family "friend". [He is used to paying fines; managed to incur a £750 late filing penalty from Companies House for a dormant company even with the COVID filing extention available].

Reclassifying previous entires is hard given how disclosed in accounts and tax comps. I am tempted to get client set up from now as you suggest, establish an annual scheme and then write to HMRC about the previous years.

Thanks again.

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