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HMRC to shut down unused PAYE schemes

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21st Oct 2013
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HMRC has alerted businesses that unused Pay As You Earn (PAYE) schemes will be shut down where there has been no activity for 120 days.

From 28 October the Revenue will be issuing letters to employers explaining that their PAYE schemes have been closed where records indicate that they have not operated PAYE or paid any subcontractors.

Any PAYE schemes opened after 5 April this year will be shut down automatically where the employer has not sent any PAYE returns or paid HMRC within four months of the scheme being set up.

Schemes registered as annual schemes will not be closed by this process.

Ruth Owen, HMRC director general for personal tax, said: “Closing schemes that are no longer needed is really important for businesses and for HMRC as it means that HMRC won’t waste employers’ or taxpayers’ time and money by needlessly pursuing returns or debts when in fact none are due.

“Since April, employers or agents (acting on behalf of their clients) who have set up PAYE schemes that are no longer needed can easily close the scheme by reporting this on their final submission. This new process helps further as it means we can identify and remove unnecessary schemes earlier,” Owen said.

According to HMRC, more than 1.69 million employer PAYE schemes, covering over 46 million individual records, are now reporting in real time.

It believes that a large number of schemes can be closed, for example because they no longer have any employees linked to them. However, it added that there are some employers who are required to operate a PAYE scheme for expenses and benefits or are required to submit Construction Industry Scheme (CIS) returns. In this case, employers should either submit a nil Employer Payment Summary (EPS) each month or contact HMRC to change the scheme to annual, and then send HMRC a nil EPS once a year.

From the end of the month, PAYE schemes will automatically be closed where

  • no real time PAYE submissions have been made
  • no payments have been made to HMRC
  • the employer is not an annual payer
  • there is no evidence that the employer wants to claim CIS deductions
  • the employer has not received an advance from HMRC
  • there have been no periods of construction industry liability
  • there is no evidence that the employer has any employees
  • there is no evidence that Class 1A NIC is due

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Replies (49)

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By carnmores
21st Oct 2013 16:42

absolute tosh

Ruth Owen, HMRC director general for personal tax, said: “Closing schemes that are no longer needed is really important for businesses and for HMRC as it means that HMRC won’t waste employers’ or taxpayers’ time and money by needlessly pursuing returns or debts when in fact none are due.

 

it would be so much easier to have an INACTIVE button so that they can be restarted at will rather than going thru the process of re registration

Thanks (6)
Replying to DJKL:
By JCresswellTax
22nd Oct 2013 14:20

Give it a rest

dstickl wrote:

carnmores wrote:

.....  it would be so much easier to have an INACTIVE button so that they can be restarted at will rather than going thru the process of re registration

A very good suggestion - how about drawing up an e-petition to HM Treasury?    I for one would "electronically" sign it !

Mind you, I didn't get a very enthusiastic reception from some AWEB commentators when I set out - in my first posting of a question on Any Answers - an e-petition [number 55679] to address the (in my opinion) clear injustice outlined in this link: https://www.accountingweb.co.uk/anyanswers/question/ir35-2 

BTW: if that link won't work, look for an IR35 story in the AWEB Home page "Hot topics:" IR35 area posted on: Wed, 09/05/2012 - 14:46.

With your bloody e-petitions - just accept that no one wanted to sign yours as it didnt make sense!

Move on!

Thanks (1)
Replying to DJKL:
Locutus of Borg
By Locutus
22nd Oct 2013 15:02

Gosh!

JCresswellTax wrote:

dstickl wrote:

carnmores wrote:

.....  it would be so much easier to have an INACTIVE button so that they can be restarted at will rather than going thru the process of re registration

A very good suggestion - how about drawing up an e-petition to HM Treasury?    I for one would "electronically" sign it !

Mind you, I didn't get a very enthusiastic reception from some AWEB commentators when I set out - in my first posting of a question on Any Answers - an e-petition [number 55679] to address the (in my opinion) clear injustice outlined in this link: https://www.accountingweb.co.uk/anyanswers/question/ir35-2 

BTW: if that link won't work, look for an IR35 story in the AWEB Home page "Hot topics:" IR35 area posted on: Wed, 09/05/2012 - 14:46.

With your bloody e-petitions - just accept that no one wanted to sign yours as it didnt make sense!

Move on!

I've just checked the e-petition and a second person has signed in the past couple of weeks.  Only another 99,998 to go before 10/10/14!

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Replying to DJKL:
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By dstickl
22nd Oct 2013 18:14

@Cresswell:If our democracy offers e-petitions, why not use them

JCresswellTax wrote:

dstickl wrote:

carnmores wrote:

.....  it would be so much easier to have an INACTIVE button so that they can be restarted at will rather than going thru the process of re registration

A very good suggestion - how about drawing up an e-petition to HM Treasury?    I for one would "electronically" sign it !

Mind you, I didn't get a very enthusiastic reception from some AWEB commentators when I set out - in my first posting of a question on Any Answers - an e-petition [number 55679] to address the (in my opinion) clear injustice outlined in this link: https://www.accountingweb.co.uk/anyanswers/question/ir35-2 

BTW: if that link won't work, look for an IR35 story in the AWEB Home page "Hot topics:" IR35 area posted on: Wed, 09/05/2012 - 14:46.

With your bloody e-petitions - just accept that no one wanted to sign yours as it didnt make sense!

Move on!

 

If our democracy offers e-petitions, why not use them, e.g. to pass on someone else's suggestion?

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By Cloudcounter
21st Oct 2013 17:41

Agreed

What a change from actual practice.  We've spent years trying to get some schemes closed down and HMRC don't take a blind bit of notice.  Now it's suddenly super important for them to actually read the letters and close down everything that they can find.

You never know, they might actually start to take notice when we write to tell them that either the client or we have changed our address.  Preferably the first time that they're told, but anything less than five would be a great improvement.

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By jon_griffey
21st Oct 2013 18:09

It would be a courtesy

If HMRC could at the very least send out a letter beforehand to say that the scheme will be closed in a month unless they hear to the contrary.  This will give us time to do something about it.

We had a number of schemes this year that we only found out were closed when we went to make a submission.

 

 

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Replying to jackjack5:
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By Eric T
23rd Oct 2013 12:01

HMRC PAYE Schemes

jon_griffey wrote:

If HMRC could at the very least send out a letter beforehand to say that the scheme will be closed in a month unless they hear to the contrary.  This will give us time to do something about it.

We had a number of schemes this year that we only found out were closed when we went to make a submission.

 

 

 

Same here.

 

RTI has thrown up an awful lot of anomalies in their system.

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Should Be Working ... not playing with the car
By should_be_working
21st Oct 2013 18:20

Hang on...

"Schemes registered as annual schemes will not be closed by this process, HMRC claimed."

There, fixed that for you all.

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By ireallyshouldknowthisbut
22nd Oct 2013 09:10

.

Another disaster waiting to happen then.

As above having spent many hours sorting our the mess whereby active schemes have been closed without asking us, they are now going to close down schemes, without asking us.

Brilliant plan.

As above why not write to us first?

This is also a charter for fraud. Dont file for 4 months? Fantastic! Never file again and keep all the PAYE!

 

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By Wieslaw
22nd Oct 2013 09:43

Going against the flow here...

I actually think this is not a bad idea...why?

For us anyway, as we produce payroll for small employers who mainly employee only one person.

So often in past employee left, no replacement and client did not renew with us for another year. No one closed scheme as out of service with us, and even though we advised client rarely to they read what we send them, let alone action it.

It really is easier to open a new scheme then back file data (and penalties possibly) for an old scheme.

HMRC however must have a robust RTI response in place though, when you try and file against a closed scheme, as we still get accepted receipts for closed schemes, and this only comes to light 6 months down the road when HMRC write asking why PAYE is being paid into a closed scheme.

We need a rejection error notice on the first RTI... SCHEME CLOSED, contact HMRC

 

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By mikefleming3028
22nd Oct 2013 12:23

Public Accounts Committee

If you want some insight as to the reasons for this move  then I would suggest that you read the most recent minutes of the above which record the exchanges between the PAC and Lyn Homer and other members of HMRC Board. It runs to 46 pages but if you are a student of tax and have an interest in PAYE, RTI and Universal Credit you would be crazy not to peruse this document at:-

   http://www.parliament.uk/documents/commons-committees/public-accounts/Uncorrected%20transcript%20HMRC%20accounts.pdf

In addition to the above there is another "meeting" of PAC and HMRC on the 28th  and Avoidance will be on the agenda, again a must read for all involved in the tax field. The transcript will be available on line within 24 to 48 hours of the meeting. Same address as above.   

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By mikefleming3028
22nd Oct 2013 12:25

Re above

 

Just to be clear re the transcript referenced above

USE OF THE TRANSCRIPT

1. This is an uncorrected transcript of evidence taken in public and reported to the House.

The transcript has been placed on the internet on the authority of the Committee, and

copies have been made available by the Vote Office for the use of Members and others.

2. Any public use of, or reference to, the contents should make clear that neither witnesses

nor Members have had the opportunity to correct the record. The transcript is not yet an

approved formal record of these proceedings.

.

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Replying to Emmamay106:
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By adbanks
25th Oct 2013 14:49

In other words this is what the stenographers recorded in the heat of the moment, recording what was said, without having been amended for what the "witnesses" meant to have said.

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By JCresswellTax
22nd Oct 2013 16:34

I take that back

Two signatures! Obviously the man himself and he's now managed to convince his poor wife to sign up...

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Replying to SteveHa:
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By dstickl
22nd Oct 2013 19:25

@ Cresswell: Sorry, I think you are wrong - this time.

JCresswellTax wrote:

Two signatures! Obviously the man himself and he's now managed to convince his poor wife to sign up...

Interesting, (A) when 55679 was posted, it had zero "signatures" reported on it; when I tried to add my "electronic signature" on it, a message came back that I couldn't "sign twice", so it seems to me that the 2 sigs currently reported don't include mine, because I'm the petitioner, and (B) no wife of mine has signed.  So I'm sorry, but I think that you are wrong - this time.  OK? 

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Stepurhan
By stepurhan
22nd Oct 2013 20:58

e-petitions and their place

e-petitions have potential, but they have to get substantial support to have any effect. I also believe that they are open to abuse, such as one person signing under multiple accounts. I don't know what sort of security precautions the government site uses to avoid this risk.An e-petition for an inactive button on PAYE schemes could actually prove useful anyway.

Regardless of the value of e-petitions in general, continuing to go on about a clearly unsuccessful e-petition is just pointless.It doesn't matter who the two signatories are, there is no chance of an e-petition being taken seriously with that little support. You have already been given a number of reasons why you are probably attracting so little support dstickl. Please stop flogging a horse that barely achieved life in the first place.

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Replying to Ruddles:
By JCresswellTax
23rd Oct 2013 09:54

Thanks stepurhan

stepurhan wrote:

Regardless of the value of e-petitions in general, continuing to go on about a clearly unsuccessful e-petition is just pointless.It doesn't matter who the two signatories are, there is no chance of an e-petition being taken seriously with that little support. You have already been given a number of reasons why you are probably attracting so little support dstickl. Please stop flogging a horse that barely achieved life in the first place.

This is what I was trying to say, I just struggle to be so polite about matters ;)

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By Karlos1986
23rd Oct 2013 11:16

Back to topic...

Its would be great if HMRC showed this enthusiasm and speed to repay our clients CIS refunds we first requested in May, as a pose to trying to shut down the schemes where there is none!!

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By markpipe
23rd Oct 2013 12:18

HMRC to shut down unused schemes

I know I am getting old and my memory is going, but wasn't it only a couple of months ago that the HMRC were banging on about the number of employers that had not made RTI submissions. Is this just a cunning ploy to shut down those schemes so that they are able to report that RTI is an overwhelming success because 99.9% of employers will have then filed under RTI!

I agree with the comment that this is just going to end up with more PAYE debts being written off in liquidations etc. Surely the logical thing is if people are not filing do something about it or does that require some staff and effort?!

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By The Black Knight
23rd Oct 2013 12:38

One rule fits all.

"P11D's ,benefits"

"oh shut up we know best and we're in power"

Nothing you can do! It has to fall over in its own time!

We should protest and demand the resignation of the idiots that fail the country!

Be along time waiting though just look at how long HMRC have been in denial about the CIS working. A scheme where defaults are the rule rather than the exception. Problem solved in the traditional civil service way of brushing under the carpet and presenting the telescope to the blind eye. "what problem" (Nelson has a lot to answer for)

 

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By MarkKing
23rd Oct 2013 12:41

But what if they aren't annual schemes

So after preventing us from registering schemes as annual (or even check the status of schemes in a reasonable manner) they now propose to start closing our schemes without prior warning.

I wonder how many single director annual schemes will be closed by this only for the poor accountant to find out at the end of the tax year when attempting to make the annual submission.

Nothing like creating more admin work that we'll never get paid for!

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By petersaxton
23rd Oct 2013 13:12

HMRC are managed by idiots

What is the point of closing schemes down now? What harm does an inactive scheme cause? Why not wait a couple of years with no P35s or nil statement?

Conversely. there's a lot of hassle closing down a scheme that shouldn't be closed down.

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By sally1964
23rd Oct 2013 13:20

But they activate schemes which have never been used!

We have had schemes reinstated by HMRC even though the company has been dissolved and HMRC were told about 6 years ago that the scheme was no longer needed.

They reinstate without telling you and now they are proposing to close without telling you.

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By miketombs
23rd Oct 2013 14:36

They need to get their act together

We have one client (a few, but one with particular hassles) where HMRC closed the scheme in error sometime in 2012/13. At the time there was no PAYE due (sole director earning below the threshold) and there were a series on nil CIS1300 returns. They accepted the quarterly nil PAYE returns online as well as the year-end P35.

When we started with RTI the monthly submissions bounced although the online CIS1300's were still accepted. When we finally got them to re-open the scheme they issued penalty notices for 'missing' CIS returns, although we had the receipts generated by HMRC. We told them that all the returns were 'nil' and they in effect updated their records based on that telephone advice. Their online team have confirmed that all the returns were submitted electronically and in time, but instead of just cancelling the penalty we have to go through a formal appeal process.

It's unreasonable of us to charge the client for our time sorting it out, and I'm bloody sure George  Osborne won't cough up.

The same client has had CIS deducted from his income which we are told will be transferred to his Corporation Tax account in November. Meanwhile his CT bill was due 1st October and we advised him to just pay the net - he didn't have a lot of choice to be fair.

If we were as sloppy as HMRC on things like with we would be struck off, but HMRC just live in a  nice, protective bubble.

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By stevechee
23rd Oct 2013 14:37

They've been doing it for quite a while now....

and they've not been telling us that they have done.  We have employers that now need to open a new scheme in double quick time to pay someone.

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Stephen Quay
By squay
23rd Oct 2013 14:37

Wouldn't it be great if we could all communicate effectively with HMRC. This thread, and others like it, show that the biggest problem in dealing with HMRC is communication. They don't want to talk to us. We can't get through to them.

We can't get though on the phones, they don't accept emails and if we post it takes at least 3 months before they read it.

But we all have an HMRC portal we can log in to and deal with our clients securely. There is a secure area to read messages from HMRC. Why on earth can we not use the same system to send secure messages to HMRC? Just like some banks do.

It would make perfect sense, secure messages, no spam, and HMRC would know exactly who its from, instant messages that don't get lost in the post. Even attachments could be received.

Perhaps the only reason something so fundamentally simple to use that could be implemented without much additional cost is not implemented is that they wouldn't be able to cope with the traffic. There would be no excuses for HMRC to hide behind. We would all see the poor service for what it really is.

 

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By cnb
23rd Oct 2013 17:21

Failure of communication?

On 27th February we were asked to process a payroll for a new employee.  We obtained from the client details of the PAYE and Accounts Office references, set up the payroll and processed the February salary. On 1st March we applied online to register as the company’s agents for payroll purposes.  We advised our client of the amount of tax and national insurance payable and a payment of £656.71 was made quoting the appropriate Accounts Office reference. We were then advised that the employee had left and on 14th March we filed online a leaver notification and received the appropriate acknowledgment by email.  Registration as the company’s agents was completed on 28th March.  Having processed the March payroll, we then issued the employee with a form P45 and attempted to file a form P35, without success. Only after this did we receive a letter dated 13th March from HMRC telling us that the scheme had been closed over 12 months previously and they could not accept the payment. They suggested we should set up a new scheme. Something is not working as it should.

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By kiwilondon99
23rd Oct 2013 19:09

nightmare all ways round

 

this is just a nightmare awaiting a crisis

 

we have several OMB / one man director shareholders who invoice [ when they can] periodically and pay themselves when there is cashflow to do so. Not always within a neat 120 days. and  What happens to the p11d side of things when the PAYE scheme is closed.  [  will they take the forms and cheques   or does one not not bother / no liability as HMRC  deems it not needed ? ]

In client scenario if they pay themselves 150 + 120 days they'll be needing new schemes for almost each payroll.

 

 Is it quicker to get a closed scheme reopened or to get a new scheme for potentially each payroll.   Small business hammered by cost and inefficiency + potential fines in due course for matters way beyond their control

Outrageous new plan

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By petersaxton
23rd Oct 2013 19:20

I dont think they will be closed

if you submit an EPS.

So the employers will be at fault if they do get closed down but why increase the hassle?

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Morph
By kevinringer
24th Oct 2013 13:24

How to register for annual schemes

HMRC tell inactive employers to register as an annnual scheme, but HMRC don’t tell you how to do it. I made enquiries yesterday: phone the payments helpline 0300 200 3401 then select options 3 (Employers) then 3 (Payment differences) and hold to speak to someone. There is no menu option for annual schemes. There is no online registration facility for annual schemes.

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Morph
By kevinringer
24th Oct 2013 13:27

HMRC's closure letter

This subject came up in our local WT meeting yesterday. HMRC intend to send a letter to inactive employers notifying them that their scheme has closed. Two big problems:

The letter is going out after the scheme is closed.The letter is going to employers and not agents.

To avoid a lot of unnecessary closures it is obvious that HMRC should send the letter to agents in advance. Who in HMRC decided to send the letters out afterwards? What planet are they on?

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By adagen
24th Oct 2013 13:53

Annual schemes aren't being handled correctly by HMRC

One scheme set up as annual. 3 occasions HMRC claimed money on the basis that no monthly return had been made. Issue was taken up by MP and resulted in an HMRC claim that the scheme 'had been changed' to annual. No acknowledgement of HMRC error and no explanation of why the initial and subsequent attempts to get the scheme set up as annual hadn't been correctly handled by HMRC.

That's 4 major RTI errors on one scheme already, all failures of HMRC processes. On that basis, this proposal is chaos waiting to happen.

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Morph
By kevinringer
24th Oct 2013 14:06

@adagen

Your experience is proof that RTI still needs time to settle down before HMRC start to close schemes - that is why I think it is a big mistake that HMRC is notifying employers after they have closed the schemes instead of notifying agents beforehand.

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By adbanks
25th Oct 2013 14:43

Huzzah!

I've been trying to close down the PAYE schemes on three (now dormant) companies

HMRC have so far refused...

All three were on Annual Returns, and I've been inundated with letters about Real-Time, whinging that I've not done a return - but I have no data to do a return with/.

So I welcome this!

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Jennifer Adams
By Jennifer Adams
27th Oct 2013 15:14

Should we tell Working together?

We seem to all agree that this is an 'accident waiting to happen'. Should we direct our respective Working Together reps to this discussion?

The CIOT/ATT working together 'lead' is Nigel Clarke and Tina Smeaton is the Working Together Technical Officer.

I have emailed them and directed them to this site - does anyone else want to do the same so possibly we will get heard (I know, I know... the relevant word here being 'possibly')

Jennifer Adams

Associate editor - accountingweb.co.uk

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Replying to Tax Conundrum:
Morph
By kevinringer
29th Oct 2013 09:04

@JAAdams - Yes

JAADAMS wrote:

Should we direct our respective Working Together reps to this discussion?

This issue was discussed in our WT meeting last week and it was fed up the line. But knowing how slow these issues are dealt with by national WT I guess it won't even be looked at until after the event. So the more WT reps that deal with this, the more likely HMRC may act on our comments.
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By carnmores
28th Oct 2013 17:04

and another thing

my hobby horse ...

where clienst have no pay but taxable benefits will their schemes be put down

can they please have a system where benefits can be returned without a scheme where no class 1a is due

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Replying to rahane12r:
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By The Black Knight
28th Oct 2013 17:13

Don't be stupid

carnmores wrote:

my hobby horse ...

where clienst have no pay but taxable benefits will their schemes be put down

can they please have a system where benefits can be returned without a scheme where no class 1a is due

Don't be stupid they have spent hours and hours on making this not work and you are asking them to be sensible and take a beneficial practical approach. Total madness you must be one of them anti-disestablishmentarianists

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By carnmores
28th Oct 2013 17:36

@blackknigh ROTF

actually i am an antidisestablishmantarianiast not only bcause its the longest word in the dictionary but becsause its  bulwark against islam.

I am turning into an anosmic mendicant!

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By The Black Knight
28th Oct 2013 18:16

Ok Friar Tuck

Will we ever be free when we have to side with our enemies enemy.

One religion is as bad as the other. They both rely on eternal damnation and killing those that disagree with the book. What paradoxical thinking.

p.s bet you smell lovely!

 

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By carnmores
28th Oct 2013 19:42

was he anosmic or mendicat ?

boom boom nevertheless

yes i do smell lovely i only know because other people tell me.

btw i disagree that all religions are as bad as each other but thats probably not for here , how were the Crusades?

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By Ian McTernan CTA
05th Nov 2013 11:45

Another fine mess..

RTI, the best messes are designed by committee!

One day, before introducing these new systems, it might occur to the powers that be that asking the 'customers' (as if we have a choice..) what they want a system to be able to do would be a good starting point, rather than designing a system with limited input from the chosen few who have their own entire departments to deal with queries, etc.

This idea to just shut down schemes without warning is utter madness.  One email or automatic letter giving 90 days notice of intention to close would be the way to do it, sent to the agent where there is one.  Any action on the scheme and the scheme is deemed 'live' for that tax year.

Better yet is the suggestion of an 'inactive' setting above.

Why they never think of these sort of basic things before imposing yet more work on us is beyond me- it's as bad as the whole 'you can't register annual schemes' at the start of it all...

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By Canary Boy
18th Dec 2013 12:16

Sole trader

turned into a Ltd Co. so new scheme set up and all employees transferred over. So sole trader scheme can be closed. Haven't sent any FPS/EPS's in hoping the old scheme would be shut.

Now getting reminders that penalties will be imposed after April next for late submissions!

What are we to do? 

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By petersaxton
18th Dec 2013 13:08

Close old scheme?

Good idea?

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Replying to Maslins:
By Canary Boy
18th Dec 2013 15:55

Peter

petersaxton wrote:

Good idea?

why would we not close the old scheme?

 

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By petersaxton
18th Dec 2013 16:01

You said it CAN be closed

so it seems you still need to close it.

You may have to bring the FPSs up to date first.

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Replying to ireallyshouldknowthisbut:
By Canary Boy
18th Dec 2013 16:35

I suppose what

I'm really asking is will HMRC close a scheme if you stop submitting RTI returns?

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By petersaxton
18th Dec 2013 18:27

The easy answer is:

If you want the scheme shut down HMRC won't shut it down, and

if you don't want the scheme shut down HMRC will shut it down.

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Replying to Portia Nina Levin:
By Canary Boy
19th Dec 2013 07:14

Ha ha ha!

I guess I'll leave it at that then.

Merry Christmas.

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