Payroll help..

tonyd Registered Posts: 8 Regular contributor ⭐ ? ⭐
I got asked this yesterday and i haven't a clue what the answer is, so thought i'd ask the MIP's on here.

An aquaintance started his own business in jan 2008 but hasn't set up a payroll registering for paye etc. If that wasn't bad enough he's also effectively been paying employees gross because he's been paying cash and has no records to speak of. Some employees have now left, to make matters even worse !!

I told him to ring HMRC right away and register a scheme, as delaying will only make matters / penalties worse?

Can anyone give me an indication of the likely penalties he'll be penalised with.

Btw - also told him to get an accountant :001_rolleyes:


  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    Sounds like a real mess. I would write to HMRC explaining the full situation and then get someone "competent" to sort it all out. (I wouldn't want the job!!:001_unsure:)
  • Nilesh Mandvia
    Nilesh Mandvia Registered Posts: 91 ? ? ?
    Not just penalty

    Is he registered as self employed? If not then you are looking penalty for this too.

    There will be penalty for not filing payroll year end forms. There will be some interest charges on paye and nic due as well.

    I think best option to settle last year's paye and nic liability by PSA. This would be costly, but would be easy to do it.

    For current year, he needs to register and get the paye reference number, and process the payroll from 06/04/2008 till today and bring everything up-to-date. Again this will cost him in Paye and Nic as he has paid the gross amount.

    The acquaintance needs to sort out this mess and find good accountant as suggeted by T.C. There may be more thant just penalty and interest. There are other compliances too for example employing illegal immigrants.

  • Debz
    Debz Registered Posts: 17 Dedicated contributor ? ? ?
    Payroll answer

    Firstly register for a paye scheme can do this online on HMRC website tap in new emplyoyer scroll down to bottom of page and register all details. Once you have the paye reference (which will be quicker doing it online) you can then process the payroll.

    As he has paid the employee's gross this figure will need to be grossed up so effectively the gross pay paid will then be the net pay(if that makes sense!). Ultimately the employer will be out of pocket as he will suffer the tax and Nic. the mployee's should have paid but that's his own fault for not doing things right in the first place. P45's can then be processed and sent to the revenue.

    Be aware that by informing the revenue you risk a paye enquiry for your client. Things can be sorted by following the above process (as long as they aren't illegal immigrants) Paye laibility although late shouldn't incur penalties for this tax year as long as its paid by the end of the tax year interest etc shouldn't accrue.
  • Debz
    Debz Registered Posts: 17 Dedicated contributor ? ? ?
    payroll answer

    Sorry i didn't notice that employee's had started in Jan 08 so there will be penalties for a late p35 return and late paye laibility from Jan 08 - 5/04/08. £100 late penalties per month for each month outstanding. If your not filing online or if your not set up to file online you will need to ask the revenue for a p35 return for 07/08.

    The previous e-mail could be followed from 06/04/08 for processing payroll in this tax year.
  • tonyd
    tonyd Registered Posts: 8 Regular contributor ⭐ ? ⭐
    Thanks for the advice - will pass it on.
  • DaveP
    DaveP Registered Posts: 79 ? ? ?
    Just to add a couple of points..

    - You can't use a PSA for tax/nic on wages.

    - Even though it is late, if you file the end of year details online you still qualify for the £100 online filing incentive. That will at least mitigate one of the penalties.
  • tonyd
    tonyd Registered Posts: 8 Regular contributor ⭐ ? ⭐
    thanks Dave
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