PAYE Query

T.C.

I have a client who does not employ anyone, but wants to take on a lady for 16 hours a week. Am I right in presuming that he does not have to register as an employer if he keeps her earnings below the tax threshold?

qwerty

There are a number of factors in deciding whether your client needs to register for PAYE. Here is a link to HMRC showing when you need to register:

http://www.hmrc.gov.uk/paye/intro/register.htm

We once had a client who persuaded HMRC that they shouldn't register even though some of their employees were above the Lower Earnings Limit but all were below the Earnings Threshold. However, we persuaded them that it is better to be registered to report the earnings to give the employees credit towards state pension entitlement etc.

T.C.

Thanks for that. I know he doesn't want to register. So basically he needs the pay to be under £95 to avoid the NIC threshold, yes?

A-Vic

you will have to register if even under the treashold as a nil P35 will have to be filed

T.C.

Oh yes, forgot about that form. But HMRC website says that:
"You don't necessarily need to register as an employer once you take someone on. Check first that at least one of the following conditions applies to you. If any apply, then you need to register:

* the employee already has another job
* they are receiving a state or occupational pension
* you're paying them at or above the PAYE threshold
* you're paying them at or above the National Insurance Lower Earnings Limit
* you're providing them with employee benefits

Confused!!!

A-Vic

New Employer Helpline on Tel 0845 60 70 143

give them a ring, however you will be lucky if you get through today as most are on strike.

But one of the questions asked when registering is will you be paying under the threshold you say no they will be registered but not have to complete monthly P30 yellow book slips however if they do go over you will have to notify them

qwerty

If the weekly wages is below the LEL (currently £95 per week) there is no need to register for PAYE provided the employee has no other jobs, pension income or benefits.

However, one should consider if the wage is likely to differ week on week, so that some weeks income may exceed the limit thereby resulting in a reporting requirement and needing to be registered as an employer.

If the employee will always earn lower then the LEL and the employer does not want to register then he does not have to. It would be advisable to get the employee to sign a P46 which will show they don't have another job/pension etc. This can be kept safe so that should HMRC come knocking you can provide them with evidence for why the client is not regsitered for PAYE. Perhaps print off a copy of the "When you need to register" summary in my previous link.

On a related note, does the employee understand the effects of being paid below the LEL?

groundy

If you dont register for PAYE and have the employee complete a P46 and it turns out this is their second job then your client will become liable for PAYE. However, if registered and P46 completed the onus is on employee to be honest and any liability will be their own.

T.C.

Mmm good point. I never thought something so simple could be so complicated!!

A P46 has a note at the bottom not to send to HMRC until the employee's earnings go above the lel, so I think I will advise my client of that. At least then the employee has signed to say that it is her only job and the form is ready should the hours need to be increased later (unlikely).

Thanks for all your help.