How do you treat PAYE in the Accouts

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bevkes
bevkes Registered Posts: 25 Regular contributor ⭐
in Chat and off-topic discussion
Hei guys, i've been gone for quite a long time but now i'm back and hope everyone is doing well.

I've just joined a Small firm of Accountants and there is something that i've noticed in the monthly management accounts they produce, they put the PAYE (which is due to be paid to the HRMC) in the assets side of the Balance Sheet. I thot this should be treated as a liability as the company is suppose to pay this.

What do you think? Any help will be appreciated........

_______________________

BEVKES

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  • Bluewednesday
    Bluewednesday Registered Posts: 1,624 Beyond epic contributor 🧙‍♂️
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    PAYE should be a liability, the only thing off the top of my head that I can think of is are they CIS registered? If they have had more deductions than they have made it is possible that they are owed by Inland Revenue.

    Also what figures are we talking about, is it less than the filing refund (unlikely I know) but if so they would still show an asset until the filing refund is used up.

    I'm sure others can add more ideas?
  • bevkes
    bevkes Registered Posts: 25 Regular contributor ⭐
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    Thanks a lot BlueWed for the reply,
    Yes the company is registerd and they are not being owed anything by the Inland Renenue. The figure that i'm talking about is the total PAYE deducted from employees for that month and still yet to be paid to Inland Revenue.
  • Diannew
    Diannew Registered Posts: 2,814 Beyond epic contributor 🧙‍♂️
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    Bluewednesday wrote: »
    PAYE should be a liability, the only thing off the top of my head that I can think of is are they CIS registered? If they have had more deductions than they have made it is possible that they are owed by Inland Revenue.

    Also what figures are we talking about, is it less than the filing refund (unlikely I know) but if so they would still show an asset until the filing refund is used up.

    I'm sure others can add more ideas?

    Hi,
    This may seem like a silly question, but do the Management Accounts include the balance sheet or just the Profit/Loss.

    Only asking because I do Management accounts, and the employee's NI is inlcuded as a cost to the department in the Management Accounts, even though these will effectivly be paid to the Inland Revenue and therefore a Liability in the Balance sheet if not paid.

    Hope I haven't confused you.
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    Diannew wrote: »
    Hi,
    This may seem like a silly question, but do the Management Accounts include the balance sheet or just the Profit/Loss.

    Only asking because I do Management accounts, and the employee's NI is inlcuded as a cost to the department in the Management Accounts, even though these will effectivly be paid to the Inland Revenue and therefore a Liability in the Balance sheet if not paid.

    Hope I haven't confused you.

    Employee's NI is a Dr in the P&L - the corresponding Cr to the balance sheet is to PAYE liability, with net wages only being a Cr to Wages owed (or bank, if paid).
    Employer's NI is the same - Dr P&L expense, Cr HMRC liability.

    I have no idea why they are showing PAYE and NI to be paid to HMRC as an asset in the BS. It should be a credit. The asset is the bank, as they still have the money and haven't paid it over.....
  • A-Vic
    A-Vic Registered Posts: 6,970 Beyond epic contributor 🧙‍♂️
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    Another point is this reclaim? maternity ect?
  • crispy
    crispy Registered Posts: 466 Dedicated contributor 🦉
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    Hello,

    I think that just the Employers NI should appear as an expense in the P&L, journals for wages would appear as: -

    Dr Gross Wages (P&L)
    Dr Employers NI (P&L)
    Cr PAYE Tax (Bal. Sheet)
    Cr Total National Insurance (Bal. Sheet)
    Cr Net Wages (Bal. Sheet)

    Then as the Net Wages are paid:

    Dr Wages Control (Bal. Sheet)
    Cr Bank (Bal. Sheet)

    This would leave the PAYE Tax and Total Nat. Insurance as a liability.

    I also have seen PAYE recorded as an asset - although this was from a US company, it was labelled as 'Taxes Witholding'. The only other reason I could think if they have paid any PAYE in adavnce or overpaid to HMRC leaving a Dr Balance?
  • marcymm
    marcymm Registered Posts: 2
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    What nominal codes for SAGE do you use for PAYE paid by employer to HMRC

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