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Post Info TOPIC: Payroll help


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Payroll help


Hi, Have a company who have just given me a years worth of paperwork and within that there is payroll. I'm really looking for advise as to how to deal with that, their year end is 31 March, and none of the payroll info has been given to HMRC, it is a limited company with 2 directors and 2 employees, one of which left in January. Any help appreciated. Thank you. Hetty

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Heather



Master Book-keeper

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Hi Hetty

So hows about an intro before we start. We always ask newbies!

Usual stuff - what prof body do you belong to, bookkeeper or accountant, what qualifications, how long in role, where up to in your studies-what exams passed/with what body/in midst of doing, where based, is this your only role/what you did before this role? That so of thing. Helps get to know you but also how best to pitch answers.

Do they have a PAYE number set up? What paperwork do you have for have for the payroll? What has been issued to the staff?

Yoi can add your first name to appear under the sign off bar at the bottom of the posts, by editing the signature section of your profile btw.


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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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Hi Joanne,

I've completed B291 & B292 Open University and am currently in the 3rd year of study toward a business degree. I am also just about to start studying with ACCA. As yet I do not belong to a professional body but intend to register with the IAB. I have been bookkeeping for about 10 years and am located in Kent. This is not my only job, I have a full time role position and this job is on a self-employed basis. They do have PAYE set up, for paying CIS, which I have sorted out and got up to date.  This is manual bookkeeping at its finest! I have got to used to working for companies where the information is on hand at the right time.

Thanks for the advise about first name.




-- Edited by Hetty on Monday 17th of April 2017 08:04:18 AM

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Heather



Master Book-keeper

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Hi Hetty
Thanks for the intro and welcome to the site. Your full first name now appears in the signature bar ( although folks will now go off that rather than Hetty, so you may wish to change it, depending on what you prefer). If you are using some mobile phones then this will not show, but it does on the full site via desktop, laptop, iPad etc.

I'm confused. So this company has a PAYE scheme including CIS but are you saying that no RTI reports have been sent? Have the CIS reports been completed via paper based method in the past? Just want to clarify the exact position before going any further.

Also- what payroll software do you use?

It seems you are following a similar route to this business as our moderator, Shaun. To be honest, I wouldn't necessarily bother with the IAB if you will be joining ACCA soon. I'm presuming you have your MLR via HMRC and as its now just renewal fees it must be cheaper than the ICB membership fee and I don't think you would get anything else out of memes hip (I could be wrong!). Of course being a student member of the ACCA doesn't provide a practice certificate. Not sure if you go beyond trial balance for any of your clients, but are you aware of the ACCA regulation 8? This will effectively prevent you going beyond that TB stage in your sole trade business. (Just as an aside!!)

__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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I don't go beyond trial balance, I recommend to all my clients that they need to engage a chartered accountant as I am not a professional bookkeeper as yet.

Nothing had been done with regard to CIS or payroll until they gave me several bags full of paperwork!  I had discussed with them several times prior to receiving paperwork that if they were paying people as employees then I needed to submit these details as they were paid, all of which fell on deaf ears.  As far as I was aware they were going to pay everyone on a self employed basis as sub-contractors and then changed their minds after I received the paperwork, so as far as the bookkeeping was concerned I was just dealing with the two directors who were paid via dividends.  CIS has been submitted using the HMRC website.

I don't have any payroll software as yet, could you advise as to the best one to use?

 



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Heather



Master Book-keeper

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You are a professional bookkeeper, as long as you know what you are doing then you are classed as QEbiggrin

Re payroll software, I would recommend Moneysoft as its a great price for a superb bit of kit.  Only problem is, that you have only got to end of day, from memory, the 19th of April to get the prior year finalised so you have a couple of days to get this done.  Failure to meet that deadline means you would have to do any prior year adjustments Via HMRc's own basic tools (which is pants and would then leave you learning two sets of software).

it is do-able, and Moneysoft is easy enough to find your way around, especially with their help files, call centre/email support or just asking on here (A fair few of us use it, although quite a few seem to be away this weekend!) Or of course you could subbie it out, there are a couple of us on here who provide this service, although that again takes time and not great when it's a bank holiday. 

Great news though is that you have the PAYE references!! Phew!! Means it's do-able quicker. 

Sorry- more questions - We're both employees earning below the LEL limit and it was their only job? That would be the only way out of this, but only if the Directors were to forgoe their wage and that element of the tax planning. When was the auto enrolment date for pensions? I might have some more (sorry, not too well today so brain engaging slower than usual!)

I will check the deadline date.

Moneysoft does have a CIS module, suggest getting that version.....nifty bit of kit. 

Worth taking a look at the penalties for none reporting as they will have to pay that lot as well as a big fat fee for you sorting it out in three days!! 

Ask anything else you need

Edited for typos



-- Edited by Cheshire on Monday 17th of April 2017 09:05:15 AM

__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Master Book-keeper

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Other Qs - do you know what salary the Director/Shareholders would want to take out?
- do you know the full names, addresses, NI numbers, dob, tax codes etc of the two employees?


I checked the date - it is 19th (you can submit any time up to midnight, although not ideal on a first run in case you need some support!)

Other option - assuming they have an Accountant already from prior years and that Accountant has a payroll department - pass it on to them as they have the set up in place already to manage it and could probably have it all done on Tuesday without flinching!

 

Edited for typos



-- Edited by Cheshire on Monday 17th of April 2017 09:05:36 AM

__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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I do have all the details of the employees, one of them yes, and the other no, the one above the LEL earned £6119.51, it was his only job. The other one earned money from previous employment but still not enough to take him over the LEL. The directors have not taken much at all in the way of dividends, one of them has taken £11895.00 and the other £4100.

This is company that switched from sole trader to being ltd, they had up to that point submitted everything on self assessment with no accountant. So i'm it at the moment and feeling a bit out of my depth.

I'll have a look at the payroll software, I've had a look at the HMRC payroll software, not a pleasure to use at all!




-- Edited by Hetty on Monday 17th of April 2017 10:13:19 AM

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Heather



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So could I put the payroll data in and send it in as an annual payment? And could I split the directors remuneration taken between dividends and salary with the salary being £155 per week each?

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Heather



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Hi again
So it sounds like these guys are less than ideal!

I wonder who gave them advice about moving from partnership to limited but then they didnt employ them as Accountants. Without knowing them this sounds like a can of worms. There are a set of processes to follow which need to be done very carefully. They should be selling the assets and the goodwill of the prior business to the company. Care needs to be taken over the valuations being used and the goodwill figure needs to be cleared/agreed by HMRC.

There are both personal and tax implications of the business transfer - eg capital gains on the income to the individual now shareholders and from a business perspective the loan due to them could mean that no salary or dividends would be needing to be drawn so the resultant repayments are tax free. A lot more information would be required to wade through this and ensure the correct treatment of tax and therefore your payroll issues are sorted properly).

Also this begs the question - when did they start with these staff and is the issue of non -reporting dating back to prior to the Limited company being in existance.

You also have the potential issue of basis periods as I am now assuming that no accounts have been done for the prior partnership business, but just the self assessments.

There is more - but I dont want to scare you off! They need to get an Accountant - and NOW. But this also begs the question - if you gave advice and asked questions and advised them of the things they needed to do (at least only in terms of payroll) and they ignored you, what else are they going to ignore. They have effectively evaded tax by not running a proper payroll, so if you are feeling out of your depth, and given they have ignored your comments, this is a good opportunity with valid reasons for dumping them as a client - before you have lost any more. Or if you want to carry on - make sure you get the cash up front and INSIST that your part of the deal is they get that Accountant on board and quickly.

The problems you have with the payroll question:-
1) You do not have one of the employees information - you will need this to set that person up on the payroll, even though they have left! Can you get this?

2) You have to run a PAYE scheme and report it due to one or more being above the LEL, or one being below but having other income (per HMRC guidelines)

3) You CANNOT run an annual payroll scheme as they have employees who have been paid on a regular basis. Under RTI you have to tell HMRC before the payment is made.  Yes - I know you are late, but you cannot break the rules of the scheme/encourage a client to do so, and must go back and provide the information in the correct tax periods  (so that the employees tax and ni is correctly reported as well as the company's)

4) The business will have overpaid the employees, having never deducted tax and ni!

5) Given the Director/shareholders have not taken ANY kind of tax advice how can you know what optimum payroll payments to make to them, given you now have no idea what their tax position will be. You would have to do the tax comps (an Accountant would)

6) re split between divis and payroll - other issue is that at this stage I am presuming you do not know what the profit after CT the company will make and therefore is there is enough to make ANY kind of divis - again a calculation is needed to see which is the best way (but you need to also know their personal tax circs)

Sorry pressed submit post before I was ready to so edited to add the extra information (although now I cannot see your Q, so I may have missed something!)

 

 



-- Edited by Cheshire on Monday 17th of April 2017 10:49:14 AM

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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Member

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They definitely need to get an accountant. I want to help them as best I can so will carry on with them it's just this blasted payroll issue that I've got stuck with. They don't want to evade paying tax and are genuinely wanting to get this sorted out, however it's not something I've come across previously, as I mostly do a basic bookkeeping service, hence feeling out of my depth. I have P45's for one of the employees, the other has not worked previously. I really had no idea about the business transfer etc, that you mentioned above, although had some idea that there was more to going from a sole trader to ltd co.

I'm going to suggest that they get an accountant to sort this out as it is way above my head.

Thanks for the advice so far.




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Heather



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Way I see it then - you have two choices.
1) Do the payroll and report as best you can before the 19th. Your client needs to get you the second persons info. Plus THEY need to advise what they wnt to pay themselves (on the back of no advice from you, given you cannot speak for their circumstances for the reasons stated above and presumably because you could be precluded from giving such advice by your PII providers). Dont forget to tell them about the fines.

or

2) Get them to get the Accountant now and get the Accountant to make a disclosure to HMRC about the tax which has been evaded and make a payment of the said tax with the disclosure and start the payroll from this tax year. Obviously there will be fines and penalties for this route for them.

Unless anyone else on here can suggest anything Ive missed. Tom (payroll specialist) may have some ideas, but Ive not seen him around over the Easter hols so worth checking back in regularly over the next day/two.


Dont forget to check the Auto Enrolment dates!!!



-- Edited by Cheshire on Monday 17th of April 2017 11:40:54 AM

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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Forum Moderator & Expert

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Hi Hetty,

welcome to the forum. See that you're in Joanne's capable hands so I won't get involved in that discussion as such. Just as an aside you state that you are joining the ACCA. You also state that you don't go beyond trial balance but don't elaborate on that.

Just so that you know... Being a member, even student member of the ACCA effectively prevents you from going beyond trial balance (so it wouldn't be a matter of choice) or providing any documentation that may be relied upon by a third party beyond your client. That can get pretty hairy when you procvide a client with a management report and then find that they have gone and used that when talkking to their bank manager. Make sure that your engagement letter stipulates that nothing that you do may be reproduced, distributed and referred to without your prior consent.

It doesn't matter what other body you are a member of as ACCA takes precedence so if you were allowed to say prepare self assessments as a member of the IAB but then became a student of the ACCA you would suddenly cease to be able to file self assessments.

There are some exceptions to that rule once you have your letters and before you get your practice certificate (circa three years post qualification).

On the route that you are taking you have exemptions from the first three ACCA papers.... If I were you I would not take the exemptions as the firs three get you into the ACCA way of asking questions which is quite different to the OU one's that you are used to. The questions are not so much trick questions but you need to get into the mindset that there is as much question written between the lines as on the paper. Do some old papers and you will see what I mean.

I only scan read the above so may have missed your response to Joanne over MLR. Make sure that is in place as whilst everything else such as PII may prove financially damaging, lack of MLR can see you go to jail and be effectively banned from ever practicing as no professional body or HMRC would touch someone who has been convicted of a crime in relation to money laundering (I know, it's draconian. It was was actually forced through as anti terrorism legislation which is why it carries so much weight).

Good luck in the new venture. Despite the above warnings about ACCA (specifically regulation 8), what you learn by doing it is second to none.

kindest regards,

Shaun.




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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.



Master Book-keeper

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Hi Hettie

Firstly welcome to the forum, and secondly, what a nightmare for you!!

A few points spring to mind.  Firstly you mention that CIS submissions have been made but then say that employer changed their mind and put through payroll.  Is it possible that some or all of their paye has gone through the CIS and it's just the employer got confused?  Maybe worth checking to see if any hasn't been duplicated.

You also say that you have a P45 for the employee that left, so all their info should be on there, and you can get the info for the other employee if they're still there.  I'd be very interested as to how they managed to do a P45 if they never operated the payroll though!

You mention dividends.  What percentage shareholdings do they have?  They can't just choose to take different dividends, it has to match their shareholdings split.  

How long til their financial year end?  Stress how important it is to get an accountant on board as well,  it's probably already cost them money in not having one.

 



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



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Not too sure that I can add any technical advice beyond what has already been stated with PAYE.

My concern would be mostly commercial. In particular the payroll RTI situation sounds like a huge can of worms and you should be careful that the blowback doesn't fall on you. If there were a number of PAYE payments during the previous PAYE year (or two years?) which weren't reported on time the penalty repercussions could be significant.

Really just repeating what Cheshire has already suggested. Make sure that you get payment up front, and that they understand that any penalties that arise due to late filing of RTI aren't your fault. Some might suggest that the historic payments be treated as something other than pay, (eg loan or dividend) but I'm not a big fan of re-writing history and I suspect if HMRC were to conduct any kind of inspection and saw a regular pattern of payments they might well take a dim view in the absence of a clear document trail showing that these payments were considered to be loans or dividends at the time they were made.

And yes, unfortunately someone needs to work fast if you're to file any FPS's before the technical deadline. After the 19th the message format for PAYE to HMRC would be an EYU which not all commercial software can process.

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Master Book-keeper

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I took the P45 for being for the job prior to this one so that Hetty had all their info, but not for the other one. Plus the divis comment - I took as just being the balance on the DLA, although thats a very good point on the shareholdings split, assuming they have the same class of shares. So easy for us to read different things into posts and why we need more info a lot of the time.

Totally agree with Tom on the not re-writing history bit - not good when it comes back to bite.

Hetty - how are you getting on with this one? You ok with Moneysoft?


__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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Hi Joanne,

As the PAYE number was set up quite recently, I am going to submit all the information for that period, anything prior to that I am going to leave to the accountant to have a conversation and sort out.

You were right regarding the P45, it was for prior employment and as for the shares, they are the same class. Again a job for the accountant.

I've tried Moneysoft and it seems quite straightforward, i'm trying to upgrade at present but having trouble.

Thanks for the advice, it has made quite a few things clear.



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Heather

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