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bigduckontax
bigduckontax, Accountant
Category: Tax
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We have just found out we underpaid an apprentice 4 years ago

Customer Question

We have just found out we underpaid an apprentice 4 years ago and owe about £5000 and do not have this amount of money can we pay the person weekly
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You could certainly negotiate with the ex employee. If he is agreeable to the underpayment being settled over a period that is quite legal. However, the ball is in his court on this one. If he refuses then you will have to find the full sum and face the consequences. At worst this could mean your business facing liquidation or you even bankruptcy. I am so sorry to have to rain on your parade.
Customer: replied 1 year ago.
Will we be charged by the tax office as well
Expert:  bigduckontax replied 1 year ago.
No, not at all.
Customer: replied 1 year ago.
Our book keeper has just said The tax office did say yesterday apparently we have two months to pay back
Expert:  bigduckontax replied 1 year ago.
My immediate reaction is 'Two month's what?' You cannot be due to make any payments under PAYE until you have started paying this ex employee his arrears. You must get your tax office to come clean on exactly what and why you have any tax, presumably PAYE, liability at this stage.
This matter is comprehensively covered in HMRC EIM42290 viz:
'Note that the rule is when a person becomes entitled to payment of earnings. This is not necessarily the same as the date on which an employee acquires a right to be paid. For example, an employee's terms of service may provide for the employee to receive a bonus for the year to 31 December 2004, payable on 30 June 2005 if the employee is still in the service of the employer on 31 December 2004. If the condition is satisfied the employee becomes entitled to a payment on 31 December 2004 but is only entitled to payment of it on 30 June 2005. So PAYE applies to it on 30 June 2005 and it is assessable for 2005/06. The date that matters is the date the employee is entitled to be paid the bonus.'
Customer: replied 1 year ago.
I am confused we owe this money to an old employee and whatever the amount the inland revenue have said it has to b paid by end of Jan to close the case.
Expert:  bigduckontax replied 1 year ago.
The Inland Revenue ceased to exist some years ago when combined with HM Customs and Excise to form HMRC. When you actually make payments to the ex employee under PAYE to settle the outstanding sums then you will have to render tax to that Department in the usual manner. What case does HMRC have to close? You must ask for an explanation in writing of HMRC's antics.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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