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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15976
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I run a small business my wife and I are joint director

Customer Question

I run a small business my wife and I are joint director we only pay ourselves enough to qualify for a stamp (and only pay ourselves in bursts when the buisness can afford it) and pay the rest as a dividend. Problem though I have received various blurb from HMRC in the past about operating payroll, but I subsequently remember getting letters from them saying they are closing down my payroll because I did not meet the requirements (I cant remember the exact wordology). Now Im led to believe I should have been operating a payroll. Last year for example (2103 - 14) I paid myself £7720 and same to my wife. Can you confirm I should have been operating a payroll and what the fines are for not having done so, and last of all if I should have been operating one how come my previous years sumissions did not trigger a letter from HMRC saying you should be using a payroll
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.


Take a look at the notes starting here.

Unless all your employees earn less than £111 per week, you should run a payroll and register it so that you get a PAYE reference and are then set up for the Real Time Information reporting system. Either way, you need to keep records. There are some extremely inexpensive and easy to use commercial payroll softwares available which you can find from a simple Google search, eg here. I'm not allowed to recommend a particular software I'm afraid.

I used to shy away from getting involved in looking after payrolls for clients as you are reliant on being provided with accurate information by the client in good time. Now, with the simple softwares that are available, its an easy way to earn fees but I still encourage people to run it for themselves.

The first link I gave you above tells you how to get registered as an employer but you may already be so registered.

There can be penalties for not operating and following the reporting requirements but as the new RTI system is still relatively young, HMRC are taking a lenient view, at least for now. If you still have the HMRC notifications telling you that they are closing your PAYE scheme, then you can use that to support your case in any argument you get into over penalties. If it gets too much to handle, consult an accountant or tax adviser.

The fact that you weren't reminded about earlier years by HMRC isn't unusual. They simply don't have the staffing levels to be 100% efficient but computer technology is changing that.

I hope this helps but let me know if you have any further questions.

Customer: replied 3 years ago.

If I call them and tell them Ive made a mistake by thinking I can pay ourselves below £149 a week rather than £111 what sort of trouble will I be in. The figure is still below a level that would mean HMRC have not lost anything. Are they fining people who did not realise they needed to operate a paye

Expert:  TonyTax replied 3 years ago.

If HMRC haven't lost lost any tax or NIC then that will help. If you have the previous correspondence to support you, that will also help as you can say it gave you some assurances. I cannot see you being fined heavily, if at all, given what you have told me. The penalties for Real Time Information reporting failures are here and here.

It's worth setting up a PAYE scheme as you earn national incurance credits even if you don't pay any as you can read here provided you earn above the lower earnings limit.