Reply to: Letter from HMRC claiming underpaid PAYE and NIC

[northernladuk]

Thanks very much for the response- my accountant is being rather shifty and vague which makes me suspect that some screw-up has happened. Is there any way I can see what HMRC thinks has been submitted - would be good to understand that.

Looking in Freeagent it *looks* like monthly RTI submissions have been made with GBP8840 in the month in question, and then zero for each of the following months. In the payroll section each month shows a zero pay and a negative (i.e. cash to be returned to me) tax amount.

In terms of what SimonMac said is there some way to see in which of the three ways my PAYE has been set - i.e. it should be on the Director basis.

I paid myself in arrears for those asking.

If you are doing it in arrears should you not be more bothered about zero for previous months not following? Anything in the following will be for the next payroll to be made in 12 months?

[eek]

I paid myself in arrears for those asking.

On April's payroll? That was a stupid idea. If you are playing the game of 1 big PAYE payment you should be doing it in February or March once you know you will not doing an inside IR35 contract that (tax) year.

[booms]

You'll need to liaise with your accountant re this, they'll know what they've done, we'd just be speculating.

Possibly they submitted the £8,840 as April's payroll, then submitted nothing for the following months. HMRC will then be guessing in the absence of submissions (though if your letter makes no mention of specified charges this probably isn't the case).

Have they possibly been actually submitting £8,840/month each and every month...either big confusion between you/them over what you wanted, or big muck up by them?

IMHO attempting to do an annual salary is daft, payroll systems aren't really set up to deal nicely with it. Divide it by 12 and do it as a monthly submission. Yes it's 12 submissions instead of 1, but the submissions are a doddle and it'll minimise risk of problems like you're seeing.

Thanks very much for the response- my accountant is being rather shifty and vague which makes me suspect that some screw-up has happened. Is there any way I can see what HMRC thinks has been submitted - would be good to understand that.

Looking in Freeagent it *looks* like monthly RTI submissions have been made with GBP8840 in the month in question, and then zero for each of the following months. In the payroll section each month shows a zero pay and a negative (i.e. cash to be returned to me) tax amount.

In terms of what SimonMac said is there some way to see in which of the three ways my PAYE has been set - i.e. it should be on the Director basis.

I paid myself in arrears for those asking.

[Fred Bloggs]

Ah yes then that's what I thought. I am assuming if the OPs accounting is saying PAYE of 1400 odd then OP has paid himself ahead of the work and may have other issues to consider above and beyond the tax code.

Quite.

[northernladuk]

I am talking about paying a year's income in arrears not in advance.

When March (April 5th tax year end) arrives you're going to know how much you can pay yourself, if anything at all? I have to admit though that I am not thinking in less than one year scenarios. Neither am I considering off sets between tax and company year ends.

Ah yes then that's what I thought. I am assuming if the OPs accounting is saying PAYE of 1400 odd then OP has paid himself ahead of the work and may have other issues to consider above and beyond the tax code.

[Fred Bloggs]

But it depends when it is paid and what for? I thought general consensus was that you can't pay yourself 9k for the year when you've not worked it. Obviously there is also the fact that things might change in that year and you are going to have mess about with your figures potentially attracting unwanted attention but as I said, I thought we were told paying a salary for the year upfront was not to be done?

I am talking about paying a year's income in arrears not in advance.

When March (April 5th tax year end) arrives you're going to know how much you can pay yourself, if anything at all? I have to admit though that I am not thinking in less than one year scenarios. Neither am I considering off sets between tax and company year ends.

[northernladuk]

I see little issue with an annual salary payment. But do it in March. Then there's no scope to mess up tax for the rest of the year because 5th April the year ends.

But it depends when it is paid and what for? I thought general consensus was that you can't pay yourself 9k for the year when you've not worked it. Obviously there is also the fact that things might change in that year and you are going to have mess about with your figures potentially attracting unwanted attention but as I said, I thought we were told paying a salary for the year upfront was not to be done?

[eek]

When it comes to setting up your PAYE scheme you have three options:

• Director
• Director (alternative arrangements)
• Employee

National Insurance Contributions will be calculated on an annual basis for directors and on a monthly basis for employees. Directors using the alternate arrangements will also have monthly basis contributions until the final month of the year, which is evaluated on an annual basis.

So who ever set you up ticked the wrong option of the three above

Monthly or weekly for employees...

[SimonMac]

When it comes to setting up your PAYE scheme you have three options:

• Director
• Director (alternative arrangements)
• Employee

National Insurance Contributions will be calculated on an annual basis for directors and on a monthly basis for employees. Directors using the alternate arrangements will also have monthly basis contributions until the final month of the year, which is evaluated on an annual basis.

So who ever set you up ticked the wrong option of the three above

[Fred Bloggs]

I see little issue with an annual salary payment. But do it in March. Then there's no scope to mess up tax for the rest of the year because 5th April the year ends.

I know it's not quite the same, but making an annual drawdown of the year's accumulated dividends is my strategy for SIPP drawdown. Exactly same reason applies. No time left in the year for my tax bill to go wrong if I draw down in March 2022. Rinse and repeat 2023 onwards.

Since the SIPP income is entirely fun money, I'll know exactly how much fun I can afford in the year. Makes perfect sense.

[northernladuk]

Why a yearly payment? Was this in arrears for the previous year? I thought paying yourself upfront before you worked it was a big no no? Did your accountant advise you do this or did you just go ahead and do it without asking?

[Maslins]

You'll need to liaise with your accountant re this, they'll know what they've done, we'd just be speculating.

Possibly they submitted the £8,840 as April's payroll, then submitted nothing for the following months. HMRC will then be guessing in the absence of submissions (though if your letter makes no mention of specified charges this probably isn't the case).

Have they possibly been actually submitting £8,840/month each and every month...either big confusion between you/them over what you wanted, or big muck up by them?

IMHO attempting to do an annual salary is daft, payroll systems aren't really set up to deal nicely with it. Divide it by 12 and do it as a monthly submission. Yes it's 12 submissions instead of 1, but the submissions are a doddle and it'll minimise risk of problems like you're seeing.

[booms]

Thanks both. PTP - that's fascinating. The number on the letter is 03002003819 which some people seem to think is a scam number! But then others think is just the HMRC is such an administrative mess that it appears to be a scam but is not...

No reference to specified charges unfortunately. Will see what my accountant comes up with.

[PTP]

Did you see this thread HMRC chasing my closed Ltd for Class 1 NI that should've been sent from umbrella - Contractor UK Bulletin Board
(Note the heading should've been Tax & NIC)

Does your letter mention the term "Specified Charges" ?

If it does then that's a good sign. Like Maslins pointed out in that thread, that's HMRC's speak for "guesses".

So just get your accountant to do whatever it takes to make them stop making the assumption.

[Lance]

you already know..
You said "looks like they've assumed I would keep being paid £8840 per month". That's what they've done.
Ring them and set them straight.