P60 to employee under LEL
Discussion
Hello
Some help please for a slightly confusing situation. My wife runs a small business, as a sole trader, and we have one employee. This employee earns way under the LEL, has no other jobs/income and therefore is not liable to pay any Tax or NI.
We were previously registered as an employer with HMRC, however on the advice of HMRC de-registered as all of our PAYE returns would be nil returns (and it didn't seem worth doing it every month).
Our employee has now requested a P60 as proof of income. Whilst I can complete a P60 we do not have an employers reference number or any other PAYE reference numbers.
Should I just print a letter on headed notepaper detailing their income for the year, a P60 with many of the fields blank, or should we be doing something else? I tried searching around HMRC website but ended up lost.
Thanks
Some help please for a slightly confusing situation. My wife runs a small business, as a sole trader, and we have one employee. This employee earns way under the LEL, has no other jobs/income and therefore is not liable to pay any Tax or NI.
We were previously registered as an employer with HMRC, however on the advice of HMRC de-registered as all of our PAYE returns would be nil returns (and it didn't seem worth doing it every month).
Our employee has now requested a P60 as proof of income. Whilst I can complete a P60 we do not have an employers reference number or any other PAYE reference numbers.
Should I just print a letter on headed notepaper detailing their income for the year, a P60 with many of the fields blank, or should we be doing something else? I tried searching around HMRC website but ended up lost.
Thanks
I think you have Fuc*ed up with HMRC's help!
This is a quote from their website:
"You must report your payroll information - which includes all employees' pay, tax and deductions - to HM Revenue and Customs (HMRC) each time you pay them. This must include payments on standard paydays, and any additional payments or amounts recovered from the employee. You need to report the payment details of all employees you pay, no matter how much you pay them - even those earning below the Lower Earnings Limit (LEL), or those paid just once a year."
Since RTI came in April 13, you have obligation to report on or before each pay day or once a month as your wife's business would qualify for the "micro" exemption - even if no tax or NIC is due.
You need to speak to your Accountant and probably HMRC to rectify the position.
David
This is a quote from their website:
"You must report your payroll information - which includes all employees' pay, tax and deductions - to HM Revenue and Customs (HMRC) each time you pay them. This must include payments on standard paydays, and any additional payments or amounts recovered from the employee. You need to report the payment details of all employees you pay, no matter how much you pay them - even those earning below the Lower Earnings Limit (LEL), or those paid just once a year."
Since RTI came in April 13, you have obligation to report on or before each pay day or once a month as your wife's business would qualify for the "micro" exemption - even if no tax or NIC is due.
You need to speak to your Accountant and probably HMRC to rectify the position.
David
sumo69 said:
I think you have Fuc*ed up with HMRC's help!
This is a quote from their website:
"You must report your payroll information - which includes all employees' pay, tax and deductions - to HM Revenue and Customs (HMRC) each time you pay them. This must include payments on standard paydays, and any additional payments or amounts recovered from the employee. You need to report the payment details of all employees you pay, no matter how much you pay them - even those earning below the Lower Earnings Limit (LEL), or those paid just once a year."
Since RTI came in April 13, you have obligation to report on or before each pay day or once a month as your wife's business would qualify for the "micro" exemption - even if no tax or NIC is due.
You need to speak to your Accountant and probably HMRC to rectify the position.
David
Thanks for the reply David.This is a quote from their website:
"You must report your payroll information - which includes all employees' pay, tax and deductions - to HM Revenue and Customs (HMRC) each time you pay them. This must include payments on standard paydays, and any additional payments or amounts recovered from the employee. You need to report the payment details of all employees you pay, no matter how much you pay them - even those earning below the Lower Earnings Limit (LEL), or those paid just once a year."
Since RTI came in April 13, you have obligation to report on or before each pay day or once a month as your wife's business would qualify for the "micro" exemption - even if no tax or NIC is due.
You need to speak to your Accountant and probably HMRC to rectify the position.
David
We were registered as an employer post April 13 and therefore were submitting, as per RTI, but all returns were nil. A software issue caused us to speak to HMRC and this is when we de-registered.
My understanding, as explained by HMRC was:
1) If you have any employees who earn over LEL you must be registered as an employer
2) If you are registered you must report as per RTI for all employees, including those under LEL
3) However, if all employees are under LEL then there is no need to register.
Sounds like my understanding could be wrong - it wouldn't surprise me as each time I spoke with HMRC I was getting different messages!
Possibly one for our accountant then.
A bit more browsing finds this:
This follows on to say:
Still confused.
HMRC said:
How to register as an employer
When you need to register
As soon as you first employ someone, you will need to register as an employer with HMRC if any of the following is true:
•you're paying them at or above the PAYE threshold
•you're paying them at or above the National Insurance Lower Earnings Limit
•the employee already has another job
•they are receiving a state, company or occupational pension
•you're providing them with employee benefits
We don't employee anyone above the PAYE threshold or above the LEL, provide no benefits etc.When you need to register
As soon as you first employ someone, you will need to register as an employer with HMRC if any of the following is true:
•you're paying them at or above the PAYE threshold
•you're paying them at or above the National Insurance Lower Earnings Limit
•the employee already has another job
•they are receiving a state, company or occupational pension
•you're providing them with employee benefits
This follows on to say:
HMRC said:
When you must operate PAYE
Whether or not you need to operate PAYE (deduct Income Tax and National Insurance contributions from their pay and pay employer's National Insurance contributions) depends on your employee's overall earnings. The figures below are relevant for the tax year 2013 to 2014.
If you pay them more than £153 a week
If you pay your employee more than £153 a week you'll have to operate PAYE.
If you pay them between £111 and £153 a week
If you pay your employee between £111 and £153 a week inclusive and this is their only job and they don't get other taxable income, there are no tax or National Insurance contributions due, but you'll need to keep a record showing how much you pay them.
If you pay them less than £111
If you pay your employee less than £111 a week and they don't have another job elsewhere - or other taxable income such as a pension - you don't have to do anything.
According to the above we don't need to register as an employer or operate PAYE (no other employees etc.).Whether or not you need to operate PAYE (deduct Income Tax and National Insurance contributions from their pay and pay employer's National Insurance contributions) depends on your employee's overall earnings. The figures below are relevant for the tax year 2013 to 2014.
If you pay them more than £153 a week
If you pay your employee more than £153 a week you'll have to operate PAYE.
If you pay them between £111 and £153 a week
If you pay your employee between £111 and £153 a week inclusive and this is their only job and they don't get other taxable income, there are no tax or National Insurance contributions due, but you'll need to keep a record showing how much you pay them.
If you pay them less than £111
If you pay your employee less than £111 a week and they don't have another job elsewhere - or other taxable income such as a pension - you don't have to do anything.
Still confused.
I am very surprised that HMRC say you don't need to operate PAYE, even if no income tax and NI is payable to them.
If you don't, how else is HMRC supposed to know what employments people have? Leave it to their honesty?
How does the employer know that they are using the correct tax code?
If I were you I would be operating a payroll and giving the employee a payslip and annual P60. I would file the weekly or monthly full payment submissions under RTI which notifies HMRC that the employee has been paid but no income tax/NI due.
If you don't, how else is HMRC supposed to know what employments people have? Leave it to their honesty?
How does the employer know that they are using the correct tax code?
If I were you I would be operating a payroll and giving the employee a payslip and annual P60. I would file the weekly or monthly full payment submissions under RTI which notifies HMRC that the employee has been paid but no income tax/NI due.
PurpleMoonlight said:
I am very surprised that HMRC say you don't need to operate PAYE, even if no income tax and NI is payable to them.
If you don't, how else is HMRC supposed to know what employments people have? Leave it to their honesty?
How does the employer know that they are using the correct tax code?
If I were you I would be operating a payroll and giving the employee a payslip and annual P60. I would file the weekly or monthly full payment submissions under RTI which notifies HMRC that the employee has been paid but no income tax/NI due.
You would give yourself loads of hassle and extra work/costs for no reason?If you don't, how else is HMRC supposed to know what employments people have? Leave it to their honesty?
How does the employer know that they are using the correct tax code?
If I were you I would be operating a payroll and giving the employee a payslip and annual P60. I would file the weekly or monthly full payment submissions under RTI which notifies HMRC that the employee has been paid but no income tax/NI due.
It is made clear on the HMRC site if you have no staff earning over the LEL you do not need to register for PAYE.
Not sure what your 'leave it to their honesty' comment is meant to mean? That is exactly what HMRC do. It is the individuals responsibility to complete a self assessment.
Edited by gregf40 on Thursday 7th August 10:09
It is a bit of a confusing situation.
Theoretically, if NOBODY in the employment of the entity is earning enough to go over the Lower Earnings Limits for NI, then there is no reason for the entity to register for PAYE. You will not be penalised if you do not.
But, as the OP has found out, there are ramification if you don't - such as the inability to produce valid PAYE type documents which are used by third parties to verify income levels etc.
Most of the payrolls I run are single or twin director limit companies. Some of the directors prefer to pay themselves below the LEL and will therefore have no NI or PAYE to pay. HOWEVER, as a precaution, I generally will encourage them to register for PAYE so
a) they can receive P60s at the end of the tax year
b) we can safely monitor the Benefits in Kind situation and be in a position to make a P11D submission if necessary
c) be able to cope quickly if employees are taken on
d) be able to handle any increases in salary that generate PAYE and NI liabilities
Theoretically, if NOBODY in the employment of the entity is earning enough to go over the Lower Earnings Limits for NI, then there is no reason for the entity to register for PAYE. You will not be penalised if you do not.
But, as the OP has found out, there are ramification if you don't - such as the inability to produce valid PAYE type documents which are used by third parties to verify income levels etc.
Most of the payrolls I run are single or twin director limit companies. Some of the directors prefer to pay themselves below the LEL and will therefore have no NI or PAYE to pay. HOWEVER, as a precaution, I generally will encourage them to register for PAYE so
a) they can receive P60s at the end of the tax year
b) we can safely monitor the Benefits in Kind situation and be in a position to make a P11D submission if necessary
c) be able to cope quickly if employees are taken on
d) be able to handle any increases in salary that generate PAYE and NI liabilities
gregf40 said:
You would give yourself loads of hassle and extra work/costs for no reason?
It is made clear on the HMRC site if you have no staff earning over the LEL you do not need to register for PAYE.
Not sure what your 'leave it to their honesty' comment is meant to mean? That is exactly what HMRC do. It is the individuals responsibility to complete a self assessment.
I guess the question is does the employee have a legal right to a P60?It is made clear on the HMRC site if you have no staff earning over the LEL you do not need to register for PAYE.
Not sure what your 'leave it to their honesty' comment is meant to mean? That is exactly what HMRC do. It is the individuals responsibility to complete a self assessment.
Edited by gregf40 on Thursday 7th August 10:09
If so, then the employer would probably have to run a payroll even if that is not registered with HMRC for PAYE. If you are running a payroll anyway, it's only a couple of clicks to file RTI's so they may as well register for PAYE and be done with it.
Income Tax can easily be liable on someone earning less than the LEL due to other earnings, income, pensions, etc.
So I've spoken to HMRC to get their views on what I need to do. Thought it worth posting in case anyone ever searches for this in the future.
The result (after being passed around a bit is this):
I have no legal obligation to issue a P60 as we are not registered as an employer (and do not need to be) due to their earnings. If we were registered as an employer, regardless of their earnings, I would need to.
Therefore we should just issue a letter on headed notepaper to act as a "Statement of Earnings". I've been told that should suffice for any child tax credit claims etc. they wish to make.
The result (after being passed around a bit is this):
I have no legal obligation to issue a P60 as we are not registered as an employer (and do not need to be) due to their earnings. If we were registered as an employer, regardless of their earnings, I would need to.
Therefore we should just issue a letter on headed notepaper to act as a "Statement of Earnings". I've been told that should suffice for any child tax credit claims etc. they wish to make.
Agreed.
HMRC (and indeed civil servants in general) tend to advise based on the type of things THEY might need to know. Notice how the examples they were giving were based on someone wanting to claim benefits or tax credits i.e. access a government service.
They don't think commercially at all.
HMRC (and indeed civil servants in general) tend to advise based on the type of things THEY might need to know. Notice how the examples they were giving were based on someone wanting to claim benefits or tax credits i.e. access a government service.
They don't think commercially at all.
Gassing Station | Business | Top of Page | What's New | My Stuff