I have a client who pays some staff on a ad hoc casual basis ad pays them cash and they are not on the payroll. I have been putting these amounts to the Drawings account and assuming the owner will have to pay the tax on it personally. Is this correct? or should it go somewhere else?
In the circumstances it is the correct way to treat it. However, you should inform your client that this is what you are doing and the consequences for it for his tax position and also that should he have a PAYE visit and it was found that he was paying people cash in hand he would be charged the tax and employers and employees NI on all this money, together with a fine. This would go back at least 6 years.
It is never a good idea to pay anyone without putting the money through a PAYE system.
these wages would need to be declared throught the paye system. If he does not do this he will be in the wrong and potentially subject to hmrc penalties.
I would post the payments to wages and tell him to declare them. If he did not do this i would need to consider my position.
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Forgive the typo's I generally do not proof read. Just lazy I guess!
I don't think so. The recipient(s) probably wouldn't be penalised but the employer would by having to pay not only the paye and ni on the sums but also with fines.
How much are we taking about, how regularly and how many people is he paying and what is the business type?
If its below the relevant limits then my understanding (bit rusty) is it does not have to go through the PAYE system as no tax or NI is payable. However, it is always a good idea to keep records of who your are paying and how much in total per tax year.
You can still treat as causal wages in the profit & loss but it all depends on the amounts
Even if your client is paying under the limits, the casual workers may have other income and therefore should perhaps go through the PAYE system.
It messy, but it does need to be addressed with the workers in relation to their own financial situation.
You can always get your client to have the workers complete the P46 forms.
dont take this as gospel as I dont know the whole picture, but I have raised a few points that need to be considered first before any of us can give a definite answer.
8)
Oh and, both the employer and employee can be chased for tax and ni due. I have seen this happen.
Hi Thanks everyone for you replies, it seems it is as I thought. I have made them aware its going to the drawings acount and that they will personally pay tax on it. Will have to make them aware of the possible situation regarding hmrc.
