I've been thinking about the implications of Real Time Information for Payroll. Where a self employed "one man band" pays a small salary to their spouse and this is their only job, then no payroll is required. However, with the advent of RTI will they now need to report this monthly?
a payroll (of sorts) is required for small payments even if the quarterly returns are always zero.
When RTI comes in every payment will need to be reported which is why I suggested in the other thread that all that this will see is directors going to annualised salary payments and living off the DLA throughout the year.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Not according to the HMRC. Friend contacted HMRC to explain that he was going to employ his wife part-time (think the figure was about £400/month) and they said there was no need to register as an employer. Just include the amount paid in the year end.
I've just helped him with a bit of advice from time to time and have never checked the official position for HMRC. It's not an area I'm expert in and would be interested in your thoughts.
I think that if they called HMRC again they might get a different answer.
There are a couple of things in there.
1) HMRC really doesn't like payments to a spouse as unless it can be proven that the spouse is actually doing something (legitimately) for the business then the money would otherwise have been part of the other persons salary payment. (sure that you've seen the high profile cases of MPs paying their wife in order to reduce their own tax liability).
2) I've never had a case where HMRC states that someone is paid a regular salary but they don't want to know about it until the period end. Every case that I've come accross has been PAYE even if the payment is zero for each quarter except the last one. Interested to hear other peoples knowledge and experience of that.
All in all, if your freind has this in writing then I would gaurd the email / letter with my life. If they don't then to my mind they are in unsafe waters with their current approach and it's not one that I would recommend to my clients. But then I do tend to always er on the side of caution so quite happy for people to tell me that I'm wrong in my approach.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks Shaun. That was my instinct. It was a while ago that they had that conversaton and they have nothing in writing as you'd expect.
Like you though, I'd be interested in how others who prepare year ends and tax returns (I don't apart from my own and families) treat the thorny issue of spousal payments.
Just switching the subject slightly! A friend of mine had a VAT inspection and asked my advice. She was advised that she could claim half of the VAT on her car, plus rent prior to registration. I spoke to HMRC and they said that would not happen and could she produce a letter confirming the findings of the VAT officer. Friend has gone very quiet ..............
I've been delving into RTI quite a bit and my only addition to the above is that there's a good chance that penalties won't happen until 2014, so no panick quite just yet.
It does seem extreme overkill that an employer of a low paid worker, for whom a PAYE scheme was never required before, will now need to file 12 or 52 submissions per year.
Oh by the way, the Revenue are insisting these are not 'Returns' but Submissions. That makes all the difference in the world. Not. :o)
Going back to spouse's payments, I have a client who pays his wife quite a substantial amount each year (approx £22,000) but she does next to nothing in the business....he takes in a bit of filing now and again and she answers the phone from the house when there's nobody in the office...but that's it. I'm assuming he has been advised about this by his accountant, but is he treading on thin ice if he were to have an inspection? He takes a minimal salary himself.
Its possibly the worst evidence / case law I've seen bandied by HMRC but it gives an insight into the guilty until proven innocent approach to viewing spouse payments by using a quite specific case in order to infer generalisation.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
