I've just read somewhere that if you are employed and on the PAYE scheme, and your employer doesn't pay the bill and just disappears, you as an employee are then liable for said tax. Is this true? I always thought the liability was with the employee.
do they come under CIS? Is that where the confusion is arising?
Shaun.
-- Edited by Shamus on Monday 6th of August 2012 02:11:16 PM
__________________
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.
The Revenue will go after the 'small-guy' who doesn't have easy access to top accountants and lawyers. HMRC might view that he has implicitly accepted self employed status by receiving payments gross.
EDIT
As it's illegal to employ someone without operating PAYE, the employer is made responsible for any tax not deducted in a bone-fide employment. I think Regulation 72 covers employer error and there needs to have been a direction sent out by HMRC stating whether employer error applies or not otherwise the employee has nothing to appeal against.
Tim
-- Edited by Don Tax on Monday 6th of August 2012 05:21:10 PM
It is false. Employees cannot be held liable for the debts of the employer.
(I guess the one situation where HMRC might examine the situation rather more closely is where the employer and employee are the same person, eg a one-man ltd.)
This is the way I assumed it would be. Can't understand where this other person may of got this from. Saying that, they basically haven't had a payslip or P60 for the past 2 years, they have however obtained a certificate of earnings, they now seem to be stating that HMRC are after them for the outstanding tax, which I can sort of see the logic in as you would to some extent appear to be self-employed. I seem to have read somewhere though that if you work a set amount of hours on a regular basis for long enough, and for the same person/business/company, you can't be classed as self-employed, or you are deemed to be employed. Either way not receiving a payslip or p60 for so long and not questioning it does seem a tad silly.
Is it not at the end of the day your own responsibility to account for any tax and NI due. Even if you are an employee i think technically you are liable for the PAYE and EE NIC. The fact that the employer collects and pays over is just an adminisrative task. The actual liability comes back to the employee if for whatever reason the PAYE and EE NIC isnt paid over. The employee wouldnt be liable for ER NIC as this is a cost of the employer of employing the person.
So if someone is paid as self employed but eventually is determined as an employee the PAYE and EE NIC costs rest with the employee rather than the employer.
MarkS, In 30 years of involvement in payroll I've never come across a single case of a PAYE employee being chased for PAYE/NI deducted by their employer and not paid over to HMRC. It simply isn't the employee's responsibility to make sure that this happens and indeed companies fail with debt to HMRC all the time without the employees ever being chased for it. The debt belongs with the employer not with the employee.
If however someone is paid without payslips or P60 or p45 and the company successfully claims that they were correctly treating the worker as self employed (not an easy thing to claim in most cases) then the debt might rest with the worker. But that *isn't* the situation that the original poster asked about. The original poster specified that the situation was employment in a PAYE scheme, and in this situation liability to operate the system correctly rests with the employer.
Tom. Only a couple of recent cases of an under-deduction of tax where HMRC stated they sent an electronic code notice and the employer said they didn't receive it. HMRC took the employers side and chased the employee both times.
Obviously either the P2 notice wasn't sent or the employer's equipment was faulty. The first case took a year to find in the employees favour, the second ongoing. In both cases the employee hadn't a clue how to check code notices to payslips with multiple sources and code numbers for each.
It's an interesting debate. I can see the logic from both sides. It is however slightly perturbing that so many put their trust in their employer to pay their tax, which could potentially leave them wide open. I prefer to think like Tom and work on the basis that it's the employers liability and employees are protected, however in light of this discussion and if I didn't run the payroll myself, I would be tempted to start checking everything is being paid as it should.
Tom. Only a couple of recent cases of an under-deduction of tax where HMRC stated they sent an electronic code notice and the employer said they didn't receive it. HMRC took the employers side and chased the employee both times.
Obviously either the P2 notice wasn't sent or the employer's equipment was faulty. The first case took a year to find in the employees favour, the second ongoing. In both cases the employee hadn't a clue how to check code notices to payslips with multiple sources and code numbers for each.
That isn't a case where the employer has deducted the tax from the employee and then not paid it to HMRC. That is what the original question was about. I assert that HMRC won't ever chase the employee in such a situation.
Ahh yes, agreed and I can see that they might in the case of an owner/employee ltd co. Just pointing out that the Revenue will go for the easier target if ithey think it will save them effort.
Mark I can see too that employer responsibility for tax makes less sense now nearly everyone has a bank account than it did in 1944. There are though, a minority who will never be able to check a Revenue assessment tor calculate liability hemselves so we're probably stuck with PAYE.
Agree that VAT liability is definitely the company liablity.
But for PAYE and EE NIC isnt the employer just paying it over on behalf of the employee? Who does the liability actually rest with? Agree in practice is the company but from a technical viewpoint is it the same?
Regards
MarkS
Well VAT you're just paying it over on behalf of the customer, you are an unpaid tax collector, with all the liability, it just appears to me to be the same thing with PAYE. From an employees point of view I would want to hope it's the companies liability, the last thing I need is a bill for all the tax i've paid over my lifetime
-- Edited by Rhianrach on Tuesday 7th of August 2012 11:24:10 AM
Yes agree that in practice HMRC probably wouldnt go after individuals if PAYE/NIC is outstanding as the cost would probably outweight the gain.
Just saying that from a technical viewpoint who's responsible for the PAYE and EE NIC. In practice employers collect and pay over but technically is the employee liable for it?
Yes agree that in practice HMRC probably wouldnt go after individuals if PAYE/NIC is outstanding as the cost would probably outweight the gain.
Just saying that from a technical viewpoint who's responsible for the PAYE and EE NIC. In practice employers collect and pay over but technically is the employee liable for it?
Regards
MarkS
Wouldn't they have the same liability as they would for VAT, they appear to be agreeing to do the same thing with both.
Agree that VAT liability is definitely the company liablity.
But for PAYE and EE NIC isnt the employer just paying it over on behalf of the employee? Who does the liability actually rest with? Agree in practice is the company but from a technical viewpoint is it the same?
lets say that the arguement is correct that the employee is responsible (something that I'm not convinced is true but neither am I currently confident that it's not).
In such instance they would not be responsible for the same PAYE as the employer. The amount that they received would have been considered paid Gross and would therefore be responsible for the PAYE on that figure bringing them down to a totally different Nett.
An employee would never be responsible for EMPR unless HMRC perceived them as self employed / Owners where we are going over into a whole different debate.
I've also got a different debate on this one from how a court of law might view it but I'll post that later as a seperate post.
kind regards,
Shaun.
__________________
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.
Yeah agree that ER NIC is the employers liability (it is a cost to the employer of employing a person on top of their gross wage).
My argument is a technical one in that who does the EE NIC an PAYE liability rest with? In practice it is paid over by the company. But this is just for ease of administration. Technically an employee could receive their gross wage from their employer and pay over the EE NIC and PAYE each month. With the employer paying their ER NIC element.
Yeah agree that ER NIC is the employers liability (it is a cost to the employer of employing a person on top of their gross wage).
My argument is a technical one in that who does the EE NIC an PAYE liability rest with? In practice it is paid over by the company. But this is just for ease of administration. Technically an employee could receive their gross wage from their employer and pay over the EE NIC and PAYE each month. With the employer paying their ER NIC element.
Regards
Marks
That explanation makes it seem clearer . I get where you are coming from now.
Yes, it's just for ease of administration. I'd not associated the phrase 'withholding tax' with PAYE until the Improving PAYE consultation came out a couple of years ago. Tax receipts would fall through the floor if the employer wasn't made responsible for deducting at source and paying over.
Its patently the same tax, charged on the individual at the same rates after deducting the same allowances whether it is Schedule A, D or E and the other one for interest received.
Steve's comparison with VAT is very interesting. At the end of the day, a government just tries to squeeze as much as possible out of the orange and then think of how they can get re-elected with the proceeds. I think that's another Sir Humphrey Appleby line.
. I get where you are coming from now.
