I have been approached by a potential new client to do his SA for 12/13 and then ongoing monthly bookkeeping. There isn't a lot of paper work/transactions so that in itself isn't an issue. The issue is that he reg as self employed and has been paying his NIC's but he is actually operating as a limited company so should have been running PAYE and hasn't (I did post about this elsewhere and thanks for the responses). What he wants to do is submit his tax return as if SA and then try and sort out his PAYE situation as he feels he will at least have paid his tax which may help his case with HMRC - he started trading in Sept 12. Does anyone have a view on this? I am not a payroll person so not sure what to advise him. He is aware there may be fines involved.
He has been paying himself approx £1k pcm and sporadically been paying his wife who is Company Sec, a smaller amount. He also has a lot of personal expenses he has been paying form the Ltd co. I know that I can put the personal expenses to the DLA and hopefully pay this off with a dividend - don't know if there is a profit to cover this. I am happy with producing his P&L etc - luckily it is a service based co so no stock or assets to worry about.
He did file his annual return but that is all he has done since he started trading!
are his sales invoices sent from his company or just from him as a sole trader. Same thing for the purchases, are they in the name of his company. Do the bankings go into a co account? I'm just wondering if he didn't know he had a limited company then maybe the company didn't trade in which case he would need to declare as a sole trader in any case. If it is all company stuff, I would as suggested in the other post set up a paye reference and just submit the salaries late, he shouldn't get penalised this side of April 5th.
thanks for that everything is through the Ltd co - in name and bank account.
Would the setting up the PAYE ref this still stand if it is for Sept - 12 - Apr 13? i.e. he has already missed an April deadline for end of year etc and would this be better than doing a self assessment now? I don't want to advise him incorrectly. Would it be worth him calling HMRC and explaining or is that a bit premature?
Just set up the paye ref from this year and back date from April 2013. If he has paid himself £1k per month during 12/13, and assuming he did not have any other PAYE income, I would mark that down as £624 salary (No NI needed for that year) and the remainder as dividend/DLA. For his self assessment you can put through his salary £7488(?) and dividends and any other income he may have received and that should sort that out. Are you doing his company accounts? If so just check when they need to be filed!
I think I would first review his income for Apr12 - Aug12. Has he got a P60? Is there scope for a 2012-13 wage once that has been taken into account? If he has already used all his tax and NIC free allowance already, it might be best to consider dividend only. The sole trader section could go in as NIL (or ring the revenue and say it ceased before it started) and he can fill out a form CF10 to apply for exemption from class 2.
You can then set up this years scheme, using directors cumulative and put through one bonus to account for his wages Apr13 to Jan14. (£640 x 10) and post monthly from then on.. or you could run each month from April 13 to date and effectively file them late.
PS - Rob.. I think the £7488 is only applicable if you have a scheme. You just don't pay any tax or NIC on it. I think, and you know I am not a payroll bod, but I think its about £5.5k where you don't need to have had a scheme in place for 2012-13?
-- Edited by FoxAccountancyServices on Thursday 16th of January 2014 12:23:56 PM
I have now got the paperwork and the info I have is;
He was made redundant in the 12/13 tax year so has used all his allowances for that tax year. I am still waiting for the P45 with the totals but looking at payments into his bank account he will be over his allowances.
It now turns out he operated through his personal bank account until March 13 even though he was a ltd co, he didn't received any payments until after he set up as a Ltd co so can I tell revenue the Sole trader ceased and then do dividend for the money he paid himself - he has also been transferring money to his wife who is company secretary would I do the same with her? She is not a director.
Apologies for the questions just having a trouble unpicking this one - never straightforward!
I will set up this years scheme for him and then do as you suggested Michelle - that all seems quite straightforward.
