GYM tips (Grasping Your Money)
How is the already stretched business owner supposed to run a profitable business if they keep tripping over stumbling blocks they don’t see coming?
For those accountants here, this is old news, but for those of you who are busy running your businesses and have no time to become experts on taxes and fines – Beware!
In recent weeks I have had a couple of conversations with recent start ups business owners trying to understand why they have been charged a fine by HMRC.
One was for not paying tax when they had no employees and were not yet trading and the other was running payroll but were not liable for payroll taxes for a particular month.
Let me deal with the first one:
Company one, received a letter informing them that they would face penalties for not filing a P35 (Annual Year End Return for Employers) by the deadline for the last tax year.
This particular organisation only started trading during the new tax year so did not think about last year at all. Their first reaction was that it must be incorrect.
However when I asked them to show me their New Employer Letter, it showed that they had been registered as an employer the previous year.
Regardless of whether you have had employees, were or were not trading; HMRC does not know this and penalise you, not just for non-payment but for non-information. As a new employer there is a chance you can appeal to the better nature of the tax man who may well take into account that you are a start-up with no history of defaulting, but this is not guaranteed.
In the second instance:
If may be you either have not processed payroll in a particular week, month or quarter. Alternatively there may be no payroll taxes due, if your salaries are under the tax threshold for that period.
You were always required to inform the tax office if nothing was due. In the days of the Employer Payment Booklet, you would have filled in one of the payslips showing Zero payments due and posted it to HMRC.
However, in the past if you did not do this, there were good odds that there would have been no problem; as it would all be reconciled at the end of the year when you filed your P35.
With the movement toward doing PAYE all electronically, you are now expected to let them know each month or payroll period or again face penalties.
Those who have never done it or want to know how, here is the link http://www.hmrc.gov.uk/payinghmrc/paye-nil.htm
Traditionally it has been easy to manipulate PAYE returns as long as by the end of the tax year the Annual Return was completed and any outstanding payments received.
In the same way companies are feeling the pinch and need to ensure they collect money quicker, the tax office is no different.
Don’t give money you don’t have to:
- Payroll is a tax minefield, if you going to run your own system ensure you understand what you are doing. Being able to enter details into a software package is not enough. The software cannot compensate for lack of understanding
- Keep track of timings and deadlines. Not paying on time is not the only transgression that the tax man will punish you for, they hate not knowing.
- Even when your records are correct it is still not unusual to receive reminders and penalties and the dreaded request for a visit. Have the information and ammunition to dispute unfair or incorrect demands.
- A letter from HMRC is not the end of the world, take advice if worried, get it dealt with before they chase you again.
- Shore up your systems and knowledge to avoid having them on your case again unnecessarily.
