Would you rather someone else handled this? Our payroll service means payslips, RTI submissions and pension duties handled every month.
This case study is based on genuine client work carried out by our practice. Names, figures and identifying details have been changed to protect confidentiality, and the numbers shown are representative of the situation rather than the exact amounts. Your own position will differ.
The scenario
A small business took on its first two employees and started paying them. Nobody set up a PAYE scheme. The thinking was reasonable enough: they are only part time, we will sort the paperwork out later.
Six months on, there is no scheme, no Real Time Information submissions, no payslips, and two people have been paid net of nothing.
What has actually gone wrong
The scheme should have existed before the first payday. Not after. Registration is not instant, so leaving it to the week you pay someone is already late.
RTI is due on or before every payday. Not monthly in arrears, not quarterly. Every single time you pay someone. Late filing penalties are charged per month, scaled by employee count, and they accrue quietly.
The tax was still due. Paying someone gross does not remove the obligation to operate PAYE. The employer is liable for the tax that should have been deducted, and recovering it from the employee afterwards is awkward at best and frequently impossible.
Auto enrolment applies too. Pension duties start from the first day of employment, not when you get round to it. The Pensions Regulator has its own penalties, entirely separate from HMRC.
Payslips are a legal right. Every employee is entitled to an itemised payslip on or before payday.
The approach we would take
Register the scheme immediately and backdate it to the correct start date. Trying to start from today and quietly forget the six months does not work, and it converts a careless problem into a deliberate one.
Reconstruct what should have been deducted, month by month, and file the outstanding submissions. HMRC would far rather receive late, accurate submissions than none.
Sort the pension duties out including backdated contributions, both employer and employee, which is a cost nobody budgeted for.
Speak to HMRC before they speak to you. Unprompted disclosure genuinely reduces penalties. It is not a technicality, it is the difference between a scaled penalty and a much larger one.
Talk to the employees honestly. They may face an unexpected tax position through no fault of theirs, and finding out from HMRC rather than their employer is how goodwill disappears.
The point of this example
Nobody in this example was avoiding anything. They were busy, they employed two people, and the paperwork felt like a formality that could wait. The cost of that delay is not the penalties, it is that the employer ends up personally liable for tax on wages that have already been paid out.
If you have started paying someone and the scheme is not set up, the position gets worse every payday. Get in touch and we will work out what needs backdating.
Behind on payroll?
We bring your filing and payments up to date, sort your pension duties, and take over the monthly running, so payroll is compliant and off your plate.