Tax/NI question

Moley · 13 Sep 2010 at 12:29

Need some opinions from those in the know.

I have been working for the best part of two years for a small consultancy company which is head quartered in Asia.

The UK registered company formed to develop the business here in the UK stopped paying wages back in April and the MD took over paying our wages out of his own pocket to keep us working for him.

The old business was folded a couple of months ago by the taxman for failing to keep up with PAYE payments. The original investors are Asia based and effectively just abandoned the company.

The MD who was paying us has now set up a new UK business to carry on where the old one left off (we just landed our largest contract ever and have a huge contract due in three months time so are/will be profitable for the first time).

He's asked us to fill in a P46 form and I would like opinions on the ramifications for me.

Firstly I'm sure no tax or NI has been paid for me this year by the previous company and he has paid me the same amount of "take home" to keep us going.

I am concerned that *I* have some direct liabilities to the taxman and I'm concerned that my take home is going to be hit significantly by being taken on by the new company on emergency tax halfway through the year.

Any advice gratefully received.

Abraham · 13 Sep 2010 at 12:33

if your tax hasn't been paid then you are liable for it more than likely, I think it depends on if you were legitimately given the impression that your tax/NI was still being paid by your employer.

hood1971 · 13 Sep 2010 at 12:41

If tax and ni was deducted from your salary, but not paid over by the company you should be ok, though will probably need to go through a few hoops to prove it. Hopefully you have kept all payslips and your P60s.

If it wasn't deducted then you will be liable.

Abraham · 13 Sep 2010 at 12:44

being paid out of the MD's pocket makes it sound very cash in hand to me, in which case you'll need to justify that you thought your tax and NI were being paid. Without wanting to sound harsh it sounds like you probably knew it wasn't being, in which case you're going to have to pay it, no bones about it, the MD might also be in the doo doo for not paying employers contributions, but you're responsible for your own.

Moley · 13 Sep 2010 at 12:58

To clarify, being paid by the MD was only supposed to be a short term solution and I expected the tax and NI to be paid up to date when the new company took over the payroll. I still do and I've fired off an email to him asking him to clarify this. My main concern is related to the P46 and emergency coding possibly hitting my take home pay.

Abraham · 13 Sep 2010 at 13:11

Moley said:
To clarify, being paid by the MD was only supposed to be a short term solution and I expected the tax and NI to be paid up to date when the new company took over the payroll. I still do and I've fired off an email to him asking him to clarify this. My main concern is related to the P46 and emergency coding possibly hitting my take home pay.

If you declare your earnings to date then you will start on the correct tax code. emergency coding is just a matter of sticking you on full BR (or higher if your earnings go over) on the assumption that you're already using your allowance elsewhere.

Vonhelmet · 13 Sep 2010 at 14:11

HMRC would usually pursue an employer for unpaid taxes, but in the case of the employer having folded, they may come after you, in which case you will indeed be left trying to prove that you honestly believe that your tax/NI was being deducted. If you can't prove that, then HMRC will regard what you thought were net payments as gross and will seek to recover the tax that would be due on those hypothetical wages.

As has been asked, did you get payslips during the period when it turns out your tax wasn't being paid? If the deductions are recorded there, then the company is at fault as you would believe your deductions were being made. That leaves HMRC up the creek, as they can't recover cash from a non-existent company, but it gets you off the hook.

As for being paid by the MD, that sounds very dodgy. Were you paid cash in hand or into the bank? Did you get payslips? How long was this going on?

The final question I would be asking is... Do you really want to keep working for these people after all this?

Ring Peace · 13 Sep 2010 at 14:29

I have no real input for the OP, sorry.

Abraham said:
If you declare your earnings to date then you will start on the correct tax code. emergency coding is just a matter of sticking you on full BR (or higher if your earnings go over) on the assumption that you're already using your allowance elsewhere.

This is incorrect, there is no "emergency tax code" if you don't produce a P45 your employer should ask you to fill in a P46. On the P46 you will be asked if this is your only or main job, if you say it is you will be put on "emergency tax code" which is just standrard personal allowance which would be 647L-W1/M1, you would only be put on BR if you stated on the P46 that this is NOT your only job.

Liquidfox · 13 Sep 2010 at 14:43

As people have already said, hopefully you have pay slips from both periods showing NI and PAYE deductions. If you have then you're all clear, if not, you may have a bill coming your way soon

Abraham · 13 Sep 2010 at 14:45

Ring Peace said:
This is incorrect, there is no "emergency tax code"

if you say it is you will be put on "emergency tax code"

I thought BR was the default unless you confirmed it was your only job, I don't believe that the default would be for you to potentially not pay enough tax.