Cash In Hand? Who Does HMRC Chase For Tax & NI?

by **SamDineWithMe** on Thu Jan 05, 2012 12:14 am

If someone has been recieving their wages in cash - 400 pounds a week, and it turns out their employer has not operated a PAYE system or paid any NI contributions for several years, who is liable for the tax? Will they chase the employee who has no assets, or the employer who has two properties? Do the HMRC chase the employer who has liability anyway? Or can the person receiving wages be chased? What approach should the employee have when contacting the HMRC? Genuinely not about me, but about a person I have casual acquaintance with who has left their employment and is looking for work. I understand that unless the NI is paid it will affect their state pension.

Anyone got experience of this?

by **wamstax** on Thu Jan 05, 2012 1:39 am

Hi there Initially HMRC would go after the employer unless it could be established that the employer had acted in good faith. If it could be established that the employer acted in good faith and there was not a failure by the employer to operate PAYE then inevitably the employee would be pursued. Of course if the employee was a director of a company then it might be very possible that a direction would be made by Debt Management that the debt should be recovered from the director who was receiving his wages/salary without the operation of PAYE.

Of course the other matter that would have to be considered si whether the "employee" was in fact an employee or self employed etc.

hope that this helps
bill@wamstaxltd.com
www.wamstaxltd.com

by **SamDineWithMe** on Thu Jan 05, 2012 1:52 am

Thank you for your reply.

What constitutes "good faith" please?

I am of the opinion that the employee should approach the HMRC and get matters straight. There is every chance the employer will be leaving the country in the future, selling up and going to live in the sunshine - and they have said as much. I suspect the employer has not made any attempt to operate PAYE as it is coming to light that they are what is known as "dodgy", but they do own properties and have a good lifestyle, with assets, foriegn holidays and an attitude that rules are for other people. I understand a tax inspector is due to visit them, and they have been seen spending two hours burning documents in August. The employee left in September.

by **wamstax** on Thu Jan 05, 2012 2:04 am

"in good faith" would mean that it was reasonable for them to consider that they did not require to operate PAYE on the amounts being paid to the employee. I assume that there may be other employees also so that all that would be taken into account in deciding if the employer had acted in good faith. Mind you if the employer has absconded then don't be surpised if HMRC were to come after the employee.

The burning of documents is not to be encouraged and if they are corenered the lack of documents may well in fact give HMRC an even better hand than they would have had with the documents- depending of course what the documents contained

by **SamDineWithMe** on Thu Jan 05, 2012 10:26 am

Can the employer claim they did not know about PAYE if they have not paid through that scheme and that they do not know about NI? They do have an accountant that deals with their paperwork so I am assuming the accountant would have asked them if they employed anyone and under what conditions. If the accountant had asked them and they lied about employing people would that be taken into account?

by **SamDineWithMe** on Thu Jan 05, 2012 10:31 am

The employer is VAT registered. I am guessing that if they could find four hundred pounds a week to pay cash to an employee and they have failed to put that on the books, then the taxman would be asking how they raised the money to do so - and if they cannot show that and don't have it in their accounts then they would be assumed to have done work that they did not charge for officially and therefore VAT would be due on those amounts as well as any PAYE tax and NI contributions due on it.

by **wamstax** on Thu Jan 05, 2012 11:26 am

Yes of course all factors would be taken into account but remember that the employee could just as easily be involved in a conspiracy to defraud HMRC along with the employer and the approach to HMRC might just be his way of seeking to pass the buck

by **mullet** on Thu Jan 05, 2012 8:05 pm

Can the employer claim they did not know about PAYE if they have not paid through that scheme and that they do not know about NI?

Ignorance of the law might be a mitigating factor, but it cannot be a defence.

by **SamDineWithMe** on Fri Jan 06, 2012 12:42 pm

Well, they have asked for a P45. They have decided that they are just going to stay straight with the HMRC and if their employer has not been paying the PAYE and NI that they claimed, they will find out shortly. They gave their employer the right paperwork when they started work and were told that tax was being paid up until this year. If the employer has stopped paying it, or failed to, or refused to it is all going to come out soon. Hopefully the employer has paid the contributions, and their dodgy reputation and the burning of paperwork is nothing to worry about.

by **SamDineWithMe** on Sat Jan 07, 2012 11:37 am

Update. The reason for concern was that someone a while back thought they were an employee, and when they asked for a P45/P60, they were told by the employer they were self employed and to sort themselves out. They did not work there long. I think they got into an altercation with the employer. Do not know how that one was decided. The employer has not sold their properties or put them up for sale, so the comment about going abroad may just have been an emotional statement and not a plan that has been put into action. Levels of dodginess will no doubt come out in the near future.