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Where Taxpayers and Advisers Meet
Business expenses
We are currently being investigated by the IR regarding business expenses. We are a small business and took help from friends when we were busy. We paid them £20 a week for their help. Are we able to claim this as employees costs. What are the rules concerning this as the IR want NI numbers of our employees however we do not have these as they earned so little. Thanks for your help in advance.
-
Simon Sweetman
- Posts:1690
- Joined:Wed Aug 06, 2008 3:11 pm
if you are being investigated, get professional advice as soon as possible. Do NOT attempt to deal with it on your own. The £20 per week is a cost for your business, but potentially taxable in the hands of the people you paid it to.
simon.sweetman@btinternet.com
simon.sweetman@btinternet.com
-
wamstax
- Posts:2019
- Joined:Wed Aug 06, 2008 3:39 pm
- Location:Operate Nationally but based in Aberdeen
- Contact:
Well the unfortunate thing is that you should have obtained a P46 form whenever you start a new employee (with really little exceptions) and if you fail to do that you are liable to operate PAYE & pay NI. After all they might (and probably did) have other employments or taxable sources of income.
Where do you go from here? Well rightly so the HMRC are looking for names and addresses so that if necessary they can prove that the friends had other income and that tax was due. They will no doubt be seeking the appropriate amounts of PAYE & NI that you probably knew (but ignored)that you should have paid over at the correct time. Alternatively the names and addresses might just satisfy HMRC that no tax or NI was lost in which event they might just be persuaded to settle for less than the statutory amount due.
As to tax deductability, yes employee costs are allowable against profits (and so is any tax & NI you have to pay for the above) but you do need to satisfy HMRC that you paid the amounts away as wages and didnt just put the £20's in your back pocket and call it wages.
Hope this helps
bill@wamstaxltd.com
http://www.wamstaxltd.com
Where do you go from here? Well rightly so the HMRC are looking for names and addresses so that if necessary they can prove that the friends had other income and that tax was due. They will no doubt be seeking the appropriate amounts of PAYE & NI that you probably knew (but ignored)that you should have paid over at the correct time. Alternatively the names and addresses might just satisfy HMRC that no tax or NI was lost in which event they might just be persuaded to settle for less than the statutory amount due.
As to tax deductability, yes employee costs are allowable against profits (and so is any tax & NI you have to pay for the above) but you do need to satisfy HMRC that you paid the amounts away as wages and didnt just put the £20's in your back pocket and call it wages.
Hope this helps
bill@wamstaxltd.com
http://www.wamstaxltd.com
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact (mob 07751720507) can be obtained from websites
-
King_Maker
- Posts:6538
- Joined:Wed Aug 06, 2008 3:22 pm
Assuming they are temporary employees (most likely), then their wages should be a business expense.
At £20.00 per week, there is no NI due, but possibly income tax depending on the circumstances of each individual.
As wamstax says the P46 procedure should have been followed.
If the amounts are not too large, HMRC may accept no PAYE in return for your not claiming those wages as a business expense.
Have you consulted your accountant? If not, as Simon Sweetman says, get some professional help as HMRC may want to broaden the scope of thier Enquiry.
At £20.00 per week, there is no NI due, but possibly income tax depending on the circumstances of each individual.
As wamstax says the P46 procedure should have been followed.
If the amounts are not too large, HMRC may accept no PAYE in return for your not claiming those wages as a business expense.
Have you consulted your accountant? If not, as Simon Sweetman says, get some professional help as HMRC may want to broaden the scope of thier Enquiry.
