Company never paid PAYE or NIC for me

[ConfusedMark]

Good morning

This is rather complicated, but I'll try and be as detailed as possible whilst still remaining brief as I understand you're all very busy people!

An ex-colleague and I started up a business in 1999 and within a year we were both earning from it. It was a limited company, and while my co-director took care of the sales, accounts and company secretary, I did the actual work that earned the income.

I was first told that our salaries were being paid as speculated annual director's dividends being split into monthly payments and that there was a tax waiver for the first year. Thereafter, I was under the impression that my co-director was making PAYE and NIC contributions for us.

In all that time, I was never shown the business bank account statements nor any other financial documentation. My co-director had been in business before and is 10 years my senior (I'm now only 33) and so I trusted his judgement and his motives.

A few weeks ago I received documentation from the Inland Revenue asking for tax returns from 2001-2004 and I've had to ask the accountants what I'm supposed to do, as I thought this was all being taken care of on my behalf as an employee of a limited company.

This morning I received another letter from the Inland Revenue detailing that the company never made ANY contributions for PAYE or NIC and since the company has ceased trading (December 2003) they want to pursue me personally for the PAYE and NIC contributions for the entire period of my employment with the company.

With some quick calculations, I would assume that the combined contributions would be around 33% of what I actually "cleared" every month (given that I was under the impression that my salary was going through the correct protocol) if the average deductions are 25% of the net salary?

Is there any advice at all that anyone can give me on this matter? In retrospect, I should have pushed harder to see the financial statements and take more to do with that side of the business, but I was always told that it was running fine and I just got on with my work.

Thank you in advance for any and all advice, at the moment I can hardly concentrate.

Mark

[deanshepherd]

Hi Mark

You are certainly in an unenviable position here.

The Company's accountants should be your first port of call as they should have full details of what was paid to you via the company. Indeed, they would probably have advised on the best way of extracting funds by way of a combination of salary and dividends.

It is possible that you were only paid dividends which would explain why no PAYE or NIC had been deducted from your income.

Are you still on good speaking terms with your former co-director?

Feel free to contact me if you wish to discuss your options.


Dean Shepherd
MMI Accountancy
dean@mmi-online.co.uk
www.mmi-online.co.uk

[ConfusedMark]

Hi Dean

Many thanks for your very prompt reply!

I contacted the company accountants on July 5th when I first received the myriad of forms for the tax returns that I spoke of. As yet, no-one has called me back, and I have left another message today. I must also add that the accountant was also a golf buddy of my co-director, so I'm not sure what to expect from him.

If it transpires that I was only paid dividends, where would I stand on PAYE or NIC? I assume there would still be some necessary contributions?

My co-director and I are still on "speaking terms" yes, but there is no trust from my end due to many incidents that have come to my attention over the last year or two. Since January 2004 we all went to work for the same company as they were our biggest clients and wanted to retain our services after the business ceased trading.

It is very strained, I have to admit, as I don't necessarily believe anything from him anymore. Too many other things, such as company loans that I knew nothing about, have eroded any trust that once existed.

Unfortunately, he is in the Greek Islands with his family until Thursday and I don't hold out much hope of the accountants getting back to me as it's already been almost a month since contacting them in the first instance.

I have until September 3rd to complete my tax returns, so I may have to fly back up and deal with it in person as I now live around 600 miles away.

I'd laugh if I had enough energy

Thanks again

Mark

[CDavey9501@aol.com]

As a director you would be required to file a self-assessment tax return each year. Did you file any?

[ConfusedMark]

No, I'm afraid not! My co-director insisted that it was all being taken care of. I'm beginning to feel rather stupid as it seems like I was duped. Any time I asked about income tax or anything like that I was always given the customary "everything's in hand, don't worry about it" response so I could just get on with actually producing the work that earned the income.

[King_Maker]

Did you actually receive any Self Assessment Tax Returns to complete?

[CDavey9501@aol.com]

Your SA Returns
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If you received seperate payments for dividends and salary then this should make the completion of your SA returns (relatively) straightforward.

Company Tax - PAYE & Corp Tax
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The matter can be resolved but you it may be best to use the services of a professional firm to assist you with this.