B&B employees

[kcamplin]

Hello,
I run a bed and breakfast - all of the cleaning can be a bit much for one person, so I would like to hire some staff to help me. I know that I would have to pay the national minimum wage (£5.35/hour) which is fine. I would like them to be here for around 16 hours a week.What I don't know is if I have to pay any national insurance or tax for them out of their wages and if so what forms would I then need to fill in and send to the tax man. Also would I need to fill in forms detailing their wages for the tax man or would they declare their wages themselves? Would I also need proper wage slips or would hand written ones do? (on notepaper or something?)
Many thanks for any help offered
Regards

[jpcentral]

That is the sort of question which can really open up a can of worms.

Strictly, if you employ anyone you are supposed to set up a PAYE scheme with Inland Revenue. By concession, if none of your employees earns above the Lower Earnings Level (£87 pw this year) and does not have any other taxable income most inpectors will not insist on a PAYE scheme so long as you keep accurate records (including P46 forms, names and addresses).

The problems of operating without a PAYE scheme are many - how do you know that an employee does not have other earnings (they may not when they start but may take another job or become self employed), how do you know they're not lying to you, how do you provide evidence for Tax Credits claims etc?

I had a client who took advantage of the concession but, when called upon to produce the evidence, it was discovered that two employees had provided false information. The result was that my client was assessed on the grossed up amount and had to pay several years back tax for the employees.

If you operate outside of a PAYE scheme you are taking a risk.

You can't treat a person as self employed and let them deal with their own tax without running the same risk. If they don't declare it (and maybe even if they do) you can end up paying their tax.

My advice is to set up a proper PAYE scheme and run it properly with payslips and full HMRC forms.

John Perry
Central Business Services
Loughborough
www.centralbusiness.co.uk

[kcamplin]

I didn't realise that if they had another job it would affect me. How will I know if the people that I interview have other jobs if they don't tell me or lie about it? If they did have another job wouldn't it be the employers responsibility who paid over the £87 limit to pay the taxes and not the employer who didn't reach that limit? How could I be responsible for someone else lying? Do I need to make them fill in some sort of questionaire and have them sign it saying that this would be their only employment so that I wouldn't get into trouble if they had more than 1 job?
I didn't relise that having a member of staff would be so complicated.

Is there any other pit falls that I should be aware of if I get a girl in to help me clean?
Many thanks again.

[jpcentral]

When you are operating a PAYE scheme and employ someone they must either give you a P45 or complete a P46 (a declaration as to employment status). The P45 or P46 is sent to HMRC who can cross reference their records and find out if the person is lying. HMRC can then advise you what tax to deduct. Because you have complied with the legal requirement, the responsibility is no longer yours.

If you don't operate a PAYE scheme, even if you get them to complete a P46 which you can't forward to HMRC, you have no way of knowing whether or not they are lying or if their circumstances change - ie start working for you as their only employer but then take on another job or also become self employed. They could even tell you that they don't have another job when, in fact, they do.

It is safer to operate a proper PAYE scheme.

John Perry
Central Business Services
Loughborough
www.centralbusiness.co.uk

[kcamplin]

I've just looked up a copy of a P46 and on the bottom of page 2 it says "Please send this form to HM revenue & customs on the first payday. However, if the employee has ticked box A or box B and their earnings are below the tax threshold, do not send the form until their earnings exceed the tax threshold" This would mean that I would never send the form to the tax office because their pay would never go above the tax threshold. So I still wouldn't know if they were lying because customs and revenue wouldn't be checking up on them because they didn't recieve the forms because the employee didn't earn enough money. Would I then still be liable.

Cheers

[Daniya]

Just an addition to the above, once you pay someone £87 + per week you have to register for PAYE, However you do not begin to pay any NIC & TAX to the I/Revenue until you pay your employee £100 + per week.

As a small business you can get your employee to sign P46 AND MAKE SURE THEY TICK the box stating that this is their only and main job and get them to sign it. If they do not tick the aforementioned box that this is their only job, then you have to register for PAYE, even if you pay them £5. As long as you have taken their ID, nat Ins number and filled in the P46 WITH THE CORRECT DETAILS..that should suffice.

If later on it transpired that the employee had lied to you and they had another job, etc..as long as you have all the documents to prove your case, then the I/REV will not chase you for any overdue tax.

rana

[kcamplin]

Thank you very much for that reply. That has helped me to understand the system a little bit more.
Regards
Kim