So I've just been sorting out my payroll for this week, due to be paid tomorrow, and two out of of my four employees have had a tax code change. Unfortunately, this apparently means they're due PAYE refunds. One of them (Average weekly pay about £100) is owed £1200, and the other (average weekly pay about £350) is owed nearly £3k. Overall, my usual weekly payment of about £800 is going to be north of £4,000. After the past couple of years our reserves are completely dry, and I have no way of paying this at such short notice! Even if I could cope with the one-off payment, a quick search online suggests that HMRC like to deduct it from your monthly PAYE payments, but ours only come in at about £600/month which would tie up a lot of money with them for the rest of the year. I'm going to try and look more at this, but unfortunately I'm running the place on my own until 11 tonight and then from 10-8 tomorrow (which is pay day!) so my options for getting in touch with HMRC or my accountant are really limited. If anybody's seen anything like this before and could help me out with some fairly urgent advice, I'd be really grateful.
Well, apparently HMRC might decide to fund it and I can expect a decision on that within 35 days (!). Looks like it's time to start gathering together the pennies under the sofa unless there's any way I'm legally allowed to pay it over a number of a pay periods.
Surely they can't expect you to pay it in one lump sum after changing their tax codes suddenly? There's got to be a degree of fair play methinks.... Have they changed the codes due them making an error previously?
I suspect for at least one of them that this change is the error - he's got a full time job elsewhere and just picks up the odd shift here and there, so him being on BR has always felt right. It's possible that it'll all be sorted out once the monthly payroll gets done at his other job, but that doesn't help me that much tomorrow! As for the other one, it may well be an annual adjustment, but I think it's a bit rich considering that the amount he's apparently owed is considerably more than the amount my business owes HMRC in PAYE - surely it should come from them! Luckily I'm on good terms with both members of staff so can probably informally negotiate something, but it feels really unprofessional to have to admit to employees that you can't afford to pay them what their payslip states they should get, even if it's not technically me who owes it.
Maybe you can cite that your accountant is looking into the matter, and a payment plan is forthcoming? That could give you a bit of time? I had an issue with HMRC two years ago where they claimed their calculations were wrong, and then they ramped up my tax bill by a further £4,700. The insisted on full payment within 28 days but i challenged them, got a reduction of £2,500, and paid the rest over the next year or so.
Agreed that this would be my best option if I owed HMRC the money (or they thought I did), but in this case I'm pretty sure HMRC think that they owe my employees money and are expecting me to pay it. My draft pay run for tomorrow literally lists the total cost to the business as being £758 but total pay due being £4160, despite my PAYE returns being up to date.
I wouldn't commit any extra payments at present, and explain the situation to your two employees, stating the money is coming from HMRC....it will give you some grace?
Luckily I'd be very surprised if they were (and to be honest I'm pretty sure it's a mistake and they're not entitled to the refund anyway, but you never know). Looks like my only option is to check with them individually, explain the situation and try and sort something out if that's the case though.