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PAYE |
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You must register with the Inspector of Taxes whose District the company's head office is situated in. You will receive a pack containing a large number of forms, which you have to complete at the correct time, and details of how to calculate how much Income Tax and National Insurance from the pay of the company’s employees. Every time that you pay an employee (including directors), you must calculate the Income Tax and National Insurance Contributions (NIC) due on the gross amount. The net amount must then be paid to the employee and the tax and NIC deducted retained by the employer. The total deductions for all employees are paid over to the Inland Revenue accompanied by a pay slip. This is theoretically done monthly, but small companies are allowed to do it quarterly. You should bear in mind that the employer also has to pay National Insurance Contributions on the whole salary over the threshold for NICs (£4615 in 02/03). A small difference in salary can make a big difference to NICs. Independence™ provides a means to model this in "Tax Illustration" which shows both employee’s and employer’s NICs. At the end of the year, there are various forms to complete which tell Inland Revenue how much each employee has been paid and how much Income Tax and NIC has been deducted from each person. There is also a reconciliation of the amounts paid monthly or quarterly and the totals deducted. Under IR35 there may be further income tax and NIC to pay on the deemed salary. Independence™ will do all of this for you, as long as you have used it to calculate salaries during the year.
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