how to employ part time schoolboy

[zinnia48]

I have started using a 16year old schoolboy as a washer-up at the weekends, I pay him cash, he doesnt have a NI number as he isnt looking for permanent work . I am a sole trader, my question is how do I deal with RTR for him. My accountant has said keep a record his dob and address and dont report him for RTR and claim his wages as an expense at the end of the year.

Is he correct ?, it does seem silly to have to put him into the tax system , just for small payments, when his total annual income will be substantially below his tax threshold.

Equally I would like to claim his wages as a salary. How do you deal with 16-18 yr old students?

 

[UK Contractor Accountant]

Do you have any other employees you are reporting under RTI? If yes then all part timers need to go on the payroll under RTI even if under 16.

 

[zinnia48]

yes , I have an over 65yr old employee, who pays no tax.
It seems crazy that a 16yr has to get a NI number, I have the beaurocracy of filling in a different payment each month, he has to pay tax until the tax office gets around to allocating his tax allowance to my company...........

There must be a simplier way (sorry what a stupid statement, where dealing with hmrc), why cant he be treated the same as paper boys etc ?

 

[UK Contractor Accountant]

Use 944L tax code and get him to sign a P46. No tax will be deducted.

 

[StevensOnln1]

He is treated the same as a paper boy, whose wages would also have to be reported under RTI if their employer has to run a payroll scheme.

 

[zinnia48]

Thanks for the reply's, If I read you correctly the thing that is causing a problem for me is already running a paye scheme, for a pensioner,who pays no tax or NI. (She is my mother , so her salary £1500 a year is tax deductable for me).

If I was to stop employing her and cease paye and employ, say three 16yr olds to do odd part time hours . Their total cost to me would be about £4000
a year, as each of there wages(£1400) would be below the LEL threshold, no tax or NI would be payable, I wouldn't need to register them for RTI. Is that correct?
More importantly can I claim the £4000 back as a overhead(WAges and SAlary's) without them being in the system. I would have a paper record of the hours worked and wages paid, would that be enough for hmrc if they queried it.

Sorry if this is a bit verbose, but I would like to get it all correct in my mind
and fully understand the stupidity of RTI as it applies to sole traders like me

 

[talkinpeace]

his NI number will have been allocated at birth and sent to him on his 16th Birthday.
In my day they came on a piece of paper.
Not sure how its done now,
NI numbers are allocated as soon as the government know you exist - often when a parent starts claiming child benefit.

 

[Scalloway]

My 16 year old was allocated an NI number at the same time we registered her birth.

 

[Caspar]

If your 65 old pays no tax and is under the threshold for NI (even though they may not be liable due to age) then they do not need to be on a payroll either if you have no other employees who earn over the threshold for NI.
Regarding the 16 year old with no NI as others have said, he doesnt need to go on if no-one else is on so I would see about the possibility of shutting the scheme down altogether and keeping a record of both staff for deductions to wages in your accounts. If you are anle to shut it down your would just need to submit a final years report. P showing that this would be your last rti report.

 

[zinnia48]

Thanks for your reply Caspar. Can you expand a bit on your last sentance, I.m not sure I fully understand it. If I shut down my paye account what is the " final year report P .......".

Also if I do shut it down and I keep a paper record of wages given to pensioner and 16yr old, can I just claim that expense without it being in rti, that was the reason why i first put the pensioner into the paye scheme. I only pay the pensioner £1500 a year, that is the residue from her personal allowance, she has a company pension and old age pension which takes up approx £9000

 

[Caspar]

Sorry the 'P' was a typo. In my payroll package under EMployer details, there is a box called 'Date PAYE scheme ceased.' When you cease a scheme, you tick this box, and you are asked in the system to process your last RTI return which is an EPS showing any SSP/SMP/ recovery/compensation or CIS suffered in the year and some notifications regarding if P1Ds are due etc. This is the final submission you will make after you have removed your employee as a leaver and after you have closed the scheme down over the phone with HMRC.

However, because your other employee has other income coming in, the only way you won't have to deduct any tax, is if HMRC have supplied you with a tax code showing the allowance remaining in the year for their employment with you.

The only way you can get this code is by setting up a PAYE scheme, which will be why you have set it up in the first place, I was unaware the 65 year old had other income. Which changes my advice about seeing if the scheme could be closed down.

Unfortunately, because of this other income that the 65 year old receives, forcing you to put her on your payroll, means that anyone else, even employees earning below the NI threshold, must go onto your scheme. It is the law. One in, all in I'm afraid.

If they sign a P46 to declare this is there first job since April and tick statement A, you an put them on a 944L tax code, if they have had other work since April and tick statement B, you would put them on 944L week1/Month1 basis. But I would certainly get a P46 signed, as this is your evidence that you are basing what you do, on the information they have provided. By just taking down their name and address. If at some point they have 10 jobs, and you have no proof of a declaration, you have no evidence to protect yourself by proving why you put them on the tax code you have.

 

[zinnia48]

Many thanks caspar for that comprehensive explanation of how the system works. You are correct in that I had to enrol my pensioner in rti so i could get a tax code (150L) allocated to my business, I was frustrated that it took nearly three months to get that code, during which she had to pay tax, and that she has to claim it back in April. (that is unecessary red tape!!!).

In terms of getting a p46 signed by 16 year olds, do I just keep them as my record, or do I need to submit them to hmrc, also do I need to do it all again next april when they are 17?.

Sorry about the continuing questions , but you have been so helpful , and I would like to put this problem to bed, it is stressful enough trying to get a small company going, without having to go through all these hmrc hoops

 

[Tom McClelland]

Do you have any other employees you are reporting under RTI? If yes then all part timers need to go on the payroll under RTI even if under 16.

This is incorrect. We have a ruling (in writing) from HMRC's RTI Support Team that employees aged under 16 and earning below LEL do not need to be put through RTI even if the employer has a PAYE scheme.

 

[Tom McClelland]

He is treated the same as a paper boy, whose wages would also have to be reported under RTI if their employer has to run a payroll scheme.

Sorry , that is wrong. See my post above. I might as well include the verbatim ruling from HMRC's RTI Programme:

[FONT="]This has come up before and the response advised by the RTI programme is as follows:[/FONT]

[FONT="]“If the paper boys/girls are under 16 then there is no need to include these on an FPS as they cannot claim Universal Credits. [/FONT]

[FONT=&quot][/FONT]

 

[Caspar]

I was not aware of the under 16 rule so thanks for that Tom,

Just to clarify for anyone else reading this, if you don't need a paye scheme because your employees are earning under the threshold, although it Is NOT sent in, I would always get a p46 signed where they declare this is their only job, to protect you in case they have other jobs where perhaps they should now be having tax deducted and have not been truthful. Its just something in your favour to confirm that you applied the correct code based on the info the employee gave you.

Caspar

 

[UK Contractor Accountant]

Sorry , that is wrong. See my post above. I might as well include the verbatim ruling from HMRC's RTI Programme:

Please reference to the specific HMRC RTI legislation which states that under 16's do not have to go on the payroll reporting.

I have found nothing to say they dont.

 

[Tom McClelland]

Please reference to the specific HMRC RTI legislation which states that under 16's do not have to go on the payroll reporting.

I have found nothing to say they dont.

We asked the question, in writing, and got an answer from HMRC RTI Programme, in writing. (copied verbatim above).

 

[UK Contractor Accountant]

Just so I am clear on this, its a written ruling you have on a specific case you referred to HMRC.

 

[Tom McClelland]

Just so I am clear on this, its a written ruling you have on a specific case you referred to HMRC.

We asked the general question, because we had reports of our clients getting different answers from the helpline according to who they talked to...

I have reports of directly contradictory answers being given by HMRC representatives. One said that paper boys should be included in RTI filing if the employer has a PAYE scheme. The other said that they should be omitted even if the employer has a PAYE scheme and is filing payments to other workers.

There are thousands of newsagents "employing" tens of thousands (at least) of children to deliver newspapers. We have recently been in conversations with several newsagents who were concerned about this issue and would welcome clear and *authoritative* guidance.

This has come up before and the response advised by the RTI programme is as follows:

"If the paper boys/girls are under 16 then there is no need to include these on an FPS as they cannot claim Universal Credits.

 

[Caspar]

I have looked it up on the hmrc website. If you follow the link below it clearly states if the employee is under 16, there is no need to include them on the FPS report.

http://www.hmrc.gov.uk/payerti/employee/changes/reaching-sixteen.htm

Caspar

 

[UK Contractor Accountant]

Thats exactly what I have received back from the Employer Helpline - depending on who you speak to, some say include everyone and other say under 16's do not go on.

Who do you believe? If you have it in writing relating to paperboys/girls then I suspect it applies to all under 16's.

 

[UK Contractor Accountant]

OK thats great - in black & white.

 

[zinnia48]

You have to wonder , if under 16's are exempt from rti, why hmrc can't extend that to all children in secondary education, up to the age of 18/19, we have all had small part time jobs whilst at school, its nearly impossible to earn a large amount. When you leave school and go to college/uni then it is a different case. The purpose for rti it seems is for the new tax credit scheme, as school children at school wont be eligible why make them sign up.

It is typical of hmrc to haave a one fit scheme for everybody, ignoring the effect this has on small busuness's

 

[Caspar]

You have to wonder , if under 16's are exempt from rti, why hmrc can't extend that to all children in secondary education, up to the age of 18/19, we have all had small part time jobs whilst at school, its nearly impossible to earn a large amount. When you leave school and go to college/uni then it is a different case. The purpose for rti it seems is for the new tax credit scheme, as school children at school wont be eligible why make them sign up.

It is typical of hmrc to haave a one fit scheme for everybody, ignoring the effect this has on small busuness's

It's a nice thought but as you have to pay tax on income over the tax threshold, from 16, this is the law unfortunately, and believe it or not, some students at college age 18, do earn over the tax allowance threshold, having several jobs on the go whilst studying.

Caspar

 

[Tom McClelland]

It's a nice thought but as you have to pay tax on income over the tax threshold, from 16, this is the law unfortunately, and believe it or not, some students at college age 18, do earn over the tax allowance threshold, having several jobs on the go whilst studying.

Caspar

And it is very easy for them to earn above LEL for a single week's work in the holidays.