Payroll question

[Randomthoughts]

Hey guys,

New here so apologise if my question is somewhat stupid, or I’m missing something among the jargon when reading online.

Basically, I’ve taken over my dads business and he uses his accountant for payroll among the employees of his company. Now he pays the accountant gross pay for each employee and the accountant then pays the net pay (employees confirm this) so I’m assuming they are taking income tax and NI to pay hmrc. However, looking into his paperwork, I can see that his accountants send him a monthly statement requiring payment for taxes due on each individual employee.

So effectively, two lots of tax and NI are being paid. First, taken out of gross pay, secondly sending a bill for it to be paid. Is this correct? Or are they fobbing him off and pocketing one lot of deductions?

I know the very basics of VAT and income tax from spending many years as a sole trader, but not as a director of a business, but that really doesn’t seem right?!

They also charge me both employers and employees NI and my dad claims that any profits made, the accountants seem to take it? (I haven’t pressed on this statement as my dad does have a habit of half ass explaining himself, so until I see that for myself, I’m assuming his overly exaggerating.)

Thanks in advance!

 

[Newchodge]

That sounds worrying. Can you log onto the business HMRC account and look at the PAYE records which will show exactly what PAYE/NI pay emts have been made?

 

[Daybooks]

The total payroll cost is the gross pay of the employees plus the employer costs (typically national insurance and pension contributions). The gross pay of the employees is typically made up of their net pay, taxes deducted under PAYE and their national insurance and pension contributions.

The amounts being paid to HMRC comprise the employer and the employee national insurance contributions plus the income tax. The amounts paid to a pension provider will similarly be the employee and employer contributions. The amount to be "handed" over therefore is the employees' gross pay plus the employer national insurance contributions and employer pension contributions. The gross pay will settle the net pay, their taxes and their employee national insurance and pension contributions.

The amounts are therefore easy to prove and reconcile.

 

[Randomthoughts]

That sounds worrying. Can you log onto the business HMRC account and look at the PAYE records which will show exactly what PAYE/NI pay emts have been made?

Hi,

Thank you for your replay yes that’s something I’m gonna look into today. Try and gain access to the business hmrc account and look into what access they have and look through it.

It was more a case of having a little more understanding on the deeper side of business and relations to accountancy before I question anything. I don’t want to make myself look silly (ie not knowing the basics) for something that might be legitimate.

 

[NicoJ]

@Pi Daybooks has given you the logical answer, that the second bill is to cover employers NIC and employers pension which wouldn't be included in the gross pay.

My advice here would be to speak to the accountant and ask them to explain everything that they do to you. You seem to have assumed wrongdoing straight away which is not a good start to the relationship.

A good accountant will not consider you to be silly just because you don't understand something.

 

[Randomthoughts]

@Pi Daybooks has given you the logical answer, that the second bill is to cover employers NIC and employers pension which wouldn't be included in the gross pay.

My advice here would be to speak to the accountant and ask them to explain everything that they do to you. You seem to have assumed wrongdoing straight away which is not a good start to the relationship.

A good accountant will not consider you to be silly just because you don't understand something.

I’m not assuming anything, nor have I brought it to their attention to damage any kind of relationship between them and the company. All Im trying to do is understand the logistics of double taxation as this is beyond my knowledge of the basics. This has been thrusted upon me to take over the business, and just wanna make sure everything is in order. I appreciate your reply, but the question was to make sure it’s all legit and no skullduggery is going on. My dad had a habit of paying everything without even looking at it. (His divorce bill was 20k more than my mums ?) but thank you. I just wanna make sure everything is as it should be and I’m sure as I get myself grounded with it, I’ll understand a lot more ?