What needs declaring with part time staff?

[Copperwood]

A friend of mine is looking at buying an established café and asked me to go with him to have a look around.

We had a good look through everything and it all seems to be as expected but when talking to the current owner they told us that they pay the staff (3 part time workers) cash in hand at the end of each day.

They said this was fine from a legal standpoint as they are paying them well below the tax and national insurance threshold so it’s not an issue. They don’t declare anything regarding staffing to anyone, literally all they do is pay them cash out of the till at the end of each day and write it in the wages column on their accounts.

I ran this past a family friend who is an accountant and surprisingly he told me that this was fine.

I find it really hard to believe that this is the case but I only have a limited knowledge of accountancy procedures which is why I am seeking clarity from anyone who can help.

I should add that we will be seeking a professional opinion from my own accountant but rather unhelpfully he’s away on holiday this week for the half term break.

 

[S2K]

It sounds hugely dodgy. Take money from the daily takings to pay staff, so declare lower takings and subsequently lower sales plus not paying employer NIC or declare the payments made to staff.

Cash payments to staff are OK as long as accurate and adequate records are kept, the staff is employed and the payroll is run periodically, including doing RTI submissions.

 

[Copperwood]

It sounds hugely dodgy. Take money from the daily takings to pay staff, so declare lower takings and subsequently lower sales plus not paying employer NIC or declare the payments made to staff.

Cash payments to staff are OK as long as accurate and adequate records are kept, the staff is employed and the payroll is run periodically, including doing RTI submissions.

It does appear that they are declaring the full takings but paying the staff cash from the till. My big concern with it is that there isn't any sort of link between the staff and HMRC.

I think my main question is whether or not there is a scenario where this is acceptable or should all payments to staff be reported to HMRC without exception?

 

[Scalloway]

From HMRC

https://www.gov.uk/paye-for-employers

You don’t need to register for PAYE if none of your employees are paid £113 or more a week, get expenses and benefits, have another job or get a pension

So if you are sure they have no other income that is taxable (another job, a pension) then you are ok. You must still keep payroll records.

 

[Newchodge]

It depends on several factors.

1. How much are they being paid, can't work if anyone is paid more than £113 per week.

2. If everyone is paid less than £113 per week, do any of them have other jobs, or are they claiming state benefits or have any other taxable income? If so, it can't work.

3. Are they all checked as being allowed to work in the UK?

 

[Newchodge]

Also, you need to bear in mind the provisions of TUPE, which is completely separate from HMRC issues.

 

[Copperwood]

Thanks for all your replies, it might not be quite as dodgy as if first looked although we obviously need to get it checked over properly before any money changes hands. Thanks again.

 

[Iain_Henderson]

One other thing to add - when you take someone on they have to fill in a sheet (can't remember it's name but from the govt website and has about 3 tick boxes) on which they declare this is their only job. Found it..

https://www.gov.uk/government/publications/paye-starter-checklist

If you have that sheet and it is their only job then cash in hand is fine. If they have another source of income (job, pension) then you do need to register with HMRC.

https://www.gov.uk/register-employer/y

 

[Root 66 Woodshop]

Also, you need to bear in mind the provisions of TUPE, which is completely separate from HMRC issues.

Out of interest... If the original owners are paying cash in hand and technically "fiddling" as these 3 staff members will no doubt be claiming benefits TBH... we can only assume that there is no mention of names within the books as the OP stated

They said this was fine from a legal standpoint as they are paying them well below the tax and national insurance threshold so it’s not an issue. They don’t declare anything regarding staffing to anyone, literally all they do is pay them cash out of the till at the end of each day and write it in the wages column on their accounts.

How would TUPE work?

 

[Newchodge]

If it is fiddling then TUPE does not apply to it - you can't use the law to enforce an illegal contract.

 

[Clinton]

A friend of mine is looking at buying an established café and asked me to go with him to have a look around.

What a wally! Why didn't he take someone who knows the first thing about buying businesses?

(Just to be clear, I'm not touting for business. I'm fully booked up and not currently taking new clients.)

 

[mhall]

(Just to be clear, I'm not touting for business. I'm fully booked up and not currently taking new clients.)

Didn't your Mother ever tell you that if you can't say something useful, don't say anything at all ? Instead of gloating why not offer advice to the OP as that was the purpose of the thread as you are obviously such an expert?

 

[Copperwood]

What a wally! Why didn't he take someone who knows the first thing about buying businesses?

Just to be clear he wanted me to go along to look at changing the layout and branding as I run a shopfitting and signage company but thanks for your helpful comments.

 

[Clinton]

It's an odd signage company that takes away questions on salary matters to "(seek) a professional opinion from my own accountant". It would appear that, whatever your normal area of operation, you are attempting to provide due diligence assistance in this case.

Instead of gloating why not offer advice to
the OP as that was the purpose of the thread as you are obviously such an expert?

I was a bit harsh, but I offer plenty of advice in other threads as I have in this one. The advice is this: get someone who knows what they're doing to check the business over.

I see the fallout from people who try to buy a business on the cheap and without professional assistance. Nine times out of ten it ends in tears. The best advice I have for someone looking to buy a business is to stop relying on your mate the shop fitter to answer questions that are way outside his area of competence i.e don't be a wally.

 

[Copperwood]

It's an odd signage company that takes away questions on salary matters to "(seek) a professional opinion from my own accountant".

Like I said in the very first post it's a good friend of mine - I don't generally involve myself in such matters but I thought I would try to get a bit of information from the forum.

I've also stated multiple times in this thread that professional advice would be sought but I am unlikely to be involved in that process and was intrigued at the situation and the legalities of it.

I got excellent, informative answers last night and thanked everyone for their input.

I genuinely don't understand why you felt the need to waste your time with childish unhelpful replies.

 

[Clinton]

In your OP you make no secret that you were the one, together with your friend, conducting the "due diligence". If I may quote you:

We had a good look through everything and it all seems to be as expected.

Everything? Wow! (No mention here about shop fitting... or seeking professional advice.)

You identified one employee payment issue on which you lacked expertise, and you attempted to get answers here to that issue.

An employee payment issue that came up when checking the cladding to see if it was properly screwed in?

When called out you squirmed and tried to play innocent shop fitter providing shop fitting related advice.

But please yourself.

My advice remains unchanged - your friend should get someone who knows about these things to advise him on the purchase of this business.

 

[Newchodge]

In your OP you make no secret that you were the one, together with your friend, conducting the "due diligence". If I may quote you:


Everything? Wow! (No mention here about shop fitting)

You identified one employee payment issue on which you lacked expertise, and you attempted to get answers here to that issue.

An employee payment issue that came up when checking the cladding to see if it was properly screwed in?

When called out you squirmed and tried to play innocent shop fitter providing shop fitting related advice.

But please yourself.

My advice remains unchanged - your friend should get someone who knows about these things to advise him on the purchase of this business.

Having a bad day @Clinton?

 

[Clinton]

Hi Cyndy, yeah, just had another muppet on the phone earlier today who did a DIY and is now desperately in need of some help. What makes it worse is that he's a really nice chap I've known for a while ... but I've got a full case load so I can't get involved sorting his crap out.

I do wish people wouldn't rely on advice from their mate down at the pub before spending tens (or hundreds) of thousands buying something they know sweet b*gger all about.

 

[Newchodge]

Hi Cyndy, yeah, just had another muppet on the phone earlier today who did a DIY and is now desperately in need of some help. What makes it worse is that he's a really nice chap I've known for a while ... but I've got a full case load so I can't get involved sorting his crap out.

I do wish people wouldn't rely on advice from their mate down at the pub before spending tens (or hundreds) of thousands buying something they know sweet b*gger all about.

Hey I understand, but sometimes people need gentle hints instead of a sledgehammer.

 

[Copperwood]

Everything? Wow! (No mention here about shop fitting... or seeking professional advice.)

I simply said we had a good look through everything and it was all as expected - from my point of view I meant things like the floor size to see how the layout could be changed in line with his new plans, whether existing sign boards could be re-used to save a bit of money, the quality of existing fixtures, quality of existing tables and chairs etc. I didn't realise that I needed to differentiate these things from business matters when it doesn't make the slightest difference to anything that I wanted advice on.

It was basically just a point that came up in conversation that interested me and I thought I would seek clarity - I genuinely wish I hadn't bothered.

I hope for your sake none of your customers read your comments here because you come across as nothing but a confrontational bully out to pick a fight over nothing. Maybe you should look at reducing the amount of pointless posts you make on this forum if you're so busy that you can't help the nice chap you've known a long time sort out his mess as you stated in your previous post.

It costs nothing to be nice...

 

[S2K]

Hello Clinton, I completely agree with you professionally. People have to be careful and in the vast majority of cases, if not all, professional advice is required. However, in my short experience on this forum I did read a number of your replies and in their vast majority you come across very direct, aggressive and disrespectful, something I believe isn't appropriate on this forum.

 

[Root 66 Woodshop]

With all due respect, Clinton is right... whether he's having a bad day or not the OP's friend should have taken someone with knowledge in buying a business... no offence but a signage company doesn't fall into said industry... does it?

The OP has to be fair already answered his own question with regards to the wages... he thought it sounded iffy, asked the question here... If this is the only question to the issue of whether or not the guy goes with the business then fair enough... Clinton need not reply - other than the simple fact that with all due respect to the OP - do you know anything about buying a business?

Fair enough you're running your own business... but have you ever bought one?



I've seen so many people fail at buying a business... or have had to fight to survive after starting a business (myself included)... having the right tools to go to war is a start to be fair.

 

[Clinton]

Hey I understand, but sometimes people need gentle hints instead of a sledgehammer.

Agreed. But the original post showed showed someone with no idea about buying businesses advising someone who's perhaps buying his first business (and I don't for a minute swallow the story about the nature of advice being related to floor layout). I felt that a kick up the backside was going to be more useful to the actual investor than answering the question which, to be fair, you and others had already addressed. I suspect that as a result of my intervention in this thread the OP's going to advise the investor that he needs what ol' Byre has often called "adult supervision".

For me that's mission accomplished. There's one more person who's now going to get a solicitor or other professional to advise.

However, in my short experience on this forum I did read a number of your replies and in their vast majority you come across very direct, aggressive and disrespectful, something I believe isn't appropriate on this forum.

I notice that you have 6 thank yous to your name. That's about a fifth of your total posts. You're obviously on the right track and people are finding your posts useful and helpful. Keep up the good work.