Redundant but still 'employed' - tax problem

plantstuffforme

Last year the company I was working for went into voluntary liquidation, as such I was made redundant but have been retained by the main investor without a contract to continue working in an effort to salvage the business.
Prior to the liquidation, I received two (net) salary payments outside of the payroll which were paid directly from the investor.
Following redundancy I was advised to claim redundancy payments but have since received two monthly (net) salary payments from the investor for me to continue working.

I'm not entirely happy with the situation as I don't know where this leaves me with tax/NI liabilities. I've been told it will only be for a few months until the investor can restructure the business.
If this is the case, then ok but won't the HMRC find out and send me a big tax bill?

roger196

In my taxes days (and many years ago), it was the responsibility of the employer to deduct PAYE and hand it over to the Revenue. It is only where the employee is a director or similar that the Revenue can chase them for the tax. If you want to check the current legal position, search the PAYE regulations. There are also employers PAYE booklets available online from www.hmrc.gov.uk

You have a contract but it is verbal or implied. Keep your payslips to show that tax was deducted.

plantstuffforme

So it sounds like before I was made redundant the employer was liable for the tax but following redundancy I am now liable even though the investor is paying me my net salary.

roger196

The following is taken from SAM142001 on www.hmrc.gov.uk

Regulation 72 Income Tax (Pay as You Earn) Regulations 2003

The papers relating to the explanation are referred to the Leeds PAYE Directions Unit to consider

• Issuing a Direction Notice under Regulation 72(5) condition A - where based on the information obtained it is determined that the employer has made an honest mistake despite taking reasonable care, and responsibility to make good the under- deduction falls to the employee
• Issuing a Refusal Notice under Regulation 72(5) condition A - where based on the information obtained it is determined that the employer did not act in good faith or take reasonable care and the employer must make good the under deduction

If the employer fails to supply an explanation the case is referred to the Recovery Office to pursue the outstanding PAYE liability from the employer.

It is possible, whilst obtaining an explanation from the employer, that it is discovered that the employer may have wilfully failed to operate PAYE correctly and that the employee was aware of the situation. This will typically be in cases where the employee was a director of the company or was involved in the operation of PAYE for example as a pay clerk. In these cases the papers will need to be referred to the nearest PAYE Directions Unit (part of the Receivables Management Stream), to consider whether a direction under Regulation 72(5) condition B is appropriate.

getmore4less

If this was me I would think along these lines

If you are redundant and terminated you should have a P45 from the company.

Now you are either employed by the investor self employed.

If employed by the investor he needs your p45
If self employed you need to contact HMRC and get paid gross.

I would talk to the investor and the tax office.

plantstuffforme

I think I should be getting my P45 soon.
Assuming I can sort this out with the investor and get him to pay me more to cover the tax liability, how likely is it the HMRC will pick up the gap between being made redundant and me either becoming employed again or self employed?