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Posted Tue, 19 Sep 2023 15:47:59 GMT by Himanshu Solanki
I have withdrawn a big amount this year can this be considered as salary for the past 4 years, can I do the back dated PAYE registration and complete the payroll (including RTI submissions) and amend the accounts accordingly, will it be considered as tax evasion, as the withdrawal is made in current year, and payroll is for past 4 years, the amount is same. And I am ready to pay any amount of PAYE and NI.
Posted Tue, 26 Sep 2023 09:26:49 GMT by HMRC Admin 17

If this was genuinely what we consider Arrears of pay, it would be treated as follows:

Arrears of pay are earnings paid after the date that an employee should have received them and are usually paid as a lump sum.
Arrears of pay are earnings and are treated just as if they had been paid at the right time.

Where you’re obliged to pay arrears of pay to employees in respect of closed tax year
(for example, where a court orders an employer to pay arrears under equal pay legislation) you should for:

- National Insurance contributions purposes enter the full amount of the arrears paid on the current year payroll record at the time of payment and work out National Insurance contributions in the normal way, include on your next FPS

- PAYE purposes:
    - submit an FPS
    - calculate and deduct tax for each closed year as if the additional pay had been paid        at week 53 for that year (read paragraph 1.13)
    - use the employee’s tax code for each closed tax year, we’ll supply the appropriate tax codes for each of the closed tax years if you no longer have them
    - give each employee a letter showing the revised pay for each tax year and the tax and National Insurance contributions deducted, each letter should also contain the following message: ‘If you think that you’ve overpaid tax or National Insurance contributions for any of the years concerned you should contact HMRC National Insurance contributions and Employer Office.’

However, you need to be very cautious.  As it mentions above, the employer must be obliged to pay salary for it to be considered Arrears of pay.

  Usually this is because the employee has a contractual right to have been paid, or a court has ordered it. 

If this is a sole director company and the sole director is simply trying to split one lump sum payment over several years, in order to make use of previous years basic personal allowance for tax, we would not allow this.  

Thank you. 

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