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monkeh
7th February 2018, 15:55
Hi

My wife was contracting though her ltd company after April 2017 (public sector who deemed all inside ir35) and I have just realised that the agency have not taken NI and PAY from every invoice prior to paying her, she was not checking this every month so there are now 16 invoices where either NI or PAYE or both are missing.

When she started through an umbrella, HMRC realised and have adjusted her tax so that she repays the missing PAYE and NI.
Question is from April 2017 I thought it was the responsibility of the agency to ensure that the correct tax was taken, so shouldn't the agency be liable for any missed TAX or are HMRC correct to reclaim the tax from my wife, who has now gone back to being a permie on my advice?

TheFaQQer
7th February 2018, 17:07
It is the responsibility of the fee payer to make the deductions before passing the net payment to the individual.

Where this gets more complicated is that employers NI guidance and legislation is all geared towards you being an employee and therefore there are different laws and guides around that. But I would assume (and we know that that means) that the same rules would apply in these cases as if you were an employee (since you are being taxed like one).

CWG2 says "As a general rule, you as the employer have to pay any underpayment of NICs arising from an error." and I don't see why that would be different under the public sector rules for IR35. That's not to say that there isn't anything that allows for the fee payer to come back and demand payment, but this is where I would start from.

I would consider taking professional legal advice, and if you are an IPSE member (and even if you aren't!) then speak to the policy team there who are looking for examples like this that would help show that the new rules just do not work.