PAYE Investigation

If you run a Limited Company registered for PAYE you may one day face a dreaded PAYE Investigation. The reason PAYE investigations are so unwelcome is that they can potentially lead to arguments over your IR35 status and if you own or run the company with a spouse, Section 660a. PAYE Investigations are therefore best avoided where possible.

The HM Revenue and Customs picks companies at random for PAYE Investigations. However, if you have a record of filing incorrect end of year PAYE returns or paying Income Tax and National Insurance deductions late you may encourage the inspectors to come calling.

On average a company should expect a PAYE Investigation every 6 years or so. If the HM Revenue and Customs have undertaken an investigation in the past and found issues you may find that PAYE Investigations happen every 3-4 years.

What can be done to avoid PAYE Investigations?

Nothing can be done to avoid PAYE Investigations. If the HMRC decides to look at your records you have no option but to cooperate. Those being Investigated should not think that they have necessarily done anything wrong. HMRC simply want to check that the correct processes are being followed at that you are running the company in the correct way.

Although nothing can be done to avoid an Investigation, actions can be taken to reduce the frequency. You should make sure that you:

• Submit PAYE documents to the HMRC on time (especially P35s and P11Ds)
• Ensure that documents are completed correctly. Blatant errors may cause the HMRC to think that everything is not quite right

What should I do if I am to receive a PAYE Investigation?

The HM Revenue and Customs will notify you of a PAYE Investigation in writing or will call to arrange a meeting. If you run your limited company from home it is recommended that you arrange the meeting at your accountant’s offices. Once the meeting has been arranged you will need to prepare all documents requested by the HMRC. Documents normally include:

• Employee PAYE records
• End of year PAYE documents for all years
• Sales Invoices
• Expense Claims
• Client/Agency Contracts

Once the Investigation has taken place you should receive a letter explaining any further action to be taken (If at all).

For further information on going into business with your own Limited Company call Commonwealth Contractors now on 0800 294 4388 or submit your details and we will get right back to you.

Related Contractor Ltd Companies Pages:

• Contractor Limited Companies
• • Contractor Limited Companies
  • IR35 Assessment Tool
• Managed Service Companies
• • Managed Service Companies
  • MSC Involvement
• UK Dividends
• • Freelance Contractors and UK Dividends
  • Calculating and Paying Dividends
  • Dividend Tax
• Income Tax and National Insurance
• • Setting a Salary
  • Registering for PAYE
  • Income Tax and National Insurance
  • PAYE Payments and Returns
  • PAYE Investigation
• Business Expenses
• • Claiming Business Expenses
  • Contractor Expenses
  • Home Based Rules and Business Expenses
  • IR35 and 5% Expense Rule
  • Site Based Rules and Business Expenses
• VAT Guide
• • VAT Guide for Contractors
  • The VAT Flat Rate Scheme
• Timesheets, Invoices and Payments
• • Contractor Timesheets
  • Limited Company Invoices
  • Client and Agency Payments
• Section 660 and Income Shifting
• • Section 660a and Income Shifting
  • Section 660a Background
• Dealing with Contracts Inside and Outside IR35
• UK Corporation Tax
• Directors Duties and Responsibilities
• Opening a Limited Company Bank Account
• Loans and Mortgages
• Contractor Limited Companies and UK Immigration