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To introduce my case briefly, I have been a contractor for two years within a company. For that, two years ago I hired an accountant who dealt with the creation of a Limited Company which was initially set-up so as to use the Flat-rate scheme.

My contracts with the company were renewed on a 6-months basis. At the end of February 2018, they did not renew it because of internal policy.

At this time, I was considering closing the limited company and accepting a full-time offer. When I asked my accountant for guidance, I really felt like he was trying to milk me by making up many fees for closing the company... So I told him, I will keep him only until the end of the tax-year (i.e. april 2018). Meanwhile, I got ill and had to decline the full time offer I received. Anyway, at the moment the limited company is still alive, even though I have not done any business since end of February.

Today, I finally got access to HMRC portal and was surprised to see HMRC was claiming FPS + interest for 4 months up to now. My former accountant declined to answer me what it was about.

So I started to search online for what to do as that seemed alien to me. Doing so I downloaded the BASIC PAYE tool on HMRC portal. From what I understood, it seems I will have to submit FPS every month from now on; or EPS if I don't paye employee (ie me).

In the past, I was paying myself something like £600 per month (based on my accountant advice) for a yearly total of £8,000 something (to be at the limit of the threshold from what I understood). Based on the fact that I would like to keep this scheme, and based on the fact that I did not pay myself any salary since the beginning of the new tax year. Should I send EPS to HMRC for all months up to now or tell them I should have send FPS for an amount of 600£ something (will they know if I pay myself the equivalent of 4 months in one go)? But I suspect if I choose the later, it will be difficult to argue with the penalties they claim, right?

Please do not hesitate if something seems unclear in my question. All your advice are more than welcome.

Cheers, Sophie

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  • I am not an accountant and I am not giving you any financial advice here. I am a UK contractor too. Every year you have to submit a self-assessment tax return. Failing to do so can incur penalties which are specified by the HRMC. I do not fully understand the question as I cannot decode what EPS or FPS is. I am using an accountancy for my limited company, but the self-assessment tax return is something that is to be done outside of an ltd. The best thing you can do is to hire an accountancy firm and let them deal with it. I am also assuming you've paid VAT and Corporation Tax already?
    – matewilk
    Aug 1, 2018 at 20:22
  • Thanks for your answer. I don't have an accoutancy firm anymore since I stopped I doing business. Thank you for the self-assessment mention. I pay VAT every 3 months. Regarding Corporation Tax, I cannot remember.
    – soso23
    Aug 1, 2018 at 21:35
  • You said you have an accountant, I'm suggesting you hire a firm, not a single accountant. Even if you pay them let's say £500 (it could be more) for their service to sort the mess your previous accountant left you in it's worthwhile. I wouldn't dare to mess up with HRMC and you can get into trouble. I know people who use accountants and they are usually not very transparent. I'm not saying there are none who are good, it's just that accountancy firms have their processes in place and they will transparently tell you what exactly needs to be done and can done it for you if you give them permiss
    – matewilk
    Aug 1, 2018 at 22:54
  • I meant accountancy firm when I said accountant as I was always dealing with one accountant. Sorry for the misunderstanding.
    – soso23
    Aug 2, 2018 at 6:24

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The explanation for monthly payroll returns to HMRC (FPS and EPS) is at https://www.gov.uk/running-payroll/reporting-to-hmrc

If your accountant used to run your payroll, she probably did this for you and would have stopped doing so when you dismissed them.

As a business owner you are accountable for the failure to make proper returns

You can download from HMRC their "Basic PAYE Tools" and use that to submit FPS and EPS with explanations for the delays.

I would contact HMRC and ask for advice - I've always found them helpful. If you do so, don't attempt to conceal anything or mislead them.

If you don't want to do that, you will probably need to contact a lawyer and/or a good accountant for advice. You will have to pay for this but it may save you getting into deeper problems. Failing to discharge your statutory obligations could have consequences you will wish to avoid.

You will gain nothing by ignoring the situation. If you are not well enough to run a limited company, I suggest you consider getting it wound up ASAP.

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  • Hi, Thank you very much for the detailed explanation. Hi downloaded the software yesterday and called HMRC this morning. They told me I should not suffer from penalties should I submit EPS. But if I do so, I will loose the £672 tax-free monthly allowance since the beginning of the tax year, right? Is it possible to submit FPS for that period (ie Apr-Jun) so as to get the £672 back? But there is a risk I get penalties for that. Maybe it's possible to pay myself more on another month without having to pay tax on salary as long as the yearly amount is below £8,000. Could that work? Thanks.
    – soso23
    Aug 2, 2018 at 10:56
  • @soso23: Sorry, trying to answer that would get me out of my comfort zone. Its the sort of thing I would have to spend hours on to be confident of an answer. You seem to be on the right track.
    – RedGrittyBrick
    Aug 2, 2018 at 11:04
  • No worries. May I just ask where you go on Basic PAYE Tool to submit an FPS? I could only find how to send EPS on HMRC tutorial unfortunately. Thanks.
    – soso23
    Aug 2, 2018 at 11:28
  • Please ignore the above. I think I found the answer at: gov.uk/government/publications/basic-paye-tools-user-guide/… Would you know in Basic PAYE tool how to set up my self as an employee? I think I should tick [Yes] to "Is this employee a company director?". But "a" (instead of "the") makes it not crystal clear. It means of this company, right? If that's correct, should I pick "Normal employee method" then? Me paying myself £672 per month does not seem in line with "director's earnings paid every period exceed the primary earnings threshold.". Thanks.
    – soso23
    Aug 2, 2018 at 12:00
  • My expert says set yourself up as an employee but tell it you are a director (I assume you are - that is the normal arrangement). You can file a return for a month where no payments were made. If you have lots of questions, a chat with HMRC may be the quickest way to get an answer you can later rely on. This Q&A website isn't really suited to discussion. You can ask new questions separately and include a link to this if related
    – RedGrittyBrick
    Aug 2, 2018 at 12:29

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