When do you need to register as an employer? When is registration not required? We will explain the steps you need to follow to register as an employer. The failure to register can incur significant penalties so follow this guide to ensure you are compliant.
When you must register as an employer?
You would assume that when you take on an employee you must register as an employer.
This is not the case. You only need to register if any of your employees are:
- Earning more than £120 a week (tax year 2020/21)
- Receiving a pension or have a 2nd job whilst still working for you
- Receiving expenses or other benefits from your employment
If none of the above apply then you do not need to register as an employer. However you must maintain records of how much you have paid each employee.
Contractors or subcontractors
If you intend to operate under the CIS scheme you will need to register. All contractors and subcontractors need a PAYE reference to file the appropriate CIS forms.
Director only companies
Do you need to register as an employer if you are just a sole director company? The answer is definitely yes if you want to receive the full tax advantages of incorporation.
Paying yourself and any other directors the optimum salary of £8,788 (tax year 2020/21) will save corporation tax of £1,670 per director.
Obviously if the directors have other employment income the salary may not be tax efficient. It is therefore important to discuss your specific situation with your accountant. This should be basic tax planning for any accountant.
How long to register?
You must not make any payments to employees without registering as an employer first.
So if you intend to pay your employees on say Friday. You must therefore complete & submit the registration application forms to HMRC by Thursday.
It can typically take around a week to receive the PAYE reference from HMRC.
If you pay your employees after applying but before receiving the PAYE reference, you must run the payroll as normal. However you will not be able to submit the full payment submission. Therefore when the PAYE reference is received this must be filed as late. But no penalties will be issued if the application was in time.
We recommend that if you do intend to take on employees that you register in advance. You can register as an employer up to 2 months in advance.
How do you register as an employer?
Businesses which already have a HMRC online account can register as an employer from there.
After logging on to your online account there is the option to register for additional services. Select the PAYE or CIS enrolment and complete the screens as required.
N.B If you are registered for VAT and submit vat returns electronically to HMRC. Then that is your HMRC online account.
Alternatively if you don’t have an online account you can click the link below. This will guide you to the correct form that you need to complete.
However the absolute easiest way is to ask your accountant to do this for you. If you don’t have a pro-active accountant who assists with these kind of tasks then why not contact ourselves for a free no obligation quote. Contact Details
Information HMRC will require to register as an employer
Listed below is the information that you will need to register as an employer:
- Company UTR
- Company Name
- Business address
- Date 1st payment will be made to employees
- Number of employees including Directors
- Will you need to register for CIS
- Intend to provide expenses and benefits to employees
- Contact email address
- Directors name
- Directors national insurance number
Penalties for failing to register as an employer
As mentioned above when you start to pay employees you need to make a full payment submission to HMRC.
If this is late the penalty is £100 a month for businesses with 1 to 9 employees.
There are very few acceptable reasons for submitting the full payment submission late. One of these as mentioned previously is not having the PAYE reference at the time it was due.
The penalties can become much more severe
If you don’t register as an employer you almost certainly won’t be deducting the correct amount of tax from your employees.
HMRC will make the company liable for any deductions that should have been made which weren’t done correctly. They will also include additional interest and penalties on top of what is owed to them for making the payments late.
Alternatively if you have made the correct deductions from employees but failed to pay this over to HMRC. Then this is a criminal offence. Potentially it could be a prison sentence depending on the severity of the case.
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer