Written by Alison Clynes
Published on August 27, 2009

PAYE stands for Pay as You Earn, the system under which tax and National Insurance has to be deducted from payments to employees.

If you're setting up a new business or expanding an existing business, you may find you need to register for PAYE for the first time. It is important to appreciate that whilst sole traders or partners in a business fall under Schedule D of the Taxes Acts and are treated as self employed, anybody else who works for you, will almost certainly be regarded by HM Revenue & Customs as an employee and subject to PAYE under Schedule E of the Taxes Acts. If you are a director of a limited company, you will need to operate PAYE on wages or salary paid to yourself.

The government are trying to make it easier for employers to comply with the complex legislation surrounding PAYE and even allow businesses to register online. Unfortunately, they also complicate matters further year on year. For example, there are many things which are done for, or supplied to, employees which are held to have a cash equivalent. It can be very confusing to try to work out that benefit and when it has to be returned. Minimum wage regulations also need to be observed. If PAYE is not operated, it is the 'employer' that the Revenue will chase for tax, penalties and interest.

It is hardly surprising that many businesses find it safest to use a payroll bureau and their specialist knowledge. Dataplan is a payroll company with over forty year's experience in dealing with payroll outsourcing.