J&K payroll

Small business payroll service

What to do if HMRC say you owe PAYE

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Had a letter from HMRC’s Debt Management division? Don’t blindly pay it.

letter from HMRC Debt Management

So far this week, 3 of our clients have called us about letters from HMRC telling them they owe £100s.

All complete nonsense.

And it’s only Tuesday. <Sigh>

1. Check what you should have paid

Ask your payroll provider for a P32. This is simply a list of all the payments that you should have made to HMRC.

For example:

  Pay Period  Amount Due to HMRC for Period
     Quarter 1 total 295.92
     Quarter 2 total 75.48
     Quarter 3 total 112.29
     Quarter 4 total 180.96
Year Total 664.65

2. Check what you actually paid

This means going through your bank statements and finding every payment to HMRC. Note how you paid it: online, cheque, debit card etc. Note down the date that the money left your account, as well as the amount paid.

The total of all your payments should be the same as the Year Total on the P32.

If it’s not, then you either overpaid or underpaid somewhere along the line. Work out when and where.

3. What to look for

Page 2 of the letter is the statement of liabilities – pictured below. Look at the total unpaid amount. Sometimes it’s obvious that a payment has gone astray – if your cheque for £45.32 hasn’t cleared, and the statement says you owe £45.32, job done. Others take a bit of investigating.

Dates are key. I can’t stress that too highly.

Late payments cause the most common problem. When you pay late, HMRC will allocate the payment to the wrong period.

For example, look at the handwritten notes below. You can see that our client pays PAYE quarterly. Accordingly he made 4 payments, which each match the P32 above.

 

HMRC statement of liabilities

 

But now focus on when those payments were made. £180.96 was paid on 7 May. Not only was that late – it should have been paid by 19 April – but critically it was the last payment for the 2013/14 tax year.

Paying it late meant that HMRC automatically took it into the 2014/15 tax year.

4. Do your sums

To check your payments, first knock off any interest that HMRC have added, because the payments you are looking for obviously don’t include that.

So we’re actually looking for £256.61 minus 17p interest = £256.44

We’ve figured out from the payment dates that £180.96 must have been allocated to the new tax year. That leaves £75.48. Ring any bells?

Yep, it’s the payment made on 6 November.

5. Call HMRC

This is usually the painful bit, involving a good 20 minute wait to speak to someone. But funnily enough, when you ring Debt Management division, you get through straight away.

The first thing they ask is, “Are you making a payment?”

This is where you laugh and say, “No, cos I don’t owe you anything.”

 

laughing cat

What will flexible working mean for you?

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The law on flexible working is changing, and employers must be ready.

Your long-standing employee Jo is a budding stand-up comic. She’s got a regular late-night gig at a comedy club 50 miles away, and is finding it tough to get up and start work at 8am the next day. She comes to you, asking for a 10am start one day a week.

How would you handle her request?

What is flexible working?

Flexible working can include:

  • Part-time or term-time working
  • Job-sharing
  • Flexitime
  • Compressed hours
  • Working from home
  • Career breaks

How is the law changing?

From 30 June 2014, all your employees have the right to request to work flexibly, not just those with children.

You must consider requests in a reasonable way and tell employees of your decision within three months.

What’s in it for me?

Employers will benefit from increased productivity, lower labour turnover, and reduced absenteeism. The government expects economic benefits of about £47m a year.

A survey by Kingston University found that workers on flexible contracts are more emotionally engaged, more satisfied with their work, more likely to speak positively about their organisation and less likely to quit.

Grounds for refusal

  • Burden of additional costs
  • Inability to reorganise work among existing staff
  • Inability to recruit additional staff
  • Detrimental impact on quality
  • Detrimental impact on performance
  • Detrimental effect on ability to meet customer demand
  • Insufficient work for the periods the employee proposes to work
  • Planned structural change to the business
As Jo’s boss, you know that your customers expect someone in the office from 8am, so you ask for volunteers.

Brian leaps at the chance. Starting early and finishing early will cut his childcare costs, so he’s happy to take Jo’s place when she has a late gig the night before.

Result = 2 ecstatic employees 

Learn more

ACAS offer a free guide on how to handle requests, with lots of examples.

And… breathe!

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It’s been tough. But we made it through.

  • There was blood – paper cuts hurt!
  • There was sweat.
  • There were no tears, just copious amounts of swearing when the government gateway threw a wobbly from 11-13 April.
  • There was much chasing of errant contractors, some of whom couldn’t get their head around the 19 April HMRC deadline.

But we got there. All returns submitted, new files created, CIS refunds applied for.

Job done for another year 🙂

 

What Is The Employment Allowance and How Do I Get It?

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Updated Mar-17

As an employer, you may have heard something about the Employment Allowance, but what’s it for and how do you get it?

First, a bit of background: the PAYE you must pay to HMRC has three components: the income tax and the National Insurance Contribution (NIC) that you deduct from each employee’s gross pay, plus a NIC that comes from the employer.

PAYE pie chart

The Employment Allowance was introduced in April 2014 to help toward the latter – the green piece of pie.

It effectively allows you to underpay the employer’s NIC by up to £3000 in a tax year.

Around 450,000 businesses – that’s a third of all employers – will no longer pay any National Insurance at all. Woo-hoo!

Eligibility

  • Director-only companies don’t qualify.
  • You won’t qualify if most of your work fulfils public sector functions – e.g. rubbish collection, NHS services.
  • You won’t qualify if you employ someone for personal or household work – e.g. gardener,  nanny – unless they’re a care or support worker.

How to Claim

If you use a payroll agent they should take care of this – if they don’t, give us a call. Otherwise you’ll need to use your own payroll software or HMRC’s Basic PAYE Tools to file an Employer Payment Summary (EPS) telling HMRC you are using the Allowance to cut your payments.

A couple of examples:

Medium Size Co Ltd pays employer NICs of £2000 each month.

In April the Employment Allowance will knock £2000 off their PAYE bill.
In May they’ll save £1000.

That’s the whole £3000 Allowance used up, so from June they’ll pay the full £2000 again.

On the other hand Teeny Co Ltd’s employer NICs are only £50 per month so their total claim for the year will be just £600.

Things to watch out for

  • If your company belongs to a group of companies, only one can claim the allowance.
  • If a company has control of another company, or both companies are under the control of the same person or persons, these companies are connected.
  • You can only claim the Employment Allowance against one PAYE scheme – even if your business runs multiple schemes.

Further information

Gov.uk overview and detailed guidance – the rules and regs

Employment Allowance calculator – see how much you’ll save

Article updated Mar-17

RTI penalties – trouble ahead

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icebergHMRC are being lobbied to delay introducing the penalties for late RTI returns planned to start from April.

A survey by The Chartered Institute of Payroll Professionals shows that employers and payroll bureaux don’t believe HMRC are currently capable of getting it right.

The survey asked just two questions:

1. “do you have confidence in HMRC issuing accurate penalty notices in respect of the employer obligations for real time information from April 2014?”

 

72% said they didn’t have confidence in HMRC issuing accurate penalty notices

“They don’t seem to be able to issue employees with correct tax codes or apply the correct credits to employers accounts so why should we have confidence in them issuing correct penalty notices”

 

2. “do you think the penalty regime should be delayed?” And by how long

Nearly 80% said the penalty regime should be delayed by 12 months or more

“At least 12 month or until HMRC are able to correct their system to handle RTI submissions effectively without putting the responsibility back on the employer/accountant/bureau”

 

Shoddy administration by HMRC was the main reason given, with respondents telling tales of bureaucratic woe.

Most worryingly, many reported that HMRC’s figures often don’t add up: they fail to correctly reconcile the RTI report with the payments made. As a result the employer’s HMRC account shows an underpayment and so companies are being aggressively chased for non-existent debts.

We say:

A penalty regime is required to ensure compliance, but HMRC need to get its systems/processes in order first, however long that takes.

Never take a penalty notice at face value. Always check your own records, and if in doubt refer to your payroll professional / accountant.

UPDATE

On 10 February 2014, HMRC announced that the penalty regime will be delayed until October. Great news for employers and payroll professionals alike.

What reason has HMRC given? “To give employers more time to adapt to reporting in real time.” Hmm.
 
 
Image credit: McKay Savage (CC0 BY 2.0)

Taking a moment

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I love this week. The stress and bustle of Christmas is over, and we get to catch our breath before New Year. Excellent!

ball of words

It’s the perfect time to step back and review the past year.

You’re focused on planning for the future, but are you learning from the past? Reflecting on the last 12 months will bolster your confidence and lay the groundwork for 2014. You could even use the answers to start examining your Strengths, Weaknesses, Opportunities and Threats (SWOT analysis).

The good

  • The high of taking on our 100th client.
  • Pleasure at seeing clients expand.
  • Passing the test of a wage inspection.
  • Redeveloping our website and starting this blog.

The bad

  • The low of saying goodbye to those that ceased trading.

The ugly

  • The challenge of HMRC’s real-time reporting for PAYE.
  • HMRC’s new interactive phone system. <I’m seeing a pattern here!>

What were your triumphs and disasters of 2013?

Image credit: Geralt (CC0)

RTI penalties and how to avoid them

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"Submit RTI" written on Post-It noteWhether you run your own payroll or outsource it to a specialist, as an employer the buck stops with you. So it’s important to know your responsibilities.

Whenever you pay your staff, you must tell HMRC about the payments. This reporting is known as real-time information – RTI for short.

If you pay your employees weekly, you must report weekly; if you pay them monthly, send the RTI monthly, and so on.

Double jeopardy

Your payroll must be:

  1. correct, and
  2. submitted on time. Send the RTI on or before the day that you pay your staff. Don’t forget or it’ll cost you.

Second time unlucky

HMRC will let you off once every 12 months – so no worries the first time your RTI is late, but if you make a habit of it the penalties will soon rack up.

How will I know?

HMRC will send out penalty notices only once a quarter, in July, October, January and April.

So if you get a penalty notice in July it will be for a late submission in April, May and/or June. Maybe all 3!

How much?

Unlike CIS penalties (a flat £100 per month), the RTI submission fines depend on your number of employees. For 2014/15 tax year they are:

No. of employees

Monthly RTI penalty

1 to 9

£100

10 to 49

£200

50-249

£300

250 or more

£400

The good news is that you can’t get more than 1 submission penalty per month. E.g. if you send a weekly RTI late for 4 weeks, you’ll only get fined once.

Those are the penalties for late submission – but remember that as well as being on time, the RTI must also be correct.

For errors, the taxman will base the penalty on the amount of potential lost revenue. If you took reasonable care, or were careless but reported the error without being prompted, you might not be penalised at all.

Avoiding RTI penalties

Whether you run your own payroll or outsource it to a specialist, as an employer the buck stops with you. So:

  • Be accurate

Take time to check your figures before paying the wages.

If your payroll service submits the RTI on your behalf, let them know any changes asap; e.g. if anyone leaves or joins, or if you’re giving someone a pay rise.

  • Be on time

If you pay your staff every Friday, that’s your RTI deadline. Diarise it, put a reminder in your phone, stick a Post-it on your fridge, whatever works for you.

If you use a payroll service, give them your info in plenty of time.

Submission penalties come into force from October 2014, so get into good habits now!

 

TOP TIP: Run your payroll a week in hand. This means that next Friday you’ll pay staff for the hours they worked this week.

This gives you more time to process the payroll and to send the RTI.

HMRC – late and inaccurate payroll reporting