Small business payroll service
HMRC announced a further postponement of RTI penalties – but only for employers with fewer than 50 staff. Larger employers are subject to “in-year penalties” from October 2014, whereas small businesses have until next March.
The move came after extensive lobbying by employers and the payroll industry, worried that HMRC’s systems just aren’t up to the job.
HMRC uses penalties to encourage compliance. There are 2 types to watch out for.
There are deadlines for paying your taxes. If you’re late in paying, expect to receive a penalty. You may also be charged interest every day until you pay the bill.
Cheques can get lost in the post. Paying electronically e.g. via online banking is quick and easily trackable.
However you pay, always include your accounts office reference, otherwise your money will end up in an HMRC slush fund instead of being correctly applied against your account!
You must report Pay As You Earn (PAYE) wages in “real time” – in other words, on or before payday.
Weekly, fortnightly, monthly, whatever. Every time someone gets paid through payroll, you must tell HMRC.
That’s why it’s so important that you tell us – in advance – about any changes to your payroll.
You may have to prove to HMRC that you weren’t careless in making an error.
Had a letter from HMRC’s Debt Management division? Don’t blindly pay it.
All complete nonsense.
And it’s only Tuesday. <Sigh>
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 |
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.
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.
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.
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.
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 often 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.”
The law on flexible working is changing, and employers must be ready.
How would you handle her request?
Flexible working can include:
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.
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.
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
ACAS offers a free guide on how to handle requests, with lots of examples.
It’s been tough. But we made it through.
But we got there. All returns submitted, new files created, CIS refunds applied for.
Job done for another year 🙂
HMRC 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:
“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”
“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:
Never take a penalty notice at face value. Always check your own records, and if in doubt refer to your payroll professional / accountant.
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)
I love this week. The stress and bustle of Christmas is over, and we get to catch our breath before New Year. Excellent!
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).
What were your triumphs and disasters of 2013?
Whether 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.
Your payroll must be:
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.
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!
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.
Whether you run your own payroll or outsource it to a specialist, as an employer the buck stops with you. So:
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.
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
