The HMRC computer can be confused by incorrect information in PAYE returns, which may then result in a demand for more tax than you have deducted from
your employees. This may happen when the HMRC computer records a duplicate employment for an employee, without ceasing the previous employment.
For example, you take on William Smith and pay him a regular salary of £2,000 per month. On the first payroll return he is correctly recorded as
William Smith. However, on a later return his name is abbreviated to Bill Smith.
The HMRC computer will assume that William Smith and Bill Smith are two different people. As the employment record for William Smith has not been closed, the HMRC computer will generate a PAYE charge for both William and Bill on the basis that you have paid out £4,000 in salary that month to both William and his doppelganger Bill.
Here are some tips to avoid duplicate employment records:
• Use consistent employee names;
• Use a unique payroll number for each employee;
Do not re-use employee numbers;
If an employee re-joins your payroll after leaving, give that person
a new payroll number and reset their year-to-date payment information to zero;
• Only include the start date on the first Full Payment Submission (FPS) when a new employee joins and do
not alter that start date later;
Paying your PAYE
To ensure that your PAYE payments get to the right place within HMRC’s systems, you must quote the correct reference when making the payment. This is made
up of your 13-character PAYE reference number (HMRC call this your Accounts Office reference), plus 4 digits to identify the tax period. For the tax month to 5
August 2023 add on ‘0423’.
The payment should arrive with HMRC by 22nd of each month, but if that falls on a weekend, pay by the last working day before that deadline. If you
use “Faster Payments” or telephone banking the payment will be processed the same day, even on a weekend or Bank Holiday.
If you don’t pay the PAYE and other payroll deductions to HMRC on time, you will be charged late payment interest, the rate of which is currently 7% p.a. In
addition, after the first late payment, you will receive a penalty calculated on the amount of PAYE outstanding, as shown in the table below.
If you are struggling to pay your PAYE, consider applying for a time to pay (TTP) agreement with HMRC , in order to spread the payment over a few months.
This TTP agreement will be granted automatically if your business meets all these conditions:
All PAYE and Construction Industry Scheme (CIS) returns have been submitted;
PAYE debt is less than £15,000;
No other tax debts exist;
You apply within 35 days of the date the PAYE was due;
The TTP plan will pay off the debt within 6 months.
If all the above conditions aren’t met, TTP agreements must be negotiated individually with HMRC. We can help you prepare for such discussions and also
help you to negotiate a bespoke TTP agreement.
• Use the ‘irregular payment pattern’ indicator for any employee who is paid infrequently. Reporting benefits and expenses Be particularly careful about payroll
numbers. If you are using new payroll software for the first time, or are merging two payrolls, so that new payroll numbers are needed, the payroll ID
‘change indicator’ must be used.
If you receive a PAYE charge that is more than you expect, please contact us without delay.
We do offer payroll services from 1 to 100 employees at a fixed rate which takes into account all the required HMRC submissions throughout the year.