Employment Tax Expert

HMRC has warned Employers about silly mistakes on their PAYE/NIC/Payroll end of year forms

In 2009/10, more than 500 PAYE forms incorrectly claimed to employ A N Other, 128 staff were entered as Mr, Ms or Mrs Dummy, and 40 employees had apparently reached the grand old age of 200.

Nearly 600 employees had surnames that included the letter X, while 75 had the surname ‘casual’. Other surnames included ‘worker’ and ‘student’. A large number of employees were simply referred to as ‘unknown’.

Jim Harra, director of customer operations of HMRC, said: “Most employers get their PAYE returns right. The few who do not cause problems for their employees, for example, incorrect deductions of tax.

“Around 80% of errors in employee data are due to an incorrect name, date of birth or national insurance number – straightforward information that can be collected and checked quite easily.

“So, whether employing ‘Mr or Mrs J Smith’ – or even ‘Mr or Mrs A N Other’, please use the full and official name on PAYE paperwork.

“First names are very important, especially for common surnames. We really want employers to check that they are sending us the right details for all their employees, to make life easier for them, HMRC and their employees.”

and just remember the stick that goes with is message is that of PENALTIES, you have been warned

A new Tax Disclosure opportunity aka The Tax Catch Up Plan began on 10 October 2011 and according to HMRC represents an opportunity for those delivering tuition and coaching in the fields of academia, sport, leisure, or music, but they have caveated it to say, ,this is not an exhaustive list who have undisclosed tax liabilities, to come forward and settle with HM Revenue & Customs.

Now, if you potentially fall into this category, this employment tax expert strongly suggests you take specialist advice BEFORE contacting HMRC, especially by phone or the internet. I will give you a clue why, because HMRC have been very, very sneaky – asking you how much penalty you should pay, now that’s a new one. Think laterally it’s like a salesman asking what your budget is, you will never get the best deal by providing this information and it has far reaching consequences with this “opportunity”.

The Tax catch up plan is also full of veiled threats that could intimidate the unwary, including some incorrect information – so if you think you may need to contemplate using this disclosure facility, call us today on 0800 917 9176

From 6 April 2012 HM Revenue & Customs (HMRC) will be able to ask employers to pay a security where there is serious risk that they won’t pay over their PAYE tax deductions or Class 1 National Insurance contributions (NICs).

so why have HMRC has been given this new power:

According to HMRC businesses have repeatedly told them that they resent the unfair advantage gained by those who don’t meet their tax obligations. HMRC have stated that they are determined to pursue those who won’t pay, to make tax fairer for all. This employment tax expert is a bit more cynical, seeing will be believing as I for one am sick to death of companies going under and then phoenixing again the next day, week or month

HMRC already have the facility to ask for a security for VAT, insurance premium tax (IPT) and environmental taxes, so why has it taken so long to sort out PAYE/NIC?

The required security will usually be either a cash deposit from the business or director – held by HMRC or paid into a joint HMRC/taxpayer bank account – or a bond from an approved financial institution which is payable on demand.

HMRC have stated that they will use securities to tackle the handful of employers who deliberately try to defraud the government. These employers:

deliberately choose not to pay
engage in phoenixism – this is where a business evades tax by becoming insolvent and then sets up a new company the next day to continue trading
have no qualms about building up large PAYE or NICs debts, including penalties
do not respond to HMRC’s attempts to contact them

These employers will have deducted this money from employees’ pay packets under the pretext of paying their employees’ income tax and NICs.

HMRC will calculate the amount of the security on a case by case basis – depending on the amount of tax at risk, the previous behaviour of the employer and other risks. Those being required to pay a security can appeal against this decision.

As with VAT, if an employer fails to provide the security for PAYE or NICs, HMRC can prosecute them. The sanction is a fine, not a custodial sentence.

Payment of any 2010 -11 PAYE Settlement Agreements (PSA) are due on 22 October for electronic payments, or 19 October 2011 for any postal payments.

As 22 October falls on a Saturday, if you pay electronically your cleared payment must reach the HMRC bank account by Friday 21 October so you will need to initiate your payment earlier than usual. If you pay late, you may be charged a late payment penalty.

A warning, as well – do not include your PSA payment with your 2011-12 PAYE/NICs payment or pay using your Accounts Office reference otherwise it will be allocated to the wrong record and you may receive a reminder – nice to know HMRC can bring together employer records, not. This employment tax expert recommends that you keep a note of when you pay

Instead HMRC states that you should pay your PSA payment using the correct unique reference. The payslip issued to you shows you what the reference is. It is a 14 character reference beginning with ‘X’.

If you’re sitting here wondering what a PSA is and whether you should have one, chances are that you might, so get in touch today on 0800 917 9176

HMRC has been forced to respond to a Freedom of Information Act request and confirmed the following:

• The new Business Record Check annual target is 20,000 visits, which represents a 30,000 reduction from the original objective of 50,000, as outlined in the Business Record Check Consultation Paper.

• The 20,000 annual target has been reduced on a pro rata basis for this tax year. 12,000 Business Record Check (“BRC”) visits are due to be conducted before March 2012.

• The 30 staff who carried out the original ‘Test and Learn’ BRC visits between April and July from Edinburgh, Irvine, Liverpool, Manchester, Portsmouth, Sheffield, Stockport and Sunderland tax offices are going to be assisted by a further 90 staff. More tax offices are going to be involved. The additional 90 staff are being drafted on to the BRC Team between September and November 2011.

In addition to this second round of BRC visits which have already begun, HMRC is also revisiting businesses deemed to have been keeping inadequate records during the first ‘Test and Learn’ exercise. The follow up letters state the intention is ‘to check that the appropriate improvements have been made.’

There is no official clarification from HMRC yet as to whether fines will be levied for poor record keeping during the second round of BRC visits, although HMRC has previously said that businesses visited during the ‘Test and Learn’ phase would not receive fines unless in the most significant circumstances