Every month HMRC creates a PAYE charge for all employers and pension providers. A “small number” contact the HMRC employer helpline about a discrepancy. In some cases the HMRC advisors explain and offer guidance on how to correct the problem. Often they don’t and the advice can be short sighted and wrong.
In the employer bulletin April 2023, the HMRC indicates that cases which need closer examination are referred to the HMRC’s charge resolution team, as complex cases take longer to review. The team may contact the employer to discuss their account. If necessary, they will work with the employer to identify the issue and explain how it can be corrected. Sometimes the issue magically disappears with limited to no explanation.
HMRC have some solutions to help analyse and resolve common issues. They claim they work well, resolving the majority of discrepancies. However, the creation of duplicate employments for employees, where an extra employment record is created which is identical to an existing live or ceased employment, is still causing issues, only HMRC can remove these (although the help desk sometime tries to indicate the employer can fix these – they can’t).
Issues can affect:
- the PAYE tax bill in respect of tax, National Insurance contributions and student loan, leading to unnecessary debt collection activity
- the accuracy of employee tax codes, resulting in an incorrect deduction of Income Tax
- PAYE, National Insurance contributions, student loan, Universal Credit processes and tax credit renewals
Avoiding duplicate employments
Different payroll solutions provide employers with different capability and levels of control around the information on their payroll system. Employers should check with their software provider on the functionality available.
Recommendations (where you are able) — to avoid the creation of duplicate employments
The HMRC make the following recommendations when a new employee starts:
- avoid the need for more updates to an employee’s name, date of birth or gender, by making sure the starter notification and first Full Payment Submission include accurate personal details
- always provide consistent information for example, if the first Full Payment Submission includes William Smith, make sure this is the case on future Full Payment Submissions, rather than Bill or W Smith
- only include a start date and starter declaration on the first Full Payment Submission, you should not show the start date on any later Full Payment Submissions – late P45 details are almost pointless and should only be applied with care
- you do not need to report changes to incorrect start dates to HMRC, they should only be recorded on your payroll system if required
Payroll ID changes (changing payroll systems)
Each employee should have a unique payroll ID. This is often known as employee number or employee payroll number, this may appear on their payslip, but often the payslip only shows a part of the PID.
If you have an employee has more than one job, on different payrolls, they should have 2 or more employee numbers or employee payroll numbers. The concept of ‘colleague number for life’ can be incompatible with the workings of HMRC IT solutions.
HMRC appreciates that payroll software will often generate the employee numbers automatically, it’s important to understand how software generates payroll IDs which may contain more than just the employee number (such as identifying the provider and the client identfication).
HMRC indicate that employers should always use unique payroll IDs reflecting employee numbers or employee payroll numbers. They should always use a different payroll ID if employees has more than one employment at the same time in the PAYE scheme.
Where an employee leaves and is later re-employed:
- use a different payroll ID, do not re-use the previous payroll ID
- start the year-to-date payment information again as £0.00 and do not add to their prior values
Where your software generates employee payroll IDs that the employer cannot override:
- enter the previous payroll ID into the ‘Old’ field
- The software will report the new payroll ID into the ‘New’ field
- only set the payroll ID ‘change indicator’ when reporting payroll ID changes
- complete both the ‘Old’ and ‘New’ fields with the most recently used payroll ID, you do not need to include the original start date or provide a new starter declaration
Where you are unsure if the previous software included a payroll ID, always set the payroll ID ‘change indicator’ when reporting a new payroll ID.
If you need to change payroll software, HMRC provide some guidance is available on how to find payroll software. HMRC recognition only refers to the ability to submit FPS files in a satisfactory format to HMRC, it does not test the capabilities or suitability of the payroll software.
What to do when or after an employee leaves
When or after an employee leaves:
- if you submit a Full Payment Submission with a leaving date do not submit another one, unless it is a correction such as to pay and deductions or an added payment after leaving
- include the original date of leaving on a payment after leaving, or any corrections made after leaving (do not change the date)
- the payment after leaving indicator only needs to be set where you have previously notified HMRC the leave date and issued a P45 and are now making another payment
- you should avoid submitting duplicate or identical Full Payment Submissions reporting a payment after leaving
- changes to leaving dates do not need to be reported to HMRC, they should only be recorded on your payroll system if required
The HMRC Real Time Information service still contains significant design flaws from its original test and live introduction back in 2012 and 2013.
The process struggles to reflect some real life scenarios well and the changing nature of employment dealing with late and changing information not being handled correctly. Although the indication is that problems are limited to a small percentage of UK employers, this still potentially equates to tens of thousands per annum. Duplicate employment records on HMRC systems are created in the millions. The effect can be particularly disruptive on impacted employers and any employee where duplication occurs. The process for correction is complex.
Many employers report that when highlighting discrepancies with their HMRC dashboard, charge resolution case raising is denied with instruction to the employer to correct by re-submission of FPS files which may result in the situation becoming worse. An employer cannot remove a duplicate.
The Personal Tax Account remains confusing where multiple submissions are made, reflecting an entry line for each submission sending Universal Credit claimants into panic.
Payroll professionals pride their operations as being accurate and in time, yet the employer often fails to even ask for the starter checklist for their new employees, and apply business HR policies that do not align with HMRC reporting requirements. An insistence by some that employment can only be had by those who can provide a National Insurance number, so they make one up causing significant challenges.
The reality is that the need for charge resolution is going to be around for a long time. Hopefully the process of dealing with what in reality are often simple errors will improve, but not much sign of things changing for a while.
PAYadvice can help
PAYadvice has experts in the field of RTI and can help. If you have hit a brick wall and need some assistance in what to do to have things resolved – please feel free to make contact with some details and we can assess and quote to assist.
PAYadvice.UK 23/4/2023 updated 24/4/2023