As part of the October 2024 Employer Bulletin, the HMRC has provided information for employers where they may have a PAYE charge query.
PAYadvice offers additional comments to aid clarification and guide employers on options for resolution.
Although HMRC often blames the employer or their payroll for errors on employer PAYE accounts, there is a sizeable group of employers whose PAYE account does not balance, or where employee records are duplicated (circa 2 million per annum), or are not correctly aligned.
PAYE charge queries
Each month, HMRC creates a PAYE charge for all employers and pension providers, using the information HMRC holds for that month…
PAYadvice – these values are labelled on the employer dashboard as FPS values, however, the values are a tally of tecords help by HMRC and are not directly from a submission FPS.
…A small number … contact our Employer Helpline to tell us there is a difference between the amount of PAYE they believe is due and the amount HMRC records show as being due. In most cases, these discrepancies are explained and put right very quickly.
Charge Resolution
Since the implementation of Real Time Information, HMRC has developed IT solutions to help analyse and resolve such issues. These work well, resolving the majority of discrepancies.
…some cases do need closer examination, and … are referred to the Charge Resolution Team…
However, some cases do need closer examination, and these are referred to the Charge Resolution Team. These take longer to work through, and the team may need to contact you to discuss your account. If necessary, they will work with you to identify the cause of the discrepancy and explain how it can be put right.
Duplicate employment records
Investigations have shown that some of the discrepancies are caused by duplicate employment records. This is when an extra employment record for one of your employees is created by mistake on HMRC’s systems, repeating an existing live or ceased employment record.
PAYadvice – sometimes HMRC spot the discrepancy and the account corrects and balances. Only HMRC can merge or remove inadvertent duplicate records.
This can affect:
- your employer charges in respect of tax, National Insurance and Student Loan repayments, leading to unnecessary debt collection activity
- incorrect employee tax codes being issued, resulting in the incorrect deduction of PAYE tax, National Insurance contributions, Student Loan repayments, Universal Credit processes and Tax Credits renewals
PAYadvice – inadvertent HMRC created duplicate employment records can result in multiple tax codes being issued and employees being placed on secondary employment tax codes such as: BR, 0T, D0 and even D1 along with the variations for Scotland and Wales.
Avoiding duplicate employments
Different payroll solutions are capable of different processes and allow employers to have different levels of control around the information they can add or update. You should check with your software provider on the process available.
PAYadvice – it is impossible for employers and payroll software to remove duplicate records, only HMRC can remove them by the process or a merge scan. However, HMRC helplines often imply that the employer must correct these which is impossible. An employer may be able to zeroise a duplicate record at best. This won’t remove the duplicate or necessarily correct a secondary employment tax code.
You can help to avoid the creation of duplicate employments, where you are able to, by following these recommendations.
When an employee starts
Make sure the starter notification and first Full Payment Submission (FPS) include accurate personal details of the employee to avoid the need for further updates on a subsequent FPS to their name, date of birth or gender. Always try to provide consistent information. For example, if the first FPS for a new employee contains the name William Smith, make sure that name is on every subsequent submission rather than Bill or W Smith. Similarly, if you report the name as Bill, use that name on every submission.
PAYadvice – change of names occur due to marriage, divorce, gender change or other legal or choice reasons, When such changes apply, there are risks to creation of duplicate records. Equally, when mistake happen, there is a drive to correct the data, however, certain data items should be left as is such as start or leave dates once reported.
Only include the start date and starter declaration on the first FPS for a new employee, you should not show the start date on any subsequent FPS.
Changes to start dates do not need reporting to HMRC, but should be recorded on your payroll system if required.
Payroll ID changes
Each employee is required to have a unique payroll ID, often known as employee number or employee payroll number. This will most likely appear on their payslip. If you have an employee working for you in more than one job, and those are on a different payroll within the same PAYE scheme, then it is important that the employee numbers or employee payroll numbers are different.
HMRC is aware that payroll software can generate the employee numbers and therefore it is important that you understand what your software payroll ID generation process is.
Where you are able to, you should make sure that unique employee numbers or employee payroll numbers are used within your PAYE employer scheme.
If the employee has more than one employment with you, each employment should have a different employee number or employee payroll number. This includes:
- more than one employment at the same time
- where an employee leaves and is re-employed — in which case a different employee number or employee payroll number should be used and you should start their year-to-date information again as 0.00; do not re-use a previous employee number or employee payroll number
…do not re-use a previous employee number or employee payroll number ..
If your software automatically generates employee numbers or employee payroll numbers and cannot be over-ridden, the previous ID should be entered into the ‘OLD’ field and the new ID into the ‘NEW’ field.
Only set the Payroll ID change indicator when reporting payroll ID changes and make sure both the ‘OLD’ and ‘NEW’ fields are completed. You do not need to include the original start date.
Further guidance can be found on finding payroll software including changing your payroll software provider.
Where you are unsure if the previous software included a payroll ID, always set the Payroll ID change indicator when reporting your new payroll ID.
When or after an employee leaves
If an employee leaves:
- you do not need to report changes to leaving dates to HMRC, but should update your own records if required
- you should not submit a FPS after one has already been submitted with a leaving date, unless it is a correction or Payment after Leaving
- Payments after Leaving and corrections made after leaving must include the original date of leaving which was included on the FPS that was submitted when the employee left
- you should only set the Payment after Leaving indicator if you have issued a P45 to your employee and have made a subsequent payment
- you should not submit a duplicate or identical FPS reporting a Payment after Leaving unless you have received a rejection notification for the original
PAYadvice – this guidance highlights a serious flaw in the HMRC RTI design and identifies that there are regular issues and errors in the HMRC process in relation to payments after leaving and corrections to leavers. Often it is HMRC helplines that request that employers resend FPS files again which can add further errors and charge misbalances.
General issues
Only set the ‘Occupational Pension’ indicator or complete the ‘Annual Amount of Occupational Pension’ if you are paying a pension. Leave the field blank — do not enter 0.00.
For any employee who is paid infrequently, set the ‘Irregular Payment Pattern’ indicator.
Preventing payment allocation issues using reference numbers for early and late payments
You need to add 4 extra numbers to your 13-character accounts office reference number if you are making:
- an early payment — before the 6th of the tax month or quarter the payment is due
- a late payment — on or after the 5th of the tax month after the payment was due
The four numbers you need to add to the end of your 13-character accounts office reference are made up of the last two numbers of the tax year your payment is for, for example, the current tax year 2024 to 2025 would be 25, plus the month of the tax year your payment is for.
If you are making an early or late payment online, by telephone bank transfer or by cheque you need to update the reference number every time you make an early or late payment.
If you are making payment through the variable Direct Debit, or paying through the online service, you will not need to find the correct references to include with your payment, as the service will work out the numbers for you.
Further information on paying employers’ PAYE is available.
Want to know more
The following resources may be of interest:
PAYadvice.UK 20/10/2024