Tag: HMRC

What happens if you do not report payroll information on time

D55F3A85-4C8C-4000-8482-9D1DEE8C5C44When penalties are charged

You can get a penalty if:

HMRC will not charge a penalty if:

  • your FPS is late but all reported payments on the FPS are within 3 days of your employees’ payday, however employers who regularly file after the payment date but within 3 days may be contacted or considered for a penalty
  • you’re a new employer and you sent your first FPS within 30 days of paying an employee
  • it’s your first failure in the tax year to send a report on time (this does not apply to employers who register with HMRC as an annual scheme)

How much you pay

What you pay depends on how many employees you have.

Number of employees Monthly penalty
1 to 9 £100
10 to 49 £200
50 to 249 £300
250 or more £400

If you run more than one PAYE scheme, you can be charged penalties for each.

How we estimate what you owe

HMRC may raise a specified charge based on an estimate of how much we think you should pay if you do not:

  • submit your FPS on time
  • tell HMRC, by sending an EPS, that you have not paid any employees

This is based on your previous PAYE payment and filing history. You’ll be able to see any specified charge by looking at your PAYE account online.

A specified charge does not replace the need for you to send your FPS or EPS. Only submitting the missing FPS or EPS for each month will:

  • replace the charges with the amount that is due for each month
  • support an appeal you make against a late filing penalty

If you send updated year-to-date figures in your next FPS instead, the specified charges will remain in place. However, your accounting record will be adjusted to reflect the year-to-date figures given in the later month.

If you get a penalty

HMRC sends penalty notices every quarter. A notice will include:

If you pay the penalty within 30 days of getting the notice you will not be charged interest.

You can appeal if you think:

  • the penalty is not due
  • the amount of the penalty is wrong
  • you had a reasonable excuse for sending your reports late

Reasons you can give for grounds of appeal are:

  • data on the returns was incorrect
  • death or bereavement
  • filing expectation incorrect
  • filed on time
  • fire, flood or natural disaster
  • ill health
  • IT difficulty
  • missed correction or easement
  • no longer have any employees
  • no payments to employees
  • theft or crime
  • other – only use this option if your reason for appeal does not fall into any of the categories in the online system

More information can be found here

Paying an employee after giving them a P45

You need to tell HM Revenue and Customs (HMRC) when one of your employees leaves or retires, and deduct and pay the right tax and National Insurance.

You must give your employee a P45 when they leave.

Paying an employee after giving them a P45

If you have to pay an employee after they leave (including someone you’re giving a taxable redundancy payment over £30,000):

  • use tax code 0T on a ‘week 1’ or ‘month 1’ basis (use the code S0T if they’re taxed at the Scottish rate or C0T if they’re taxed at the Welsh rate)
  • deduct National Insurance (unless it’s a redundancy payment) and any student loan repayments as normal – but if it’s an ‘irregular’ payment like accrued holiday pay or an unexpected bonus, treat it as a weekly payment
  • report the payment and deductions in your next FPS, using the employee’s original ‘Date of leaving’ and payroll ID, and set the ‘Payment after leaving’ indicator
  • give the employee written confirmation of the payment showing the gross amount and deductions
  • add the additional payment in the ‘Year to date’ field if the payment is in the same tax year

The payment should be the only one in the ‘Year to date’ field if it’s being paid in the next tax year.

You must not give the employee another P45

Introduction to PAYE

HMRC PAYE jpegAs an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.

You do not need to register for PAYE if none of your employees are paid £120 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.

Payments and deductions

When paying your employees through payroll you also need to make deductions for PAYE.

Payments to your employees

Payments to your employees include their salary or wages, as well as things like any tips or bonuses, or statutory sick or maternity pay.

Deductions from their pay

From these payments, you’ll need to deduct tax and National Insurance for most employees. Other deductions you may need to make include student loan repayments or pension contributions.

Reporting pay and deductions

If you run payroll yourself, you’ll need to report your employees’ payments and deductions to HMRC on or before each payday.

Your payroll software will work out how much tax and National Insurance you owe, including an employer’s National Insurance contribution on each employee’s earnings above £170 a week.

You’ll need to send another report to claim any reduction on what you owe HMRC, for example for statutory pay.

Paying HMRC

You’ll be able to view what you owe HMRC, based on your reports. You then have to pay HMRC, usually every month.

If you’re a small employer that expects to pay less than £1,500 a month, you can arrange to pay quarterly – contact HMRC’s payment enquiry helpline.

Other things to report

As part of your regular reports, you should tell HMRC when a new employee joins and if an employee’s circumstances change, for example they reach State Pension age or become a director.

You have to run annual reports at the end of the tax year – including telling HMRC about any expenses or benefits.

More details can be found here

Trustee Expenses and Payments

Trustee ExpensesThe concept of unpaid trusteeship has been one of the defining characteristics of the charitable sector, contributing greatly to public confidence in charities. This does not mean that a trustee can never receive any payment or benefit from his or her charity; there are sometimes good reasons why it can be in a charity’s interests to make a payment to a trustee. Trustee boards need, though, to minimise the risks to their charity’s reputation and operation.

Expenses are normally refunds by the charity of costs a trustee has had to meet personally (or which have been met on his or her behalf) in order to carry out trustee duties. In some cases, these expenses may be paid in advance. A refund of properly incurred expenses is not a trustee payment, nor does it count as any kind of personal benefit.

Some types of payment are often confused with expenses, when they are actually trustee benefits which HMRC will consider can be taxed as income. They can only properly be paid out of charity funds if there is suitable authority for doing so.

A charity can pay a trustee for the supply of any services over and above normal trustee duties. The decision to do this must be made by those trustees who will not benefit. They must decide that the service is required by the charity and agree it is in the charity’s best interests to make the payment and must comply with certain other conditions

More detailed information and guidance can be found in this document

Tax Codes

taxcodesYour tax code is used by your employer or pension provider to work out how much Income Tax to take from your pay or pension. HM Revenue and Customs (HMRC) will tell them which code to use.

Find your tax code

Use the check your Income Tax online service within your Personal Tax Account to find your tax code for the current year. You can also view your tax code for:

  • a previous tax year
  • the next tax year

You’ll be asked to sign in with Government Gateway or create an account if you do not already have one.

Once signed in, you can also see:

  • if your tax code has changed
  • how much tax you’re likely to pay

You can also find your tax code on your payslip or tax code letter from HMRC.

If you think your tax code is wrong

If you think your tax code is wrong, you can update your employment details using the check your Income Tax online service.

You can also tell HMRC about a change in income that may have affected your tax code.

Why your tax code might change

HMRC may update your tax code if:

You may also be put on an emergency tax code if you change jobs.

Payroll Annual Reporting

Payroll 21If you are an employer running payroll, you need to:

  • report to HM Revenue and Customs (HMRC) on the previous tax year (which ends on 5 April) and give your employees a P60
  • prepare for the new tax year, which starts on 6 April

Update employee payroll records

For each employee working for you on 6 April, you’ll need to:

  • prepare a payroll record
  • identify the correct tax code to use in the new tax year (The most common tax code for tax year 2021 to 2022 is 1257L.  You can find out more about tax codes here)
  • enter their tax code in your payroll software

You should include in your payroll:

  • all employees you pay in the tax year, no matter how much you pay them
  • any employee who has worked for you in the current tax year (since 6 April) even if they have already left

News from HMRC about Furlough (Coronavirus Job Retention Scheme)

The new Job Support Scheme, which was due to start on Sunday 1 November, has now been postponed until the furlough scheme ends.

The Coronavirus Job Retention Scheme (CJRS), (Furlough), which was due to end on 31‌ October, will now be extended, with the UK government paying 80% of wages for the hours furloughed employees do not work, up to a cap of £2,500 for periods from 1 November.  Employers small or large, charitable or non-profit, are eligible for the extended Job Retention Scheme.

You will need to pay all employer National Insurance Contributions (NICs) and pension contributions. You can choose to top up your furloughed employees’ wages beyond the 80% paid by the UK government for hours not worked, but you are not required to do so.

There will be no gap in support between the previously announced end date of CJRS and this extension.

Under the extended scheme, the cost for employers of retaining workers will be reduced compared to the original scheme, which was due to end on 31st October 2020. This means the extended furlough scheme is more generous for employers than it was in October.  ACAS also provides more details here

What you need to do now

  • Check if your employees are eligible for the scheme here
  • Agree working hours with your employees, so they know if they are furloughed fully or part-time during November.
  • Keep the records that support the amount of CJRS grant you claim, in case HMRC need to check it.  You can view, print or download copies of your previously submitted claims by logging onto your CJRS service on GOV‌.UK.‌ 

Further help and advice can be found here

Statutory Maternity Pay and Pay Rises

Statutory Maternity Pay and LeaveEmployee earnings affected by a pay rise

A pay rise must not be withheld because of maternity leave.

You must recalculate the average weekly earnings (AWE) to take account of pay rises awarded, or that would have been awarded had your employee not been on maternity leave.

This applies if the pay rise was effective from anytime between the start of the 8 week relevant period for Statutory Maternity Pay (SMP) and the end of the statutory maternity leave.

If a pay rise is awarded after you’ve calculated your employee’s earnings, and that pay rise is effective from the start date of the relevant period but before the Maternity Pay Period (MPP) ends, you must:

  • recalculate the AWE to include the pay rise as though it was effective from the beginning of the relevant period
  • pay any extra SMP due

If a pay rise is awarded which, when recalculated, means that earnings are now high enough for your employee to get SMP when they could not before, you must:

  1. Work out 90% of the AWE.
  2. Take away the standard rate of SMP.
  3. Pay the difference for 6 weeks.

If 90% of the AWE is less than the standard rate you might not have to pay your employee anything.

This is because they may have received the balance of SMP due from Jobcentre Plus (or the Jobs and Benefits office in Northern Ireland) as Maternity Allowance (MA).

Not all women are entitled to MA, or the MA may be less than the SMP your employee is now entitled to. You should ask them to get a letter from the Jobcentre Plus (or the Jobs and Benefits office in Northern Ireland) to confirm how much MA was received.

If your employee gives you a letter from the Jobcentre Plus office (or the Jobs and Benefits office in Northern Ireland) showing how much MA was received:

  1. Work out the total amount of SMP they’re entitled to.
  2. Take away the MA that was paid.
  3. Take away any SMP you’ve already paid.
  4. Pay your employee the difference.

Your employee should still benefit from a pay rise, even if they do not intend to return to work with you after their maternity leave has ended.

If a pay award is made after they have terminated their employment and the pay rise is backdated to when they were working for you, or were on maternity leave with you, they may be entitled to benefit from the pay rise. You must check the terms of their old contract of employment.

If more than one pay rise has been awarded during the period they were on maternity leave you’ll need to make separate calculations for each one.

Further details can be found here

PAYE Form P60 for your employees

Form P60 pictureIf you employ staff, you must give all employees a P60 at the end of each tax year, if they are working for you on 5 April.  This must provide this by 31 May, on paper or electronically.  You can either:

You can’t download blank P45 and P60 forms.

Contact HMRC if you have problems ordering online, your order hasn’t arrived in 7 working days, or to order by telephone 0300 123 1074.

A P60 shows an employee the tax that has been paid on their salary during the tax year (6 April – 5 April).  They will get a separate P60 for each of their jobs.

They need this P60 to prove how much tax they have paid on their salary, for example:

  • to claim back overpaid tax
  • to apply for tax credits
  • as proof of their income if they apply for a loan or a mortgage

They can check how much tax they paid last year if they think they might have paid too much (https://www.gov.uk/check-income-tax-last-year)