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Archives for PAYE

Tax reconciliation errors affect ‘thousands’

HMRC has “stopped” issuing income tax repayments after a leaked email revealed that end of year tax reconciliations for thousands of taxpayers may have been calculated wrongly, the Telegraph reported this morning. An HMRC spokesman told AccountingWEB that the process is “continuing as normal”. But the email, now reproduced below, said that some large employers were involved “so several thousands of employees may be affected”.

The Telegraph reported that “HMRC said tens of thousands would ultimately be affected but admitted it currently had no idea about the scale of problem”.

It added that a spokesman for HMRC said the incorrect letters were not demands but merely tax summaries, and that “no one has been asked to hand a penny over in tax because of this”.

HMRC told AccountingWEB: “The majority of the errors have happened because an employer failed to make a final payment statement for the 2013/14 tax year meaning our records were incomplete despite reminders that these submissions had to be made. We are sorry this has happened and we will issue corrected calculations in the next few weeks.”

HMRC has provided a copy of the note sent to stakeholders including employers, professional bodies and business groups. It is reproduced in full below.

“We are today emailing our stakeholders to explain that we are aware that a number of employees recently received a form 2013-14 P800 which was issued during our bulk 2013-14 End of Year reconciliation exercise.

The 2013-14 P800 shows an incorrect overpayment or underpayment where the pay and tax shown on the P800 is incorrect and does not match that shown on their 2013-14 P60.

The most common scenarios are where:

  • An incorrect overpayment is created as the 2013-14 reconciliation is based upon the Full Payment Submission (FPS) up to month 11 although the employment continued all year.
  • Where the year to date figures supplied are incorrect, for example where an employer reference changed in-year and the previous pay and tax is incorrectly included in the “year to date” (YTD) totals.
  • We have received an “Earlier Year Update” (EYU) and this is yet to be processed to the account.
  • There is a duplicate employment (often caused by differences in works numbers and other changes throughout the year)

We are urgently investigating these cases and will look to resolve the matter in the next 6-8 weeks.

We currently do not know the scale of the issue, but some large employers are involved, so several thousands of employees may be affected.

Next Steps

We are very sorry that some customers will receive an incorrect 2013-14 P800 tax calculation.

We are urgently investigating these cases and will look to resolve the matter and issue a revised P800 to the employee in the next 6-8 weeks.

Employers and their agents should not send any 2013-14 EYUs unless requested by us. We are aware that there are still some 2013-14 EYUs which we have yet to process to the relevant account.

If an employee asks about a 2013-14 P800 which they think is incorrect, they should advise them:

  • Not to repay any underpayment shown on the P800
  • Not to cash any payable order they may have received
  • Employees will not be affected by the incorrect tax code as we will issue a revised P800 before Annual Coding.”

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If you’ve received a P800T and you believe it’s incorrect contact Davenports Accountancy today on 01367 602011 to see how we can help.

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HMRC gains pay packet tax debt collection powers

HM Revenue & Customs will be able to deduct up to £17,000 per year of tax debts from high earners’ pay packets under powers coming into force this week.

The move represents a significant increase on the previous annual tax collection ceiling, which was previously set at £3,000.

Over the course of the year there has been controversy over HMRC’s increasing powers in the area of debt recovery in recent months, with ICAEW tax faculty technical committee chairman Paul Aplin warned the measures would have to be “bomb-proof” when they were initially extended in March’s Budget.

In that speech, the chancellor announced HMRC would be given powers to take money from bank accounts on debtors who owe more than £1,000 in tax or tax credits and had repeatedly failed to respond. Crucially, too, HMRC said it would leave at least £5,000 across debtors’ accounts.

HMRC sought to increase the limits on the debt it can collect through PAYE because it was “inefficient and unfair” to be forced to use more expensive debt pursuit methods when collecting larger sums. It added the new rules would also potentially help debtors on higher incomes as they would be able to stagger their debts over the tax year, instead of having to pay upfront.

The increased threshold is expected to bring in an additional £115m in 2015/16 and has attracted less concern from practitioners than the direct debt recovery powers because it will not affect those earning below £30,000, who will still operate under the £3,000 limit. An incremental scale will be in place, with £17,000 limit reserved for those earning £90,000 or more.

A spokesman for HMRC said: “Taxpayers welcome the option to have tax debt collected by instalment. This is a very longstanding feature of the payroll system but the increase in the current threshold will allow more tax debts to be paid in this way.

“We will issue letters advising taxpayers that collection through their PAYE tax code is being considered to collect their outstanding arrears. The amount of debt to be collected through the PAYE code will then be shown on the Annual Coding Notice (P2) which is sent to the taxpayer between January and March 2015 before the new tax year starts on 6 April 2015.”

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For advice or help with any tax issues contact Davenports Accountancy today on 01367 602011

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Automatic RTI penalties delayed again for small companies

HMRC has announced that the introduction of automatic penalties for late RTI submissions will be delayed another five months for small employers.

Under the revised timetable announced back in February, automatic penalties were due to start from 6 October. This date will still apply for companies that employ 50 or more people, but smaller companies will get an extra five months until the automated regime starts to bite from 6 March 2015.

The Revenue said it will send electronic messages to all employers shortly to let them know when the penalties will apply to them, based on the number of employees shown in the department’s records.

Ruth Owen, HMRC director-general for personal tax, said that RTI is “working well”.

”Our most recent figures show that over 95% of PAYE schemes making payments to individuals are successfully reporting in real time, and 70% say that it is easy to do.”

HMRC added that where employers believe they have a reasonable excuse for sending a return late, they will be able to appeal using HMRC’s new online appeals process for automated penalties.

It added it would look at other ways to encourage employers to comply with the rules, in addition to financial penalties, in the run up to March 2015.

Chas Roy-Chowdhury, head of tax at ACCA, welcomed the announcement as a “commonsense” solution. With the complex RTI system still bedding in, he said the delay would save businesses from situations where they might have incurred automatic penalties.

Initial comment – John Stokdyk, Editor, AccountingWEB: We have contacted HMRC to clarify some of the questions raised by yesterday’s announcement, which follows a similar penalty delay back in February.

In the official announcement, Ruth Owen said how the transition would be easier for “customers” if it was introduced in stages – but why was this formula not set out eight months ago?

The statement says the extra time will allow HMRC to update its systems and enhance its guidance and customer support, but once again shifts the focus of the policy change from its internal processes to taxpayers. “We know that those who have had most difficulty adjusting to real-time reporting have been small businesses, so this staged approach means they have a little more time to comply with the new arrangements before facing a penalty,” she said.

For most of this year AccountingWEB has been hearing from companies and agents mystified by reconciliation errors and inaccurate figures that go through the RTI system, which has seen many firms harassed by HMRC debt collection agents for tax they do not owe.

Many of these issues were caused by the system creating duplicate records when companies changed their payroll systems (and payroll ID numbers) and other minor administrative changes. Owen told us earlier in the year that HMRC had sorted out 95% of the duplicate record issues by the end of the tax year, but that still left 20,000 people with the wrong codes.

In some instances, employers are fouling up the system by not following the complex requirements set down by HMRC.

But the announcement of yet another change of tack on penalties indicates that HMRC is not confident enough of its data quality to pull the level and set off a torrent of wrong automatic fines. That would set off an even bigger furore than the outcry we saw with penalty warnings in February.

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RTI package of help for micro businesses

More than 99 per cent of Pay As You Earn (PAYE) records are now successfully being reported in real time, HM Revenue and Customs (HMRC) announced today as it launched a package of support for micro businesses.

Almost 93 per cent of employers, and nearly 99 per cent of employers with 10 or more employees, are now using the new process to send PAYE information about their employees in real time, and the majority are finding the new system easy to use.

HMRC is offering a continued package of support for micro businesses (with nine or fewer employees) who need more time to adapt to reporting PAYE information in real time. This will allow them to report PAYE information on or before the last payday in the month, rather than every payday, until April 2016.

This is narrower than the existing relaxation to real time reporting, which applies to employers with up to 49 employees and will end, as planned, in April 2014. Employers who are already reporting PAYE information on or before the date they pay their employees should continue to do so. And HMRC will be encouraging and supporting micro businesses to adapt their processes to move to payday-by-payday reporting as soon as possible.

All employers will have to report PAYE on or before the date they pay their employees by April 2016.

The package was developed with employer, agent and payroll software representatives and the Department for Work and Pensions, to help micro employers as they move towards reporting PAYE information in real time.

The package, which applies only to existing employers, also includes:

–  improved guidance, including best practice scenarios

–  working with the software industry to harness technology to develop new ways to report PAYE information on or before the date employers pay their employees – for example, by exploring the use of mobile apps.

Real Time Information (RTI) will support the operation of Universal Credit, which brings together means-tested in and out-of-work benefits.

HMRC’s Director General for Personal Tax, Ruth Owen, said:

“The vast majority of employers are now successfully reporting PAYE in real time and are finding it easier to do this than they expected. But we appreciate that for some micro employers it has presented challenges for them to meet the deadlines. This package strikes a good balance by ensuring RTI improves PAYE processes while minimising the impact on micro businesses and their agents by giving them up to two years to adapt.”

For help operating your payroll, contact Davenports today on 0845 351 0381

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NIC tax break confirmed for businesses

Policy adviser at HM Revenue & Customs (HMRC), Raj Nayyar, has confirmed that the government’s proposal to give limited companies and other businesses a £2,000 employment allowance towards their national insurance contributions (NICs) will become law by the end of the year.

According to Mr Nayyar, the proposed measure will be legalised despite the fact that it was not developed sufficiently to feature in the draft National Insurance Contributions Bill, which was published on 15 July. He explained: “We did not publish draft legislation for the employment allowance as we were not far enough along the policy development route, but it will be in the final bill.”

Mr Nayyar said that all businesses would be entitled to the allowance from April 2014 onwards, but that more details will be confirmed during the upcoming months as further decisions are made concerning the finer points of the new law. He also noted that it was “difficult to comment” on any amendments that would be made as the legislation is still being considered by ministers.

The draft bill is considered part of the current government campaign to vigorously crack down on “abusive” tax schemes used by firms that are looking to avoid paying their fair share of business tax. It is hoped that if companies are presented with an allowance to minimise employment costs, instances of tax avoidance will eventually decrease.

Davenports Accountancy provides work-related solutions for businesses of all types. For more information call 0845 351 0381.

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Shake up of PAYE begins

The biggest shake up of the Pay As You Earn (PAYE) system in nearly 70 years – Real Time Information – starts from 6 April, HM Revenue and Customs (HMRC) reminded employers today.

Employers will be required to move to a new way of reporting PAYE in real time, sometimes called Real Time Information (RTI), where they report to HMRC each time they pay employees, rather than annually. This updates the PAYE system so that it is quicker, easier and more accurate.

With the introduction of RTI, employers will benefit from much simpler requirements for reporting to HMRC and the abolition of the extensive annual tax return that the old system required.

David Gauke, Exchequer Secretary to the Treasury, said:

“For employees, particularly the 1 million people in the UK with multiple jobs, RTI will bring benefits as HMRC starts to get details of their tax every time their wages are paid, rather than just once a year. This will make HMRC’s records more accurate and up-to-date and will reduce the number of cases where someone is found to have under or overpaid tax during the year.

“RTI will deliver the new Employment Allowance, which will reduce the cost of taking on new staff for small business. RTI will make it simple to administer, to ensure maximum take-up and help aspiring businesses grow by hiring employees or expanding their workforce.

“Real Time Information will be better for employers and employees. It will bring PAYE into the 21st century.”

Ruth Owen, HMRC’s Director General Personal Tax, said:

“This will be a year of transition. Employers will start to report PAYE in real time from their first payday on or after 6 April. We understand it may take some time before all employers will get into the routine of real time reporting. But HMRC is here to give help and support, including offering free software for employers with nine or fewer employees, regular live Twitter Q&As, YouTube videos and roadshows across the country.”

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Davenports Accountancy is ready for RTI, and we offer a full payroll service. For further information please contact us on 0845 351 0381 or visit our website

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Call to action – Government tells business ‘prepare for 21st century tax reporting’

Real Time Information (RTI) will be better for employers, better for employees and better for Britain. It is time we replaced a tax reporting system that is not fit for purpose.

From this week, all employers will receive a letter from HMRC telling them what they need to do to get ready for the introduction in April of RTI, the biggest reform of business tax reporting in 70 years.

Under RTI, every employer in the country will move to a new way of reporting tax and national insurance deductions from employees’ wages and salaries. This updates the PAYE system so that it is quicker, easier and more accurate.

Employers will benefit from much simpler requirements for reporting to HMRC and from the abolition of the extensive annual tax return that the old system required. Savings to business will total £300 million in reduced administration costs once the system is up and running.

Employees, particularly the million people in the UK who have multiple jobs, will benefit from HMRC getting details of their tax every time that their wages are paid,rather than just once a year. This will make HMRC’s records more accurate and up-to-date and will begin to reduce the number of cases where someone is found to have under or overpaid tax during the year.

Britain will benefit from HMRC getting the right tax in on time, receiving the £3 billion that is currently not paid until the end of the year.

When the new Universal Credit system comes in, it will be underpinned by RTI, ensuring it always pays to work and the system is responsive to individuals’ changing circumstances. Until then, RTI will increase the accuracy of HMRC’s information about tax credits claimants, enabling better detection of fraud and error in the system and potentially saving the UK hundreds of millions of pounds.

Lin Homer, Chief Executive of HMRC, said:

“PAYE directly affects every employee in the country and that is why it is vital that it reflects, on time and accurately, the tax circumstances of the millions of employees who depend on the system to get their tax right.

“RTI delivers on all fronts. Business costs will be cut by £300 million a year, employees will be taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year.

“Employers can find all the information they need on our website about moving onto the new system, and small businesses can download our free software to help them get ready. Businesses should act now to be ready for April, when RTI comes in.”

Diane Jones, practice manager, Yorkshire Street Doctor’s Surgery, said:

“After the first time, it’s straightforward every month. It’s just an extra click at the end of your usual routine.”

Barbara Dunn, centre manager, Horden Youth and Community Centre, said:

“It’s just a case of clicking another button.”

We are already RTI compliant and can assist you with your payroll, taking the headache away. For further information please contact us on 0845 351 0381 or visit our website

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PAYE attention – RTI is coming

Employers are being urged by HM Revenue and Customs to get ready for major PAYE changes that come into effect in three months’ time.

In April 2013 employers will have to start sending PAYE returns electronically, using RTI-enabled payroll software, to HM Revenue and Customs (HMRC) each time they pay their employees as part of routine payroll processes. The returns will include details of all employees’ pay, tax and deductions. This new process will replace sending a separate return at the end of the year.

To be ready employers should follow these three easy steps:

1. Visit HMRC website at for comprehensive information about RTI, including how to prepare, payroll software options and hints and tips to help avoid some common pitfalls.

2. Acquire new or updated payroll software – employers will need to talk to their payroll software provider or their payroll service-provider (if they have one) about this.

3. Start checking and updating employee information. It’s vital that the information employers have about their employees is accurate and up to date.

Ruth Owen, HMRC’s Director General Personal Tax, said:

“To avoid a last minute rush it’s vital employers act now, if they have not already done so.

“Employers will need to send their first return – called a ‘Full Payment Submission’ or ‘FPS’ for salary or wage payments made to employees on or after 6 April – and if they have 250 or more employees they will have to send an Employer Alignment Submission before the first FPS.

“Although reporting PAYE in real time will be straightforward for most, some preparation is needed. There is more to it than simply buying or updating software – although this is key. Employers may need to add employees such as casuals or those below the Lower Earnings Limit to their payroll system and must think about their payroll practices to make sure that they work for real-time reporting.”

We are already RTI compliant and can assist you with your payroll, taking the headache away. For further information please contact us on 0845 351 0381 or visit our website

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