PAYE Procedures – Rationalising online filing and communications rules

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From tax year 2009/10, the requirement to file year-end P35 and P14 Returns online is extended to employers of all sizes and, from tax year 2011/12, all employers, irrespective of size, will also be required to file in-year forms online.  The Income Tax (Pay As You Earn) Regulations 2003 include many regulations, paragraphs and Tables that were introduced when different rules applied to employers of different sizes.

New amendment regulations have been made in order to rationalise the situation and to simplify the PAYE Regulations.  Most of the details in the amendment regulations have already been announced, but there are a few new points to highlight and one major innovation for employers.

Mandatory electronic payments

Mandatory monthly electronic payments is one requirement that has not been extended to all employers and continues to be an obligation only on “large” employers, i.e. those with 250 or more employees.  At present, large employers are sent a notice each year, informing them that they are required to pay the Accounts Office electronically and to ensure that the payments are cleared into HMRC’s bank account by the 22nd of each month.

Starting with the notice that would be due in advance of the 2011/12 tax year, no more such notices will be issued.  An employer (PAYE scheme) will be a “large” employer if it has 250 employees on 31 October preceding the relevant tax year.  An employee counts towards this total if the employer is required at that date to prepare and maintain a deductions working sheet (i.e. create a payroll record) for the employee and no P45 Part 1 leaver form has been issued for the employee.

On 31 October 2010, therefore, larger employers must count up their employees and decide whether or not they fall within the mandatory electronic payment rules.  The punitive surcharge regime for late payments by large employers is replaced by the new non/late-payment penalties that apply to all employers from April 2010.  However, the mandatory electronic payment requirement is still in place, although the enforcement rules are not at all clear.

Mandatory use of electronic communications

From April 2011, all employers (other than a few exempt employers) are required to file their year-end P35 and P14 Returns online, and their in-year P45 and P46-range forms online.  As there is no need to distinguish between year-end and in-year forms in the context of online filing, the PAYE Regulations are being generally amended to refer simply to the filing of all “specified information”.

Penalties for failing to file online

The current penalties for failing to file online operate during the final tax quarter of 2009/10 and the whole of 2010/11.  If an employer fails to file up to 5 in-year P45s or P46s online in a tax quarter, there is no penalty at all.  But, for more than 5 documents, the penalties start at £100 and increase to £3,000 for larger employers.  For the 2011/12 and 2012/13 tax years, the “no penalty” concession will only apply if no more than 2 documents are not filed online in a tax quarter.  And, from the 2013/14 tax year, penalties will be applied automatically if there are any failures to file online in a tax quarter, with a minimum £100 penalty.

P60 End of Year Certificate

For tax year 2009/10, although employer’s P35 and P14 Returns must be filed online, the employee copy of the P14, the P60 End of Year Certificate, may only be issued in paper form.  However, that restriction has been removed by the amendment regulations and, from the end of the 2010/11 tax year, employers may, if they wish, issue P60s electronically, in the same way as many employers are already doing with payslips.

HMRC is to “work with employers and representative bodies to ensure that the appropriate guidance is in place and available to those employers who choose to provide P60s to their employees electronically.”

Staying with P60s but in another context, we queried with HMRC in 2008 why Schedule 4 to the Social Security (Contributions) Regulations 2001 includes a requirement for a P60 that includes payments of NICs to be issued to employees who are no longer employed at the end of the tax year when the PAYE Regulations specifically prohibit that from happening.  HMRC has never highlighted that requirement and, when we asked about, they admitted that they did not know it was there or why it had been added to the Regulations in 2004.  In September 2009, HMRC confirmed that the requirement would be removed from the Regulations and this has now been done by means of the amendment Regulations referred to below.

Further information:

The Income Tax (Pay As You Earn) (Amendment) Regulations 2010

Explanatory Memorandum to the Income Tax (Pay As You Earn) (Amendment) Regulations 2010

The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2010

Explanatory Memorandum to the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2010

The Social Security (Contributions) (Amendment No. 4) Regulations 2010

Explanatory Memorandum to the Social Security (Contributions) (Amendment No. 4) Regulations 2010

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This entry was posted on Friday, March 19th, 2010 at 12:36 and is filed under P45 / P46. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.