HMRC urges employers to send real time PAYE

Tuesday 18 March 2014

Employers are being urged to submit Pay as You Earn (PAYE) information in real time to HM Revenue and Customs (HMRC).

Over 70,000 employers that are yet to use the new system have been sent an email telling them they must make the switch by the end of the year or face penalties.

Businesses that don't send PAYE information may be fined at least £100. However, the sum of the penalty depends on the number of employees and the length of time involved.

HMRC’s director general for personal tax, Ruth Owen, said: "Over 99 per cent of PAYE records are being successfully reported in real time and the majority of businesses say they find the new system easy to use.

"So those who have not begun using the system should not stick their heads in the sand. They need to act now to ensure that they don’t get a penalty at the year end."

PAYE umbrellas will also need to ensure they are compliant, helping contractors stay on the right side of the tax man.

Ms Owen reminded employers that if they no longer need their PAYE schemes, they should alert HMRC as soon as possible.

Furthermore, PAYE schemes that pay employees annually must also ensure they have their information with HMRC by the deadline.

This comes months after HMRC introduced a new package of support for micro-companies with nine or fewer employees.

Developed in conjunction with employers' agents, payroll software representatives and the Department for Work and Pensions, the scheme is expected to help micro-employers make the switch.

Guidance includes best practice scenarios and advice on how to work with technology to access new ways to report PAYE.

In a bid to simplify things further, micro-companies will be able to submit PAYE information on or before the last payday in the month until April 2016. This will add more flexibility to current proceedings, which have previously demanded that PAYE is reported every payday.

Ms Owen said in December: "This package strikes a good balance by ensuring RTI (real-time information) improves PAYE processes while minimising the impact on micro businesses and their agents by giving them up to two years to adapt."

A PAYE umbrella can also make things simpler for contractors. Once joined, freelancers can instruct their umbrella to invoice the agency or client each week or month based on their timesheet.

The umbrella then pays a net salary to the contractor, deducting National Insurance and income tax.

Meanwhile, contractors working through a limited company are now able to change their PAYE status to reflect being paid annually. This means they no longer have to submit monthly returns.

HMRC had to make a 'fix' to do this and was previously unable to deal with such requests. However, companies have not been informed directly of the changes, so employers should beware when submitting PAYE.

To be eligible for the scheme, businesses must ensure all employees are paid once a year in the same tax month. What's more, an employer must ensure they are only required to pay HMRC on an annual basis.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter