End of Tax Year Considerations for Employers
May 12th 2009
As well as ensuring that year end payroll and benefit returns are submitted on a timely basis, employers should also take great care to avoid making mistakes. Below is a summary of some common errors and oversights that can occur.
1) P11Ds/P9Ds
Care should be taken to ensure that the information reported on P11Ds/P9Ds is correct. For instance do you hold a valid dispensation that allows you to omit certain expenses from P11D such as travel, subsistence and entertaining? If not, you will need to include these items on the P11Ds. You may also wish to update your agreement with HMRC at the earliest opportunity to avoid having to report them in the future . Also, have benefits been reported correctly where these are calculated by reference to very specific rules, e.g. employer-provided cars (and, if appropriate, private fuel), living accommodation, relocation and beneficial loans?
2) P35/P14 and P60s
The information reported on these forms relies upon accurate payroll recording, so it is important that these tally to the payroll records throughout the course of the year and are transferred correctly on to the appropriate year end forms. For example, where an employee has been in receipt of Statutory Sick Pay, has this been paid in accordance with the rules taking into account waiting days and linked periods of sickness? Also, you are advised to make sure you include on the P14/P60 relevant information such as Student Loan Deductions, Pension Scheme Contracting out Number (For Money Purchase/Stakeholder Schemes) and the employee’s final tax code. These areas are often overlooked.
3) PAYE Settlement Agreements (PSAs)
PSAs enable employers to meet the tax/NIC liability arising on benefits in kind that are minor, irregular or impractical to calculate on P11D. On the one hand, it is important to ensure that the correct value of benefit is reported by grossing up the tax liability at the correct marginal rate and ensuring that Class 1B NICs are paid on the value of the grossed up benefit including the tax liability. On the other, it is possible that employers are including items in the PSA that it may actually be possible to exclude, because they are trivial or covered by a statutory exemption.
If you have provided benefits suitable for inclusion in a PSA, but have not yet registered an agreement with HMRC it is possible to do this up to and including 5th July 2009 (of course, it is advisable to do this well before this date).
4) Termination payments
In the current climate there have been more termination/redundancy payments and there is a (not very well known) statutory requirement to report these to HMRC by 6th July following the end of the tax year where the payment exceeds £30,000 and includes non-cash benefits. There is no specific form to make this return - a letter giving full details of the package should be sent to your PAYE tax office and copied to the individual concerned.
If you have any queries relating to this or PAYE/NIC, benefits or the Construction Industry Scheme, please contact John Harling on 07768 446381.
