Year End Matters for Employers 2009/10
March 23rd 2010
As another tax year ends employers need to give some thought to their obligations regarding the reporting of payroll details and benefits in kind.
1) P35,P14 and P60s
The information reported on these returns relies on 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 returns which, with very few exceptions, must now be submitted online.
There are a number of common errors that occur in preparing these returns, which include:
- Incorrect use of Category X for National Insurance. This only applies to those paid below the Lower Earnings Limit, for pension-only schemes (not Category C) and workers from abroad.
- Incorrectly entering the Scheme Contracting Out Number (SCON) on the P14 relating to a pension scheme. This should only be the case for NIC letters F,G,H,K,S or V.
- On the P35 Box 3 should be the total of all employee and employer contributions relating to all employees.
2) P11Ds/P9Ds and Dispensations
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. There is still time to do this for tax year 2009/10.
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 2010 (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 regarding these or related matters please contact John Harling on 07768446381 or jharling@edftax.co.uk
