T O P I C A L I N F O R M A T I O N F R OM M A G E E G A MMO N
Henwood House, Henwood,
Ashford, Kent TN24 8DH
Phone: 01233 630000
Email:
mg@mageegammon.comWebsite:
www.mageegammon.comPrincipals:
Jon Gammon, Antony Tutt, Mark Britland, Abhi Jain, Roland Parry, Andy Childs
Managers:
Julie Devine, Linda Hayward, Peter Horton, Barry Spokes, Andy Vanburen, Steven Wanstall, Ross Parsler
Magee Gammon is a trading style of Magee Gammon Partnership LLP and Magee Gammon Corporate Limited.
Registered to carry out audit work in the UK and Ireland, and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.
Winter 2017/18
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Getting to grips with PAYE
HMRC recently reviewed the ‘effectiveness’ of its risk-based approach to late filing PAYE penalties, and opted to
continue to use this approach for the current tax year. Here we provide an overview of the PAYE system.
How the PAYE system works
Pay As You Earn (PAYE) is the system through which employers
deduct an amount of income tax, national insurance contributions
(NICs) and student loan repayments from employees’ wages, in
accordance with the relevant PAYE codes and HMRC procedures.
Employers must normally operate PAYE as part of their payroll
process. However, if none of the employees are paid £116 or more
per week, receive expenses and benefits, have an additional job or
receive a pension, employers do not have to register for PAYE, but
they must still keep payroll records.
Real Time Information (RTI)
Since April 2014, employers have been required to report using the
PAYE system in real time. As part of the RTI initiative, employers
or their agents are required to make regular payroll submissions
for each pay period during the year, outlining the payments and
deductions made to and from employees each time they get paid.
Employers are required to make two main returns: a Full Payment
Submission (FPS), and an Employer Payment Summary (EPS).
The FPS must be sent to HMRC on or before the date employees
get paid. Employers must include all employees, even if they earn
less than £116 per week.
Some employers may be required to submit an EPS to cover certain
situations, including:
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cases where no employees were paid in the tax month
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cases where an employer received advance funding to account
for statutory payments
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situations where such statutory payments (such as Shared
Parental Pay) are recoverable, alongside a National Insurance
Compensation Payment
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instances where Construction Industry Scheme (CIS) deductions
are suffered, which could be offset (note that this applies to
companies only).
The amounts recoverable will be offset against the amount due
from the FPS, in order to calculate the amount payable. An
employer’s EPS must be with HMRC by the 19th of the month for it
to be offset against the previous tax month’s payment.
At the end of the tax year, employers must make a final FPS or EPS
return in order to inform HMRC that all payments and deductions
have been reported.
PAYE and new employers
Employers must contact HMRC as soon as they take on employees,
as a PAYE scheme must be set up for the business. Once registered,
employers will receive guidance from HMRC, including a variety of
forms together with online ‘basic PAYE tools’ to help calculate the
amount of tax and NICs due.
Understanding the requirements is vital: HMRC carries out routine
compliance checks, and can visit at any time. Employers will be held
liable for any under-deductions found.
Avoiding penalties
Penalties are issued where employers fail to meet their PAYE
reporting requirements. You may be liable to a penalty if your FPS
was late; if you failed to send the correct number of FPSs; or if
you failed to send an EPS when you didn’t pay any employees in
a tax month. Penalty fines issued by HMRC range from £100 for
businesses with one to nine employees, to £400 for firms with 250
or more employees.
Successfully managing a PAYE scheme can be
challenging and time-consuming. We can help. Please
contact us for more information.
November 2018
i i e this issue…
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Data protection self-assessment:
are you up-to-date?
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Changes to the stamp duty payment
window
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Creating a business continuity plan
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Business Round-up
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Web Watch
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Reminders for your diary
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