Author: Yvette Lamidey
Published in: IPP News
Date: March 2007
Taxation: Electronic Delivery
Online Filing - March 2007
Hints and tips for employers as they embark on the 2007 End of Year Returns. Checking the HMRC website during the filing period is imperative as updates will be given re service availability and also information re errors.
All employers are encouraged to regularly check the HMRC website for the latest information on filing this year's Annual Return whether you are using the Revenue's own product or a third party product via the Internet or EDI. The website will keep you up to date with service availability and useful information on filing your Return. We would also encourage all employers to sign up for ‘notes for payroll software developers'. This may have a scary title but it is an excellent document and gives far more information to the employer than can be found in other publications and contrary to the title is not just information on the IT side of things. To register to receive notes go to www.hmrc.gov.uk/comp/ .
Information about your return and also Online filing and what you need to know
Reference: HMRC 2006 Online
HMRC has published updated guidance for filing your online Return for 2005/06. The ability to submit a live file via the Internet will not be available until 6th April 2006; those using EDI should be able to submit returns from mid March. A number of employers use software that requires the return for the closing year to be sent before the next year's can be opened; since 6 th April is a Thursday this may cause some issues for employers with weekly payrolls. You should contact your payroll provider if your product is as described above to ensure that you will be able to process the first payroll of 2006/7 before the 2005/6 Return has been successfully filed. If you require further information please use the above link to the appropriate Revenue notice.
Paper P35 and Online Filing
Reference: HMRC 2006 Online
Employers who are filing on-line may find that they receive a paper P35 in error; HMRC have recently reported a glitch where paper P35s have been erroneously sent to some employers. If you are filing electronically you should ignore the Paper P35 and must only complete and submit the electronic version. Once you have filed electronically you will receive a Government Gateway Response. HMRC will stand by this response and there will be no requirement for the employer to call to check that the Return has been received.
Tax Code ‘NI'
Following some comments received via Advice on Line in recent weeks we thought that it would be helpful to confirm when and how the tax code ‘NI' can be used.
• NI is not a tax code but an indicator that is used where a person (normally a student) will not pay tax but will pay NICs
• NI may be used as a tax code for the purpose of payroll processing so that income tax is not calculated for the student. But at the end of the tax year the payroll record must be changed so that the P14 does not show a NI code
• As part of the end of year checking process the tax code NI should be replaced with a blank tax code field (and this does mean a blank space and not filling the field with zeros). This is accepted under the HMRC quality standard.
• During payroll processing where no tax code is entered, the system should calculate tax at BR (non-cumulative basis) and output a ‘warning' message.
• If the employer then inputs say code 'NI' the tax is calculated on cumulative basis which will generate a refund if tax has already been deducted
• The system should also perform checks each pay period to see whether the taxable earnings for an employee with a NI code has exceeded the single person's tax allowance (e.g. £4895) in that year. If it has the code should be changed to 0T wk1/month1 basis.
Review to check online filing tax-free payment claims
HM Revenue and Customs is reviewing a number of 2004-05 tax-free payment cheque claims where no tax and National Insurance has been deducted during
the tax year, to check if the tax-free incentive payment is due.
In some of those cases there is evidence of abuse and of some employers
trying to exploit the incentive system. Others have sent Returns that are not due by mistake.
This means that a small number of employers who have made a genuine Return
will experience a further delay in getting a cheque for their tax-free payment for sending their 2004-05 Return online. HM Revenue and Customs has expressed regret about this and grateful to compliant employers for their patience. But they must make sure they maintain the integrity of the system by only awarding tax-free payments to employers who are entitled to them.
HM Revenue and Customs will tell employers when their claim has been reviewed and if the tax-free payment is due or not.
Yvette Lamidey
Yvette Lamidey is director of Paris and Parks Consulting
www.parisandparks.com