Business owners and particularly those who employ staff, have many responsibilities to fulfil. Whether that be health and safety, duty of care, human resources, or in this case, the correct way in which to pay their employees and report this to HMRC.
The process may seem complicated at first but thanks to tools such as PAYE, much of it is automated. The employer just needs to ensure that they are sending the right information to HMRC, at the right time, to avoid penalties or investigation.
With this in mind, how do you report payroll to HMRC correctly?
Full Payment Submission
Each time an employer pays their employees, they need to provide a full payment submission to HMRC. This submission will include details on their staff, their pay and any relevant deductions and tax. Information needs to be provided either before or on the day that the relevant payment is made. Businesses that miss this deadline could face a late penalty, unless they can provide HMRC with a good reason why they were late.
It’s worth noting that not all companies have regular payment schedules and may make early or late payments. However, you still need to make regular full payment submissions, following your normal payment schedule.
When making a full payment submission, companies are required to provide relevant information. Of course, this includes personal details on the employee themselves, such as name, address, national insurance number and tax code. You’ll also need to provide financial information, including salary amounts and any deductions that are made, such as income tax and National Insurance. All of these details are utilised to calculate the amount of tax that the employer owes HMRC and this also needs to be included in your submission. The statement should also note if an employee has left the business or a new employee has joined.
It’s worth noting that employers are required to make these submissions, even if the employee in question doesn’t meet the threshold for paying tax.
Every business follows their own unique schedule, however when it comes to dealings with HMRC, there is a standard tax month which runs from the 6th of one month, to the 5th of the next. There are important dates within the tax month, pertaining to employment payroll, including:
- From the 12th you can view your Full Payment Statement and how much tax and National Insurance that you owe HMRC.
- You must make any claims of tax reduction before the 19th.
- The full balance payable to HMRC is due from the 19th (post) and 22nd (online).
Whilst the majority of payroll processes are carried out correctly, mistake can and do happen. There are many errors which are possible but some of the most common include- using the wrong tax codes, mistakes with software or just simply inputting the wrong figures. Often an employee will notice a mistake with their salary before their employer does. In these instances, contacting your boss is the best way to go, however you can also contact HMRC directly, if necessary.
When it comes to genuine mistakes, made in good faith, HMRC will often allow the business to repay any tax that has been missed. However, if there is evidence that a company has deliberately misled HMRC, then an investigation or penalties may follow.
Business owners, particularly those who run new or smaller businesses, can often struggle with the responsibilities of the job, leading to feelings of being overwhelmed. Fortunately, there are experts available to lend a helping hand. One such lifeline comes from Taxation Investigation, from Salhan Accountants. They offer a comprehensive roster of accountancy and taxation services, including those specifically related to payroll operations. To find out more about everything Taxation Investigation has to offer, don’t hesitate to visit their website.