It’s often a struggle fitting in the payroll processing but clearly it’s important to avoid mistakes which can quickly lead to staff problems and significant fines.
Here are some of our experiences:
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Examples of payroll and auto enrollment problems
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Specific inherited errors - Payroll
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How we resolved
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Client 1
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Incorrect pay submissions to HMRC
Pay components set up incorrectly
Attachment of earnings incorrectly deducted
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Corrected all issues and submitted revised info to HMRC
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Client 2
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Non-filing penalties, fines etc. (5 schemes)
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Brought all PAYE schemes up to date and successfully appealed 16 penalties
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Client 3
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5 incorrect annual payrolls run for Director only businesses
Incorrect treatment of CIS.
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Reran and resubmitted
Ensured robust reporting processes in place going forwards. Successfully appealed penalties.
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Client 4
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Claim of Employment Allowance had been wrong, the company was deemed to be in a group therefore should not have claimed
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Ensured that HMRC was notified to remove the claim.
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Specific inherited errors - Auto enrolment
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How we resolved
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Client 5
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NHS pension contributions were being incorrectly calculated
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Historic analysis and re-calculation provided to client, outstanding contributions paid to pension provider
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Client 6
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Pension scheme had been set up incorrectly leading to under deduction of contributions across 2 tax years. Previously reported to the Pension Regulator as contributions had not been uploaded to the Pension provider
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Reviewed, analysed and corrected all members and employer contributions
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Client 7
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Unable to add a payroll to TPR for re-declaration
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Called the TPR, found that they submitted a Declaration of Compliance in June 16, then filed an exemption which is why the system didn’t allow a re Declaration. TPR needed to re-activate them.
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Not specific but common errors
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Consequences
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Directors set up incorrectly as employees
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NI incorrectly calculated
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Wrong SMP information given
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Wrong amounts paid, wrong ending dates etc.
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Employment Allowance not claimed or wrongly claimed
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Not claimed or incorrectly claimed
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Not informing us of leavers in the current year
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End of year figures then inconsistent with HMRC
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Tax codes not uplifted for the current year
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Wrong tax calculations
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Pensions being calculated incorrectly re tax relief, e.g. pre-tax when it should be post tax or opposite
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Double tax relief to employee, or no tax relief at all
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Pensions being calculated on full salary when it should be on qualified earnings only
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Wrong calculations for employees and employers
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Some suggestions if you run the payroll yourselves
• Set it up correctly
An essential requirement otherwise you’ll risk always being wrong and it will catch up with you some day.
• Keep it accurate
This may sound obvious but we’ve seen many examples of slackness, errors, gaps and issues. It’s surprisingly common for the wrong amounts to be paid which can lead to all sorts of issues.
• Keep up with changes in payroll and employment laws
Otherwise costly mistakes can be made. When this affects employees, considerable annoyance or even upset can be caused.
• Avoid penalties
Keep to HMRC deadlines. Penalties from late filing or payroll errors can be high and nowadays there’s no scope for being late with payments to HMRC. You need to know precisely what you are required to do and stick to it, all the time.
• Keep track of employee matters affecting the payroll
Such as benefits or student loans which may change their tax code. If these are not dealt with properly there may be some costly amendments, possibly upsetting employees and facing your business with a tax bill.
• Avoid paying a contractor when they are really an employee
If you employ contractors or freelancers you need to understand the rules. When might they be regarded by HMRC as an employee and must then be on the payroll, subject to PAYE and NIC? Unfortunately, HMRC can go back years in claiming unpaid taxes.
• Keep good records
You should be disciplined in recording everything clearly and keep all the information for the current tax year plus the preceding three. Examples include starting and leaving dates, maternity dates, benefits, rates of pay, time.
• Handle childcare vouchers correctly
If these are through a salary sacrifice scheme then they need to be deducted from gross salary before tax. If not then you will be missing out on National Insurance savings and employees will be overtaxed.
