Payroll changes - keeping up to date
Summer 2010
If you employ people, you must submit the end of year PAYE returns for the tax year to 5 April 2010 (and for subsequent years) by electronic means, such as online using the HM Revenue & Customs (HMRC) website, unless you operate the simplified PAYE deductions scheme for domestic workers, are a member of a religious society whose beliefs are incompatible with electronic communications (in which case you must write to your HMRC office), or are a care and support employer.
The simplified PAYE deductions scheme can only be used if you employ part-time staff to work for you on a personal basis. The maximum earnings per employee that can be covered by this scheme is £160 a week, which is not enough to pay a full-time salary at the national minimum wage.
Care and support employers are those who employ one or more care workers to assist themselves or a relative who is elderly or disabled. The employer must write to HMRC to claim this exemption. However, no exemption will be granted if an agent submits the PAYE forms on the employer’s behalf.
You can now be subject to a penalty if you are late with any payroll deductions that are due to be paid to HMRC after 18 May 2010, and all employers are subject to these new penalties. The payroll deductions include national insurance contributions (NICs), student loan repayments and Construction Industry Scheme (CIS) deductions, as well as income tax deducted under PAYE.
Previously, only large employers could be subject to a surcharge penalty if they paid their monthly PAYE late. Those surcharge penalties have been replaced by the new late payment rules applicable to all employers. No employers or CIS contractors are exempt, not even those using the simplified PAYE deductions scheme or care and support employers.
No penalty is due for the first late payment, although the employer will receive a warning letter. The second and subsequent late payments in the same tax year will attract a penalty that increases from 1% to 4% of the total amount paid late for the tax year. As the number of late payments increases so does the amount of penalty charged. Where any payment is made more than six months late, a 5% penalty may be applied, with a further 5% due if the payment is more than 12 months late.
If the total paid for the tax year agrees with the total of the monthly payments, and these are all paid on time, then any discrepancy between months may not be discovered unless HMRC undertakes a PAYE audit. There is also no penalty where an employer has a reasonable excuse for being late.
Many former students can end up paying more than they owe towards their student loan with the Student Loan Company (SLC) due to excess repayments being deducted from their wages. This happens because the details of how much has been deducted are only forwarded to the SLC after the end of each tax year.
Employees can now arrange to repay their student loan directly to the SLC, by arranging to make direct debit payments to the SLC that will repay the loan within 23 months. Once the borrower has set up the direct debit facility, the SLC will send a stop notice to the employer so payroll deductions will end.
If the SLC is aware that a loan may be repaid by way of payroll deductions within the next 23 months, it will attempt to contact the borrower to offer the direct debit facility.
