UK: The Tax Year Has Ended - Now The Reporting Starts, Warns KPMG

Last Updated: 24 May 2000

Host of PAYE and NIC deadlines for employers to meet between now and July

The reporting deadline season for employers and construction contractors is in full swing. But KPMG Tax Advisers warn that failure to complete returns correctly and comply with the strict deadlines imposed by the Inland Revenue may lead to the imposition of swingeing penalties. In addition, automatic interest charges arise for late payments of PAYE and NIC.

Inez Anderson, Remuneration Consulting Partner at KPMG, says: 'Prompt and accurate year-end reporting is more important now than at any time in the past. The last few years have seen many changes:- new reporting burdens on employers; penalty regimes tightened; the extension of NIC to cover many more types of remuneration including PAYE Settlement Agreements (which enable employers to settle the tax for their employees on a wide range of expenses and benefits); substantial changes to the new Construction Industry Scheme of tax deduction, with yet more new certificates and forms; and the merging of the Inland Revenue and the Contributions Agency to form a single, much stronger entity.'

KPMG warns that the shift of Revenue investment and manpower into compliance work has resulted in more Revenue PAYE Auditors and Compliance Officers checking up on employers. Companies must ensure they have the right systems and procedures in place, especially now that employers have been made responsible for administration of state benefits, such as working families' and disabled persons' tax credit, and collecting student loan repayments.

Inez Anderson warns: 'Put a single foot wrong, and you could find an unwelcome visitor knocking at your door. Rather like a credit-rating agency, the Revenue has a number of criteria which it uses to help decide which employers should be audited. Plus points might include sending in accurate returns on time and paying PAYE/NIC over when it is due. Minus points could be submitting returns late or not at all, late or under-payments of tax, and errors in the data provided - but at least the threat of a penalty for simply showing an incorrect NI number on PAYE returns has been deferred again.'

Other triggers for a Revenue visit might be a complaint from an employee (or ex-employee), information from a third party (such as an employee's tax return, or from another PAYE investigation) or simply operating in an industry sector known to be under financial pressure.

Inez Anderson adds: 'There is a host of deadlines throughout May, June and July, involving PAYE, benefits in kind, awards and expenses. Just to take one example, a form P11D or P9D must be completed for every employee who received taxable benefits or expense reimbursements not covered by an Inland Revenue dispensation. This information must reach the Inland Revenue and the employee by 6 July 2000 - errors could result in a fine levied on the employer of up to £3,000 per employee. P11Ds cause a huge amount of work for most employers. They must be sure their systems can cope - that's why many employers now use a software program to do the calculations for them'.

KPMG has recently re-engineered its own P11D software, P11D Solutions, which it licenses to many employers. Inez Anderson explains: 'The PAYE and NIC rules are changing all the time, so a P11D program must be updated regularly. It is important to check well in advance that your program will be able to cope with this year's regime. Electronic lodgement is a much quicker and more accurate way of submitting data to the Revenue, and definitely the method they prefer. Soon it will be possible to submit most employer returns electronically, which is perhaps one thing employers should be thankful for as it does help to reduce administration time.'

Recent Changes In Employment Taxes

  • Employer's NIC @ 12.2% is now charged on all taxable benefits (from 6 April 2000) not just on cars and fuel and is even chargeable on the genuine business element of mixed use items, such as chauffeurs and company aeroplanes or boats, if no suitable dispensation is held.
  • Employer's NIC @12.2% is now charged on tax and certain benefits paid through PSAs (first payment due 19 Oct)
  • The new construction industry scheme, affecting most entities carrying out construction work valued at over £1million per annum, started from August 1999 and the first returns were due last week.
  • The Working Family Tax Credit started from October 1999; from 6 April 2000 employers have been responsible for paying WFTC and DPTC to employees through the PAYE system.
  • From 6 April 2000 employers have been made responsible for deducting student loan repayments from the wages of many employees who were formerly students.

Year end Checklist

PAYE returns

Send P35, P14, P38A, P38S and CIS36, where appropriate, to the Inland Revenue by 19 May.

Copies of forms P60 to be given to employees by 31 May.

Calculation of Class 1A liability to be submitted to Inland Revenue by 19 July.

Benefits in Kind

Forms P11D and P9D to be sent to the Inland Revenue and employees by 6 July.

Is your P11D software package up to date?

P11D Dispensation

Is yours up to date?

Does it cover all appropriate expense payments which you pay?

Does it take into account the recent changes to the Travel and Subsistence rules?

Are your employees aware that a dispensation is in place, so that they do not report information unnecessarily on their own tax return?

PAYE Settlement Agreement (PSA)

Does the company have a PSA?

New PSAs to be agreed by Inland Revenue by 6 July.

Tax and Class 1B NIC due to be paid over by 19 October.

Are the employees aware that a PSA has been agreed, so that they do not report information unnecessarily on their own tax return?

Awards

Do you provide awards to your employees?

Are they paid under a Taxed Award Scheme? If not, are these awards included on form P11D?

Tax payable under a Taxed Award Scheme should reach the Inland Revenue by 4 July.

Have you paid the Class 1 NIC on the tax under the TAS?

Expenses and Benefits policy

Is yours up to date?

Has it been amended for travel & subsistence, computer equipment, mobile phones and other recent changes?

For further information, please contact: Inez Anderson, Remuneration Consulting Partner, KPMG 020 7311 2610 Ian Welch, Media Relations Manager, KPMG 020 7311 5816

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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