HMRC have issued their Employer Bulletin for December 2015, and we have summarised all of the key content for you, which includes a number of tips from HMRC to avoid mistakes in PAYE reporting and payment.

Annual paying PAYE electronically letters and Employer Payment Booklets for 2016/17 will be issued during January, February and March.

Avoiding common mistakes in PAYE reporting

HMRC have included some tips on how to avoid some of the common mistakes that they see happening with online filing.

  • Report the correct hours worked.  
    • Some employers are using 'E- other' as a matter of course when completing the Normal Hours Worked on the Full Payment Submission (FPS).  
    • This should only be used where hours are irregular or the payment relates to a pension or annuity.
    • There are four bands A, B, C and D which should be used for up to 15.99 hours, 16 - 23.99 hours, 24 - 29.99 hours and 30 hours or more.
  • Select the correct payment frequency.
  • Late reporting reason codes.
    • These should be used where there is a reasonable excuse for filing late.
    • Use 'H' where you are making a correction to a previous submission whose filing date has now passed.
    • Use 'F' where you report within 7 days as it was impractical to report on or before the pay day due to the nature of work.
  • The payment date on the FPS should be the date of payment, or the date that payment entitlement arose if this was earlier.  It should not be the payroll run date or any other date.
  • Remember that even if payments to HMRC are made on time, penalties can still be charged if reporting is late.  Information should be reported on or before the date that employees are paid, not when HMRC are paid.
  • Don't ignore Generic Notification Service (GNS) electronic warning messages.
  • Update any changes to your email address if using PAYE online.
  • Make sure software is up to date.
  • If you haven't paid anyone in a tax month you need to submit an Employer Payment Summary (EPS) by the 19th of the following month.

For HMRC guidance on reporting see What payroll information to report to HMRC.

See our Real Time Information (RTI) index.


HMRC Tips for appealing late RTI filing penalties

  • Use the new online appeals service accessed through PAYE online and your appeal will be dealt with much faster than by appealing in writing.
  • When using the online appeals service select the reason for your appeal from the drop down menu.  Avoid using 'Other' if there is any suitable alternative. For example
    • If you are unable to report on time due to a bank holiday and didn't indicate a late reporting reason on the FPS then use "missed correction/easement".
    • If you had difficulty using your payroll package then use "IT difficulty".
  • Be concise in the appeal explanation as there is a limit of 1,000 characters in the additional information field.
  • Appeal against all defaults shown on the penalty notice if you don't agree with them, including the "first unpenalised default".  This is the default for the first failure in a tax year, and by itself this does not give rise to a penalty.

See Penalties: RTI (Real Time Information) for PAYE for our detailed guide to reporting requirements and penalties.


Tips for making correct payments to HMRC

HMRC advise that some employers are getting the payment reference wrong meaning that payments are not allocated to the correct accounts or to the correct months.  They offer the following tips:

  • Most PAYE payment references (your Accounts Office reference) should be 13 characters long in the format 123PA00012345
  • If you pay more than 14 days early or late an additional 4 numbers should be added to tell HMRC the tax year and tax month that is being paid.  For example a payment which is due on 22 May 2015 would have the additional four characters 1601; 16 for the tax year 15/16 and 01 for the month April 2015. The reference would be 123PA000123451601 with no spaces.
  • Remember to remove the additional four characters next time you make a payment. 
  • Do not use your employer reference to pay.
  • Do not put any additional information after the Accounts Office reference, or use words instead of the reference number (such as Month 1 or M01).
  • Do not put the four numbers the wrong way round - year first, then the month.


The end of "on or before" reporting relaxation for micro employers

The relaxation of the reporting rules allowing micro employers with nine or fewer employees to report monthly rather than each time they pay their employees comes to an end in April 2016.

HMRC will be writing to employers who are using the reporting relaxation to advise them that it is coming to an end.

See RTI: Real Time Information for PAYE for details of reporting requirements.


Beginning and Ending of employer status

The bulletin contains details of how to register as a new employer and how to advise HMRC that your PAYE scheme should be closed.


Starters and Leavers

HMRC are reminding employees to include details of starters and leavers on their Full Payment Submissions, particularly if they are increasing staffing levels over the Christmas period.

Where employees are employed on a casual basis and is not paid regularly, there is an irregular payment indicator on the FPS.

Forms P46 are no longer used for new employees and has been replaced by the starter checklist.  The information collected from the employee can be used to work out their tax code and starter declaration code using HMRC’s online tool.


Voluntary Payrolling of benefits

Employers who intend to use this facility from April 2016 or who already payroll certain benefits under informal arrangements are reminded that they need to register using HMRC’s online registration service.

See PBIK registration service to begin registration.  A government gateway account is required.

Note that whilst payrolling benefits will remove the requirement to submit P11D forms, P11D(b) forms will still be required which include all payrolled and non-payrolled benefits.

See Employers: What's On - from 6 April 2016 for more information about voluntary payrolling of benefits and other changes affecting employee benefits and expenses.


Trivial Benefits

The previously shelved plans to introduce an exemption for trivial benefits of less than £50 have been reintroduced with draft legislation included in the 2016 Finance Bill.

From April 2016, benefits will be excluded from income tax and national insurance where the benefit is

  • not provided in return for services
  • is not cash or a cash voucher
  • costs £50 or less

There will be an annual cap of £300 for office holders of close companies, and members of their family or household.

See Trivial Benefits for more detail.


Income tax allowances, rates and bands

The bulletin includes a note of the relevant amounts from 6 April 2016.

See Tax Data for details relating to all taxes.


Employment Allowance

From April 2016 the employment allowance will no longer be available for companies where the sole director is the only employee.

To claim the employment allowance for 2015/16 tick ‘yes’ in the Employment Allowance Indicator field in the payroll software.

This claim only needs to be made once and should then carry forward each year.

Only change the Employment Allowance Indicator field to ‘no’ if you are no longer eligible to claim the allowance.


Office of Tax Simplification (OTS)

The OTS is currently running two surveys.  To let them know your views contact them by email or by completing their surveys using the links below

  • Would it be helpful to more closely align Income Tax and National Insurance contributions?
  • How can tax be made simpler for companies with under 10 employees?


Scottish Rate of Income Tax (SRIT)

HMRC have begun contacting taxpayers whose records show that their main address is in Scotland to advise them that they have been identified as Scottish taxpayers.

Employers are advised that:

  • They are not responsible for identifying Scottish taxpayers
  • Scottish taxpayers will have an ‘S’ prefix in their tax codes
  • They should check that their payroll software is able to apply the new ‘S’ codes
  • The new ‘S’ code should be applied even though the rates of income tax will remain the same in Scotland for the 2016/17 tax year
  • Employees should be encouraged to make sure that they update HMRC with any changes of address
  • HMRC have a Scottish Rate of Income Tax news page with updates and latest information relating to the SRIT

See Scottish Income Tax for our guide to the introduction and impact of this new tax.


Income Tax Allowances – Tax Code Suffix Y

Age related personal allowances have now been phased out and from April 2016 HMRC will no longer be using the ‘Y’ suffix on tax codes.

Notices of Coding should be issued to all affected individuals and although Y codes will still be accepted by HMRC’s systems employers are nonetheless being asked to stop using them.


Contracting Out

Contracting out of the additional State Pension comes to an end on 5 April 2016.

The bulletin includes some changes that this will make to reporting for those affected.


Employer Bulletin: December 2015

A link to the published Bulletin can be found here or accessed via HMRC's website