The HMRC computer can be confused by incorrect information in PAYE returns, which may then result in a demand for more tax than you have deducted from your employees. This may happen when the HMRC computer records a duplicate employment for an employee, without ceasing the previous employment.
For example, you take on William Smith and pay him a regular salary of £2,000 per month. On the first payroll return he is correctly recorded as William Smith. However, on a later return his name is abbreviated to Bill Smith. The HMRC computer will assume that William Smith and Bill Smith are two different people.
As the employment record for William Smith has not been closed, the HMRC computer will generate a PAYE charge for both William and Bill on the basis that you have paid out £4,000 in salary that month to both William and his doppelganger Bill.
Here are some tips to avoid duplicate employment records:
- Use consistent employee names;
- Use a unique payroll number for each employee;
- Do not re-use employee numbers;
- If an employee re-joins your payroll after leaving, give that person a new payroll number and reset their year-to-date payment information to zero;
- Only include the start date on the first Full Payment Submission (FPS) when a new employee joins and do not alter that start date later;
- Use the ‘irregular payment pattern’ indicator for any employee who is paid infrequently.
Be particularly careful about payroll numbers. If you are using new payroll software for the first time, or are merging two payrolls, so that new payroll numbers are needed, the payroll ID ‘change indicator’ must be used.
If you receive a PAYE charge that is more than you expect, please contact us without delay.
