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HMRC have published Brief 15/07: PAYE update, which reminds employers of their online reporting obligations from April 2007.

From 6 April 2008, employers with 50 or more employees will have to send their employee starting and leaving details and some pension information to HMRC electronically. From 2010, electronic filing with be mandatory for all employers.

Although early online filing is, of course, to be encouraged, employers and agents should note that they are currently not obliged to send forms P11D and P9D online. The following are also exempt from the online filing provisions:

• the Employer's Supplementary Return (P38A);
• CIS return of payments to subcontractors (CIS36);
• direct collection and payment;
• electoral payments returns (P35(EP), P527, P528);
• examination payments returns (P523 and P524);
• Taxed Award Scheme returns (P440 and P35(TAS));
• returns for Profit Sharing Schemes (P35(PSS)); and
• Norwegian Protocol returns (P35 Offshore Protocol).

A small employer, therefore, who submits forms P35 and P14 online, but sends in a paper version of form P38A, will still qualify for the incentive payments available (starting in 2004–05 at £250, with £250, £150, £100 and £75 for successive years up to and including 2008–09).

Small employers who have filed electronically will be notified accordingly by HMRC, and may then (but not before) set off the incentive payment against liabilities for the following tax year. Deductions must not be made against (say) month 12 or 13 payments for the year to which the return relates. The only exception to this is where trading ceased in the year to which the return related.

Given that the incentive payments are not taxable, they should not simply be credited against allowable payroll costs. HMRC's advice is that they should be shown in accounts as "other operating income" and that the employer's tax computation should then be adjusted to reduce the taxable profit accordingly. The payments are not liable to VAT.

Agents need to ensure that they are ready to meet these obligations on behalf of clients and with this in mind, HMRC have recently updated the "inyear" pages of their website with all the latest information on filing in-year information online (see link below).

Internal changes are currently being undertaken by HMRC, which are designed to help the system run more efficiently from April 2007. From April 2007, HMRC are introducing an automatic process to change tax codes during the tax year for benefits in kind that employers report on forms P11D and P46(Car). It is hoped that this will speed up the rate that information is processed and the current year tax code is updated, in advance of settling the previous year’s liability. Details of code changes will be notified by the normal process.

Employees will have more accurate tax deductions and employers will benefit from more accurate and timely handling of benefits in kind information they have supplied, for example, a change in company car. It is hoped that these changes will mean that agents and employers will get fewer enquiries from employees about their tax.

From April 2007, HMRC will also automatically bring together pay and tax information for an individual from forms P14 into a single total, irrespective of the number of jobs they have had during the year. This will enable HMRC to more quickly check that the right amount of tax has been paid and reduce the number of enquiries they have to make.

There will be no change to National Insurance processing arrangements.

Links

HMRC: Brief 15/07: PAYE update

HMRC: In year pages