Many years ago the government of the day realised that the most cost effective way to collect taxes from employees was to legislate and make employers do the job for them thus Pay As You Earn (PAYE) was born!
PAYE has an impact for both employers and employees, and we have covered some of the pitfalls below.
If you employ staff then you will have statutory filing deadlines to meet for filing forms and making payments to HM Revenue & Customs (HMRC).
Unfortunately, ignorance is not bliss! If you ignore these obligations, penalties and interest will soon be added to your employment costs! Penalties are now issued automatically and arise when employer return forms are submitted late or when the tax and National Insurance deducted from employees’ wages is paid late to HMRC.
• Small businesses are able to pay their deductions quarterly rather than monthly – this can help with cash flow especially for new ventures.
• Employers have an additional National Insurance liability which is based on salary levels paid to employees. This is paid to HMRC each month/quarter with the tax and National Insurance deducted from employees’ gross salaries.
Employees – make sure you only pay what you owe!
The tax deducted from your salary is calculated by subtracting your annual tax free allowance from your salary and applying the appropriate tax rate to the difference. Most payroll systems are quite adept at calculating the tax due, but they rely on the tax office to issue a correct code number to quantify your annual tax free allowance – this is the area where mistakes can be made and your tax bill increased unnecessarily. The key to maintaining the correct tax code number is to notify the tax office immediately when changes occur.
The latest change introduced by the government has been workplace pensions. Every business with employees may be required to register and operate a pension scheme for its employees and we are seeing that this is going to mean a significant change to operation and compliance for employers. Our payroll software has been upgraded to ensure that we can offer an administrative solution to meet the requirements for Auto Enrolement (AE). This will include identifying all eligible employees, issuing of required information to them and calculating the deductions and advising the pension provider. We do not offer advice on the type of pension you should use but we can recommend a suitably qualified Independent Financial Adviser, who will be able to provide additional services in this regard.
At Mark Evans & Co, we only use HMRC approved software and can provide a full range of services to meet the needs of your payroll operation, including
• Payroll calculation – either weekly, monthly or otherwise
• Provision of calculation summaries and payslips
• Real Time Information (RTI) compliance and filing
• End of tax year reconciliations and provision of P60s
• Advise on tax codes and other employment issues, eg. SSP, SMP, SPP
• AE operation and administration
• Employee benefits calculation and completion of forms P11D