Our payroll service helps your business to comply with the law.
The operation of PAYE under RTI can be a difficult and time consuming procedure for anyone trying to run a business. We can carry out your payroll for you so please do contact us for further information.
We've set out on this page just some of the processes you, as an employer, are legally required to carry out, but of course if we are processing your payroll then we do all this for you.
What you need to know...
In order to set up a Pay As You Earn (PAYE) scheme you must register your details with HMRC, which we can do for you.
As an employer you are legally responsible for operating PAYE and calculating National Insurance Contributions (NICs) but we can assist you by processing payroll for you using our dedicated payroll software.
Any tax and NICs due to be paid to HMRC by your business should be paid to them by the 19th of the month following the payment. An extension to this date to the 22nd of each month is available to employers paying through internet banking, which will be most likely.
Employers whose average monthly payments are less than £1,500 are allowed to pay quarterly rather than monthly.
You need to complete the following forms or maintain the equivalent digital records:
- P11 Deductions working sheet
- P60 End of year summary
- P45 Details of employee leaving
- Starter Checklist
All these records are kept and maintained by ourselves if you choose to use our payroll service.
HMRC can charge penalties to employers who fail to:
- make online submissions on time
- pay their liabilities on time
- keep the required records
- operate PAYE or NI correctly
- provide HMRC or the employees with the relevant forms on time
Under RTI, employers or their agents are obliged to make regular payroll submissions for every pay period during the year, these submissions detailing payments and deductions made from employees each time they are paid.
There are two main returns to make as detailed below.
Full Payment Submission
A Full Payment Submission (FPS) must be sent to HMRC on or before the date employees are paid.
Employer Payment Summary
Employers may also have to make a further return to HMRC each month, the Employer Payment Summary (EPS) to cover the following situations:
- where no employees were paid in the tax month
- where the employer has received advance funding to cover statutory payments
- where statutory payments are recoverable or
- where CIS deductions are suffered which could be offset (companies only).
HMRC will offset the amounts recoverable against the amount due from the FPS to calculate what should be payable. The EPS needs to be with HMRC by the 19th of the month to be offset against the payment due for the previous tax month.
Payments to HMRC
Under RTI HMRC are always aware of the amount due on a monthly/quarterly basis and are therefore quicker to chase you an employer for any unpaid amounts due to them than they used to be before the introduction of RTI.
Year end procedures
At the end of the tax year a final FPS or EPS return must be made to advise HMRC that all payments and deductions have been reported to HMRC.
Tax planning opportunities removed as a result of RTI
Under RTI it is no longer possible to 'declare' wages at the accounting year end of the business and treat this as though it had been paid throughout the year. In the past this method was often used as a way of tax efficient utilisation of a family member's national insurance lower earnings limit to give them a credit for state pension and statutory payment purposes.
Under RTI this doesn't work because wages have to be reported to HMRC through the RTI system on a timely basis.
Penalties can apply where employers fail to meet their RTI filing and payment obligations.
The size of any penalty is based on the number of employees in the PAYE scheme.
Monthly penalties of between £100 and £400 may be applied to micro, small, medium and large employers as shown below:
- 1-9 employees - £100
- 10-49 employees - £200
- 50-249 employees - £300; and
- 250 or more employees - £400.
Each scheme is subject to only one late filing penalty each month regardless of the number of returns submitted late in the month.
There is only one unpenalised default allowed each year with all subsequent defaults then attracting a penalty.
Rather than issue late filing penalties automatically when a deadline is missed, HMRC have so far taken a proportionate approach and concentrated on the more serious defaults on a risk-assessed basis, but it is not clear for how much longer they will continue with this relaxed attitude to penalties.
In all cases HMRC charge daily interest on all unpaid amounts from the due and payable date to the date of payment.
HMRC may also charge penalties to employers who fail to pay their PAYE liabilities on time. These penalties are ‘risk assessed’ and range between 1% and 4% of the amounts paid late. The first late payment does not attract a penalty.
Automatic enrolment pensions
Automatic enrolment obliges employers to automatically enrol ‘workers’ into a work based pension scheme from a specified ‘staging date’ if their circumstances require this.
The main duties of auto enrolment for an employer are:
- initial and ongoing assessment of the types of workers in the business
- to provide a qualifying automatic enrolment pension scheme for the relevant workers
- write to workers to explain what automatic enrolment into a pension means for them
- automatically enrol all ‘eligible jobholders’ into the scheme and pay employer contributions
- complete the declaration of compliance and keep records.
All employees, including those working part-time and temporarily, are entitled to receive a written payslip on or before their pay day.
The Employment Allowance
Some employers are able to claim the Employment Allowance which reduces their employer Class 1 National Insurance contributions (NICs) by up to £3,000 per year.
The Employment Allowance is available to businesses and charities (including Community Amateur Sports Clubs) that pay employer NICs on earnings of employees or directors. However the allowance is specifically unavailable to companies with only one director and no other employees, or for set off against the deemed payment in managed service companies.
The allowance can be claimed against only one PAYE scheme, even if the business runs multiple schemes. Connected businesses such as companies under the control of the same person or persons are only entitled to one Employment Allowance between them.
We can make these claims for your business if you choose our payroll processing services.