Has the System been properly tested? 

We have all been advised that Electronic Filing is the "Way to Go" and that would make a lot of sense, but .....

Has HMRC actually undertaken Comprehensive Testing of the software and processes involved? Many would say that there appears to have been a less than rigerous level of testing of the electronic filing process.

There has been considerable web chatter which indicates that PAYE references which begin with a "0" ( zero ) suffer from problems when Payroll Bureaux or Accountants attempt to access or submit information. The HMRC system refuses to allow access to these references. In view of the fact that it is HMRC who actually allocate the PAYE Reference Numbers, it could be regarded as less than satisfactory that this electronic filing problem was not spotted before the system was deployed to the general public.

For the Year Ending 5^th April 2006

15% of Forms P14 are not “TRACED” by HMRC

This means that Billions of Tax & NI Contributionsare not recorded against the Individual who paid them. 

HMRC have two basic responsibilities in relationship to the PAYE system. The first is to ensure that Employers deduct the appropriate amount of Tax, NI Contribution, etc. in relationship to the Income paid and declared on the Form P14. There is an associated requirement to ensure that such sums deducted by an Employer are properly paid to HMRC by the end of the Income Tax Year. The second responsibility is to review the liability of each Taxpayer and ensure that the Tax, NI Contributions, etc. deducted by Employers is correct and in accordance with the Individuals personal circumstances. This review can clearly only be conducted when HMRC have details of all the Individuals Income for the Tax Year and details of the various deductions which have been made, information available on Form P14. 

The Residual File is the location where HMRC places those Forms P14 which it has been unable to trace & post to an Individual person. This may be due to a number of circumstances, such as the National Insurance Number on the Form P14 being missing or perhaps the fact that the NI Number appears to relate to another person. Regretably at the eand of each Tax year, the Residual File is cleared down, inother words it is wiped clean and the information deleted. Not a ver satisfactory situation.

Regardless of the reason, the fact remains that Forms P14 in the Residual File represent a situation where the Payroll Department have:

 a) Sent valid information on Income, PAYE Tax, Student Loans, NI Contributions etc. on a Form P14 to HMRC

b) HMRC have received and confirmed that the Form P14 is accurate, arithmetically

c) HMRC have confirmed, by cross checking the Form P14 with the related Form P35, that the monies deducted have been recovered from the Employer. 

The failure to trace these Forms P14 to an Individual means that HMRC have not performed an annual review of the particular Taxpayers liability for the Income Tax Year in question. This has been estimated to involve some £3.2 BILLION pounds !!!!

Do they know what they are doing? 

Phil Nilson, a senior member of the HMRC’s Customer Care Team recently let slip that the new HMRC policy was to inhibit the submission of PAYE End of Year electronic submissions where there was a NIL P35 return to be made.

He went on to elaborate that this inhibition ONLY applied to submission made using HMRC’s own Internet facility. Those Employers and Payroll staff using either commercially available software or the Electronic Data Interchange method could continue to make NIL submissions

The reason for this difference in treatment, he went on to say, was to try an stop Incentive Payment for filing Electronically, being made to PAYE Schemes who were making a NIL Return.

HMRC do not appear to have fully understood the fact that a small Employer, in other words a single PAYE Scheme, may be in the situation where in previous years they were making End of Year submissions with Tax and or NIC paid, but in this particular year, this is not the case and a NIL return is appropriate.

It is a rather strange situation that encourages Employers etc. to utilise Electronic Filing, to the extent that Incentive Payments are made AND THEN to attempt to reduce the expenditure bill by denying it to those PAYE Schemes where a proper NIL return is due.

Using knowledge and commonsense, perhaps a strange concept to Mr Nilson and or his colleagues, HMRC either want an End of Year Return or they don’t and they either accept it electronically or they don’t. The idea of subdividing and categorising would appear to indicate just what lip service is being paid to Customer Care.

Should HMRC be allowed to refuse a submission just because they want to cut down on the ridiculous amount of money they have committed to Incentive Payments?

Let us know what you think.

EDI Submissions

It would seem that those using the Electronic Data Interchange route for the submission of PAYE End of Year information are costing HMRC a small fortune. They are also, no doubt, makeing some employees of EDS very happy.

Why? EDS are the commercial operators of the "computer gateway" through which those Employers who use the Electronic Data Interchange facility must pass End of Year submissions to HMRC. Needles to say HMRC have to pay for the facility and current indications are that this is set at about 20p per Form.