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PAYE online payment ref problem

I have a client for whom I manage a small payroll. Each month they pay their PAYE liability online, on time. I don't believe they have ever missed a due date. However their online banking software doesn't permit the entry of a new reference for an already established payee. The choice is to either establish a whole new payment instruction for each monthly payment (and delete old ones to save clutter in the payee list) or use a generic reference for the established payment instruction. They do the latter i.e. use reference xxxPKxxxxxxxx0000 instead of the period reference in the last 4 digits.

For the last few months we have had a phone call from HMRC Collections stating that my client has not made their payment. I have to check payment details with the client and call back to tell them when the payment was made, they then seem happy.

We even had a letter last year saying that no payments had been made for the entire year and threatening legal action yet when I phoned them they readily stated that there was a £15k overpaid balance on the previous year account made up of a number of payments from the current year ! In the words of Homer Simpson DOH

Am I expecting too much of them to allocate a payment made on 18 October with a 0000 reference to be allocated to month 6 where no previous unpaid months remain ?

Does anyone else have this problem and has successfully resolved it ?

I am reluctant to tell my client they must set up a new payment each time.

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02nd Feb 2011 09:33

Direct Debit

Tell your client to set up a direct debit.

You have to access it through HMRC Online Services each month to set up the amount and the date of payment (last working day up to 22nd, so they would get an extra couple of days), but that is no different to accessing their own online banking.  The only difference is that HMRC invites you (not compulsory) to enter the month reference (1110 for Month 10 in 2010/11).

 For an extra 4 digits of input, your client's problem will be solved.

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02nd Feb 2011 11:22

Or use Billpay ansd a card on the company account

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02nd Feb 2011 11:56

Bacs Payment

I pay by bacs with banking software using a fixed ref each month, my payments have never been misposted and I have never been chased for late or non-payment either.

Try using the ref: xxxPKxxxxxxxx without anything following it, that's in essence how I do it.  You should only add the additional digits if you are not paying the current month or quarter.

:D

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02nd Feb 2011 12:21

Thanks...

3 useful options.

The company don't have a card on the account so we won't try that but it's worth knowing.

Direct debit is a probable route for the future but the client has lost their online login details (I do it all from my agent account) so we'll set that up in time.

I'll try the plain vanilla reference next month and see where that gets us.

I've just returned HMRC's latest call and they had already sorted it !

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02nd Feb 2011 12:26

Timing

I appreciate that this may not have ehelped in your case as something seems to have gone very wrong, but try to have the payment hit HMRCs account between 5 and 19th of the month.  If you pay earlier than this, they tend to allocate it to the month before and then send out a demand.

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02nd Feb 2011 14:59

Precisely!

I had the same problem - was sending payment in a day or two early and causing havoc at HMRC - apart from the usual havoc that is!  I now just ensure that it doesn't leave our bank account until the 6th of the month and all now seems to be ok

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02nd Feb 2011 19:25

Drop the zeros...

It's the four zeros that they're adding to the payment reference which is causing the problem. Get rid of those and you'll get rid of the problem too.

There's no need to add the extra four characters if you're paying for the 'current' month (i.e. if you're paying on time). You only need to add a year and month indicator if you're paying late or early. See here for full details.

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03rd Feb 2011 11:54

Pay early? WHY??

I always make sure my payment goes through by BACS on the last banking day on or before 19th and never have a problem 

Incidentally, what an opportunity missed by HMRC! How useful it would be if agents could submit the payment to the DD system on their clients behalf. I have 28 clients who would welcome that every month! 

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03rd Feb 2011 11:54

Sounds like HSBC...

For a long while you couldn't even delete old bill payments and they still create a new payment each time you change the reference.

I got round this, like the posts above, by simply not adding the month/year reference. I have only had one year-end payment where this caused a problem and the payment was assigned to the wrong year (treated as an advance payment for April rather than a closing payment for March).

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03rd Feb 2011 12:06

DDs for clients

@woodworm

Why pay early by BACS on the 19th, when you can pay by DD on the 22nd?

I agree it would have been convenient to be able as agents to initiate DDs for clients, but provided your clients agree, you can set up their User ID and password for them to gain access to their Online Services and set up their DD mandate on the account they specify.  Then, after you have run their payroll, you log on as them each month and enter a new "payment plan" with the total PAYE for that month due on (the last working day up to) the 22nd of the following month.  Print/save a copy of the confirmation and send it to the client with their payroll.

Simple!  We do it for several clients' payrolls.  The only inconvenience is that we have to log on as each separate client, rather than being able to do it from our one agent logon.

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03rd Feb 2011 16:13

Same here

Had a client in the same boat, though they were using a payment reference with last year's period at the end, so payment was being allocated to  prior year and client getting chased for non-payment.

HMRC officer suggested we did need a period reference as well as PAYE ref but if you didn't want to change it then to just use the month one reference (1101 for current year) each month and it would all be allocated to correct year, which so far seems to be working.

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18th Feb 2011 13:26

Online banks should get with it

Even so, it's pretty poor that the online banking of various banks does not allow you to easily add a varying payee reference suffix. They say it's in the name of security.

For example, to do it with Natwest, you have to effectively change the payee reference each time, making it potentially error-prone. And you then need to use the card-reader system twice, first time to make the change, second time to make the actual payment. Of course, having made the payment you will not need that month's payee reference ever again.

So it's easier to leave the month ref off altogether.

How much easier if the bank could let you choose from a preset list of payee references or just suffixes, say "01-12" plus "Jan-Dec". Also handy would be "Salary, Expenses, Dividend" but they can't even do the monthly option.

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18th Feb 2011 14:35

Not all banks....

HSBC Business internet Banking allows you to change the reference on the fly and in fact make payments on the fly - ie you don't have to set up the payee first. This only works for BACS payments though, so can't be used for same-day payments. But then HMRC can't be done same day yet anyway!  

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