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<b>Tax Feature:</b> Preparing for PAYE online filing 2006. By Rebecca Benneyworth

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14th Feb 2006
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We are now less than two months away from the end of the PAYE year, and employers' thoughts should be turning to online filing, and preparations necessary for this year's filing process.

More employers are required to file online this year. The rules now include employers with more than 49 employees as at the count date last autumn. There is no necessity for employers to count the number of employees that they have ' this was done in late October by HMRC, and notices requiring employers to make a return online were sent out during November 2005. Some employers may not have registered what these notices were, but a little thought, and perhaps a look in a long buried in-tray will reveal the answer. Any employers in doubt about whether they are required to file online could check with HMRC now to be sure.

Those employers not required to file online will be the smallest category of employer, and these employers (with 49 or fewer employees) will once again be able to claim a tax free incentive payment of £250 if they successfully file online. However, since last year's PAYE year end, HMRC is quite rightly paying more attention to those employers who intend to abuse the incentive payment arrangements.

Employers who pay earnings solely to exploit the system may find their incentive payments blocked by anti-avoidance regulations introduced in March 2005 ' in some cases too late to prevent abuses last year, but in plenty of time to stop the same problems this year end.

While on this topic, it is worth noting that following evidence of abuse of the system last year, HMRC announced in January that all the £250 incentive payments for last year were now being scrutinised in detail before any further payments are made. This will only affect those employers with a nil liability for both last year and this year. Employers in this position may now have to wait a further one to two months to receive their payments.

So what should employers be doing to get ready for the year end? It is wise to remember that the level of accuracy of this year's data will need to be better than last year. This is because ERIC, the employer master file system, was not in use last year, as it was still being updated. ERIC's unavailability caused the delays to online processing as data filed during April and May last year had to be held in limbo awaiting completion of the update. The data was then processed late in the summer. Thus any problems arising at that stage did not present employers with a rejection on filing, which may be the case this year.

Help is available in a Table produce by HMRC which is available in both Tax Bulletin Issue 80 and the recent copy of Employers Bulletin. This shows the most common errors in returns last year, to help employers eliminate these so that they do not cause hold ups with filing.

Employers can also 'test in live' certain aspects of their payroll before they are ready to file the year end return. This will allow validation of some of the data during the time the payroll is being prepared for year end. Test in live is not available for third party software until after 5 April, but for those employers intending to use the free HMRC software, they may be able to test their payroll data before the end of the tax year. Larger employers with mandatory filing responsibilities are recommended to test standing data such as National Insurance numbers before filing the entire return.

Agents will be glad to know that it is not necessary to have a client authorised using form FBI2 if you are only going to file his return online. However, this would not give you access to any other PAYE data in respect of that client. If you wish to go for full authorisation then the online process works in the same way as that for Self Assessment.

Following your application online, a code is sent to the employer, who must forward it to the agent. Once this code in input, the authorisation is complete. Agents might usefully check their clients lists now, so that any problems can be rectified in good time.

Employers should also bear in mind the significant potential for capacity problems presented by such a short filing window. With Easter and May bank holiday, employers have just 29 working days to test and file their returns. Taking into account dates which HMRC recommend that you avoid ' that is 6th and 7th of April and 18th and 19th of May, that leaves just 25 working days!

Good Luck!

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    Replies (8)

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    avatar
    By mail.taxperfect.co.uk
    25th Apr 2006 11:17

    How do I do the "simplified" filing for agents?
    Rebecca,

    You say "Agents will be glad to know that it is not necessary to have a client authorised using form FBI2 if you are only going to file his return online. However, this would not give you access to any other PAYE data in respect of that client. If you wish to go for full authorisation then the online process works in the same way as that for Self Assessment.

    Following your application online, a code is sent to the employer, who must forward it to the agent. Once this code in input, the authorisation is complete. Agents might usefully check their clients lists now, so that any problems can be rectified in good time."

    I have looked on the HMRC website but cannot find any reference to this "simplifed" procedure so can you please direct me to the correct place?

    Also, how do I get hold on the free software?

    Many thanks in advance.

    Colin

    Thanks (0)
    avatar
    By User deleted
    14th Mar 2006 13:51

    Hard copy for approval
    I note Rob’s comment on 15 Feb and is a fantastic idea.We use Iris and we have been informed that we cannot get a full print out of the P35 to send for approval. If it is this true it is hard to believe?

    We can only get it having filed it online, which is too late!It seems we are unable to get page 4 of the return i.e. cannot get the clients to complete the checklists and declaration.

    I find this hard to believe and surely Iris has misinformed us.Any iris user out there? Would appreciate comments as to how you are planning ahead.

    Thanks (0)
    avatar
    By User deleted
    15th Feb 2006 13:46

    How do you verify p35 forms ?
    If Agents are filing P35's electronically, how do they obtain client signed confirmation that the details and tick boxes are correct? This must presumably be required, not least for professional indemnity purposes.
    Last year, I obtained client signature on manual forms P35 before submitting electronically but cannot do so this year as HMRC have barred the issue of manual forms P35 when electronic lodgment was used last year. What do I do ?

    Thanks (0)
    Stephen Quay
    By squay
    15th Feb 2006 15:34

    P35 Verification
    Terry, I did the same as you last year - completed the paper P35, got the clients to sign, then FBI. However, one client lost the completed P35 and I hadn't photocopied it first! I compiled a letter with the relevant questions and answers and attached a hard copy of the printout from the software. They signed this so I felt I was in the clear audit wise.

    I also have a client who is a posssibly caught by IR35 but he doesn't think so. I always make him tick his own IR35 box on the P35.

    A stongly believe some form of declaration from the client prior to submitting is a must to avoid possible arguements later if anything goes wrong.

    Thanks (0)
    By Kate Upcraft
    16th Feb 2006 11:03

    shapshot letters
    just a quick note: the employee counts in November 2005 were not for 2005/6 but for 2006/7. The classificaiton for filing for 2005/6 returns was sent in November 2004 as it has to be completed by the 30th December before the commencment of the tax year that the returns will be due for.

    Thanks (0)
    avatar
    By LJCWBW
    17th Feb 2006 08:43

    Incentive payment received
    Yes, my business has received the incentive payment for last year - I received it last week! But only after asking for it twice.

    On the 2nd time the helpful Revenue employee said to write in and claim which I did - it came within days. She said that they were so far behind that they were giving separate written requests priority.

    So a firm I do some freelance work for did the same thing and wrote a letter listing all their payrolls which had not received payment and cheques are now coming through.

    Thanks (0)
    avatar
    By User deleted
    15th Feb 2006 14:57

    Hardcopy
    Print off hardcopy of whatever you are submitting. Any approved software will have the facility to do this. Get client to sign it and - hey presto - the audit trail is complete.

    Thanks (0)
    By EMichaelJakins
    16th Feb 2006 17:07

    Incentives
    Hi

    Has anyone had their incentive payment from the IR for making an online return?

    Michae.

    Thanks (0)