Small employers should be thinking about their year end filing for 2009/10 in good time this year, as they will need to prepare to file online if they have not done so until now. This year is the first for which online filing of year end returns – forms P35 and accompanying P14’s – is mandatory for small employers – that is those with fewer than 50 employees.
Many small employers have already filed online as HMRC has been offering incentive payments for early adoption of online filing. However, the incentives have now ended, and small employers will be fined next year if they do not file their return online.
Take up in the small employer sector is good – the latest figures from HMRC show that there were 1.9 million employers with fewer than 50 employees as at October 2008 (the last time a count was performed). By March 2009 – that is before the 2008/09 payroll filing season at least 60% of these had filed at least one return online (generally in return for an incentive payment), and by August 2009 1.4 million of these employers had filed at least one end of year return online, representing around 72% of the population.
So what of the remaining around half a million small employers? Will they be ready to file online come April 2010? And what should firms of accountants be doing to capture this market? It is safe to assume that a significant number of these employers do not file online because they do not use computers.
It would be useful to look first at the exemptions. Some employers are exempt from filing their year end return online. The exemptions are:
- Employers who cease paying PAYE during the 2009-10 tax year providing that their Return reaches HMRC by 5 April 2010.
- Employers who are authorised by HMRC to deduct tax in accordance with regulation 34 of the IT (PAYE) Regulations (that is domestic employers operating a simplified deduction scheme - often referred to as the "nanny scheme") and who have not received a tax-free incentive payment for filing online previously.
- Employers who are a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications.
- 'Care and support' employers – that is employers who employ someone to provide domestic or personal services at or from the employer’s home.
To qualify as a 'care and support' employer:
- those services must be provided to the employer or a member of the employer’s family
- the recipient of those services must have a physical or mental disability, or be elderly or infirm
- the employer must not have received a tax-free incentive payment in respect of the preceding last three tax years
- and it must be the employer who sends the Return to HMRC (and not some other person on the employer’s behalf)
There is no specific claim form so employers in categories (3) or (4) should send a written claim to their HMRC office giving full details. If you are contacted by one of these employers it is a case of either submitting a return electronically on their behalf, or advising the employer that a paper return can be prepared and submitted by them.
This potentially leaves a significant number of very small employers who have not filed online before. The most recent version of Employer Bulletin (distributed on paper to all employers) includes a number of articles on the subject of online filing, and plenty of pointers to employers for help with this. HMRC will also be writing to all employers in November to reinforce the message about online filing, so small employers should be aware by now of the changes.
As far as software is concerned, there is the free HMRC product PAYE Online, but many agents consider the paper output inappropriate to send to clients for approval. Very small employers can file online using the Employer CD-ROM. The CD ROM product is only suitable for employers with nine or fewer employees, and they need to use the PAYE calculator on the disc to enable them to file online at the end of the year. More details of this are in the Employer Bulletin. Third party software is listed on HMRC’s site, and the winner in the payroll software category of the Software Satisfaction Awards 2009 was Pegasus’ Opera II product.
So over to you – are you intending to pitch for this market and if so how will you reach very small employers? Do you see this as a useful source of revenue or is it likely to be a lot of work for very little reward? We would be very interested to hear your views.
