Hi there,
I have an issue where my previous accountant has not worked in the employee's P45 pay to date values while running payroll in the previous tax year. They have not even used the right surname for this employee.
I have stopped working with the accountants as of April and have taken things on myself.
Employee is asking me to fix the issue as they did not pay any tax because their salary from my company was below the threshold without the P45 pay to date information.
They are worried about HMRC chasing them but I cannot find anything about such issue anywhere on the web..
The P45 is dated July 2021, now is May 2022 (past the tax year) is there anything I can do about this?
Would appreciate any help. Thanks!
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Would appreciate any help.
Would have thought the best bet was to appoint a new accountant.
You haven’t “taken things on myself”; you’re trying to get some random anonymous internet people (who may or may not know what they are doing) to tell you what to do.
Looks like there’s been a foul up so far better to get professional advice to resolve.
+1.
Being fair to others, I thought to add the following the other day as well:-
https://www.accaglobal.com/an/en/member/find-an-accountant.html?isocount...
The good news = it can all be rectified.
The bad news (especially for your employee) is that doing so is mandatory (not a choice) and will cost ... the 'missing' tax in the case of the employee, and the effort of recalculating each of the wrongly calculated pay periods since your employee started in your case.
As David says, doing those recalculations (and then submitting corrective FPS and EPS files + doing so in such a way as to minimise the penalties that HMRC will levy) is a task beyond anyone who doesn't run Payrolls for a living (and only the more expert of those)!
BTW if your employee is correct (that Tax will now become due on payments received in the last tax year), you will also have a non-Payroll issue to contend with - namely how to extract that money legally from your employee so that you can remit it to HMRC. Don't make the mistake of offering to pay it for her/him without checking the precise details with your Payroll expert (once appointed), otherwise the tax that you pay on behalf of the employee is likely to be treated as employee earnings - and so be subject itself to further tax and NICs!
You talk about FPS and EPS, but last time I checked there is no option to go back a financial year and rectify the P45 information. Please correct me if I am wrong. The problem is that previous accountant used their own payroll software and there is no way I can go back and fix it unless I was to pay them again.
I know how to do FPS, earlier year update and such and know ins and outs as I had to fix few issues already- but nothing I can see anywhere about P45 information and as far as I am aware HMRC guideline is "if you had no P45 information at hand not to worry".
I know that they will try to resolve things directly with the employee in cases like this but am trying to save some trouble on their side.
Thank you for your insight anyhow.
I know how to do FPS, earlier year update.
Is there still an option to file EYU? For Tax Year 2021/22?
Londoraqb wrote:
I know how to do FPS, earlier year update.
Is there still an option to file EYU? For Tax Year 2021/22?
EYU's have gone, apparently. Replaced by refiling FPSs, so I've heard.
Not quite accurate ... but too boring to go into all the details here.
FWIW the replacement to the EYU (that still exists as an option IF the year needing correction is prior to 2020-21) looks like an FPS but is a special 'instance' of one of those.
In other words it has the same file format/contents but different rules for how some of those data items are to be completed - and, most importantly, is only filed as a replacement for the final FPS previously submitted for the relevant tax year (not all the individual FPSs during that year which may turn out to have been wrong)!
The absolutely key difference to an EYU is that you now file the correct YTD values (not the delta, or difference, values as required for an EYU).
Just checked all the records and employee did not share it until after the tax year passed. I believe in this case there is nothing I can do but let HMRC send the P800 to the employee- am I correct?
Just checked all the records and employee did not share it until after the tax year passed. I believe in this case there is nothing I can do but let HMRC send the P800 to the employee- am I correct?
Happen - what did the employee declare on his starter's declaration?
There is a chance that HMRC will issue a P800 directly to the employee showing the shortfall of tax. You might want to warn him/her of the situation. That will take you out of the issue. It will be between HMRC and the employee.
Agreed, that would be a good outcome. Same would apply if the employee completes a self assessment tax return.
Follow on question out of interest though - In the event of a P800 being issued or a SATR identifying a liability, HMRC is pursuing the employee to settle the underpaid tax. Does anyone know how often HMRC follow up with the employer to find out why the tax calculated was too low, and therefore get into the realms of penalties for the employer?
It *should* be clear to HMRC (due to RTI) that the current employer has operated PAYE correctly on the earnings within this employment - subject of course to not having had sight of a P45 for previous employment figures.
A lot rests on that 'should', but I'd not expect any attempt at raising penalties on the current employer (and they'd be easy to fight off if issued by the system).
Hi, yes, the first thought that crossed my mind was this- that I do not really have to do anything as HMRC will treat it as if P45 was not provided on employment start for the employee.
I was hoping if I could save the trouble for the employee by taking pre-emptive action now that I am aware of it. I've looked at all options available through payroll softwares but they are all telling me it's not possible to go back a year (especially which was not filed using the said payroll software) to update P45 information that was supposed to have been entered before enrolling the employee on the payroll software.
Similarly, HMRC earlier year updates would only allow me update whatever was between my company and the employee and have no option anywhere to update the P45 information for the previous tax year.
Is letting the HMRC naturally play out its procedures via P800 the only way around this then do you think?
What was the start date and what starter data was provided?
Regardless of whether the payroll provider should have entered the YTD figures from the P45, HMRC should have issued a revised tax code the following month and the correct tax should have been paid under the PAYE system.
In any case the employee owes the tax. If you have made a loss then make a claim/complaint against the provider.
At 15:10 you said...
Just checked all the records and employee did not share it until after the tax year passed. I believe in this case there is nothing I can do but let HMRC send the P800 to the employee- am I correct?
Well, firstly your question suggested the accountant was in the wrong for not entering the information. This is perhaps a little unjustified and a misrepresentation.
You later suggest that you do not wish for that accountant to correct the error because they will charge again - something that, on current information (15:10) now seems perfectly justified.
If your employee failed to provide the P45 until after the year end (you state the P45 was dated July 2021, but not when they actually started), then I'm afraid the employee has a tax liability that would have been paid earlier - had they acted sooner. You may also incur interest.
Notwithstanding the above, and as others have explained, you should have received a P6 coding notice (on paper or online). Was this sent to the accountant? If they weren't your registered PAYE Agent, they would not receive any notification (online).
Now you need to resolve it, and rather than pay someone to do it, you've come here.
I'm afraid that any sympathy I may have had for you, or your employee has evaporated as a result of this single post (15:10). We've gone from suggestions of 'accountant negligence' and the impact that's had on a 'poor helpless employee'... to finding out the 'neglient accountant' couldn't have submitted information because the 'poor helpless employee' didn't provide it.
Please pay an accountant (or your last one) to sort this out. If you don't you're taking a risk. I appreciate you believe you know all there is to know but, this thread would suggest you don't.
At 15:10 you said...
Well, firstly your question suggested the accountant was in the wrong for not entering the information. This is perhaps a little unjustified and a misrepresentation.
Yes, an apology to his Accountant on here wouldnt go amiss would it.
OK, so after extensive digging, I can see from records that:-
1. employee did not provide P45 at start, but provided it few months later into the employment.
2. I passed this on to the accountant and it was completely neglected.
I was not so well versed in payroll back then and had full trust in the accountant to guide me (and hence paying them!). Plus the past 2 years have been very dramatic with COVID, etc. I could not remember exact details of everything until I dug out all emails in the past 12 months.
Having called the HMRC, I'm told to treat it as if P45 was missing and let it play out but do warn the employee of additional tax payments. However, the person did not sound so confident about this so I'm a little weary/lost still.
Anyone with similar experience with P45 being outside the tax year- can I relax now and let HMRC send the P800 to the employee in question?
OK, so after extensive digging, I can see from records that:-
1. employee did not provide P45 at start, but provided it few months later into the employment.
2. I passed this on to the accountant and it was completely neglected.
I was not so well versed in payroll back then and had full trust in the accountant to guide me (and hence paying them!). Plus the past 2 years have been very dramatic with COVID, etc. I could not remember exact details of everything until I dug out all emails in the past 12 months.
Having called the HMRC, I'm told to treat it as if P45 was missing and let it play out but do warn the employee of additional tax payments. However, the person did not sound so confident about this so I'm a little weary/lost still.
Anyone with similar experience with P45 being outside the tax year- can I relax now and let HMRC send the P800 to the employee in question?
Have you said yet what the employee said on his starter declaration ?
Did he tick Box A, B or C ?
If A, it's all his problem.
If B or C, there might be a case against the employer.
IF a starter checklist was completed then B should have been selected (based on the info above) in which case employer (or at least person running the payroll) should have used the W1/M1 tax basis rather than the default cumulative basis.
If the checklist wasn't provided or the tax basis wasn't correctly applied, then that is the employer's "fault" - but in moral terms not as in likely to incur a penalty from HMRC.
Let's hope that the employee had no outstanding SL type!
Just to cover some of the bases...
1. What was the employee's start date?
2. Did they work elsewhere between July 2021 and starting with you?
3. What was the statement on the starter form (A, B,or C)?
4. When did the employee pass you the P45?
5. When did you pass the P45 to the payroll provider/ accountant
6. Did you receive a P6 for the employee?
7. Did you pass the P6 to the accountant, and when?
8. What tax code (or codes) was (or were) applied to the employee?
9. Overall... have you actually confirmed that the is tax actually wrong (and quantified it £1s, £100s, £1,000s) - particularly if there were gaps in employment?!
The above may yield answers appropriate to the case. At this stage, it is unclear as to whether the accountant is at fault, and whether they, should potentially be expected to correct this FOC.
IF for example...
... The employee started on 1 Feb 2022,
stated they had no previous employment in the 2021/22 tax year provided a P45 on 31 March 2022 which you passed onto the payroll provider on 30 April, and despite you receiving a P6 on 19 March 2022, you didn't pass it on...
THAT would be an entirely different scenario to...
... The employee started on 1 Aug 2021,
stated they did have previous employment in the 2021/22 tax year, provided a P45 on 31 August 2021 which you passed onto the payroll provider on 1 September 2021, and you received a P6 on 19 September 2021, and you passed it on immediately.
In the first case, berating your accountant's lack of ESP is unprofessional. In the latter case, your accountant may well have failed to act correctly.
You do say you've had to correct a number of issues. There can be a number of suggestions for the reasons behind this... your accountant was the problem (get a new one), your internal systems were the problem (get them sorted and appoint an accountant/ payroll provider). Neither would suggest you take it in house if you don't know what you're doing.
Whilst I admit, there are many carp 'accountants' (loosest expression of the term) out there, I can categorically state that the problems I have to resolve are the provision of accurate and timely information by clients (and their employees) I charge clients a few quid per employee pcm (usually 'at cost') to process payroll... that does not cover me ensuring the employees' entire tax affairs are correct (or, for that matter, second-guessing what is included in documents they don't provide).
Finally, would I act on a P45 supplied in April, for the previous tax year, where an employee has a gap of 6 months between P45 and commencement? Possibly not. If the employee ticked the wrong box on the starter declaration, and if no P6 was issued (or provided), I'm not going to make things up and 'fudge' an employee tax code based on what I 'think' may have happened. I'd have done all I can without the aid of a crystal ball. Although if that employee wanted to pay for tax advice, and assuming there were no conflicts of interest, I may consider it... but only *may*!
Sorry for not leaving direct replies but thanks to all who shared their thoughts with me!
I've caught up on every issue and the problem was in 2 ways.
1. I had no idea back then how everything worked and expected the said accountant will advise me on all payroll issues (as they were getting paid to do this!). They had not told me anything about a P45 nor a Starter declaration form and sort of just went on without asking the key questions.
Luckily enough only one staff member is affected as the accountants we had before the one in question had done everything according to standard procedures for us back in the days.
2. The employee started in July, gave us the P45 in September, passed this on and it was not recorded by the accountant.
Anyhow, now it is quite clear to me that it will be treated as if the employee started working with the P45 missing, and that HMRC will send a P800 to the employee to apply correct amount of tax owed to the employee if need be. I have explained it all to the employee in question.
Again, thanks for your insights to everyone that replied to my post! I wish you all all the best.
STOP PRESS ... HMRC (subtly) change their guidance yet again. Yesterday's edition of Agent Update contained the following mini-article:
"Tell HMRC about a new employee.
When adding a new employee onto your payroll system you should use the employees P45 information to record their previous pay, tax and student loan (if applicable).
If the employee does not have a P45, you can use the starter checklist available.
After the starter checklist is added and submitted on your full payment submission (FPS) only use any tax code or previous pay or tax changes received directly from HMRC.
If you use the starter checklist to add the employee onto your payroll records and you receive the P45 after you have submitted your first full payment submission, you do not need to update the previous pay, tax, or tax code on your payroll software, only update student loan details (if applicable)."
You may notice the absence of any indication as to which 'instructions' are mandatory and which optional (weasel words abound), but I guess they've been bitten too often with the frequent flip-flops.
The good news for OP is that:
* employee did not present P45 in time for first pay-run - and, despite the fact that we would all have reverted to the Starter Checklist, HMRC only refer to the possibility ("can use") not mandation to do so;
* and they categorically state "you do not need to update the previous pay, tax, or tax code on your payroll software (from the P45)" if the P45 is received after the first FPS has been submitted.
Thank you for pointing out the update Hugo!
Which would then suggest we (by which I really mean the employer) are reliant on HMRC advising the employer if the Tax Code being used is incorrect.
This thread has asked the question of the OP (regularly), yet it has been completely ignored. Has a tax code notification (e.g. P6) been issued... and if so, was it passed on?
As the new employee started in July 2021, I'd be inclined to believe one was issued if relevant (HMRC seem surprisingly efficient at this). The remaining question is 'how' (post, electronically) and to 'whom' (OP, accountant, previous accountant), it was issued AND whether the details were actually relayed to the (current ex) accountant/ payroll provider. It wouldn't be for the provider to 'ask' for this info... any half decent agreement would put the onus on the client to send all relevant documentation and correspondence!
I do find it quite amazing that the OP has a number of employees but was not aware that a P45 may be required due to his current accountant not advising him(?). But then I have - in the past - had clients take issue with the fact I didn't prepare contracts, staff handbooks, policies, risk assessments, or handle disciplinary matters... as part of a payroll processing service.
I've long ceased being amazed by how poorly understood HR/Payroll/Pensions is even within large organisations.
One of my favourites (prior to the pandemic so no excuses) was my son noticing that his last few payslips suddenly had SL deductions. He worked for a large Whitehall ministry who (like so much in govt) outsourced their Payroll - which didn't make communications easy - but I suggested that he ask them for sight of the SL1 that they must have received in error.
Long story short ... it turned out there never had been an SL1 - just a temporary employee who had decided 'if he has a degree there should be SL deductions', and so set them up!
No apologies ever received (and I had to call in a favour at senior HMRC levels to get the repayment expedited - as it was beyond the capabilities of the outsourced payrollers to reverse the invalid deductions/submissions, and SLC couldn't do anything because they'd received nowt as my son had no account with them)!
Back to OP ... I totally agree that I would've expected HMRC to issue a Tax Code Notice after the first (1 or 2) FPS that included the new employee.
The better payroll products can be set to auto-read/process such notices ... but if that's not the case here then it seems likely that there's been a(nother) failure in communication between employer and processor.
Your point about an employer being "reliant on HMRC advising the employer if the Tax Code being used is incorrect" is of course valid.
Indeed Payroll is entirely dependent on following the rules and notices issued by HMRC (which is why I groan so loudly when people tell me they've just 'corrected' the tax code/basis or whatever)!
What even fewer seem to realise is that PAYE is only the means by which HMRC attempt to collect roughly the right amount of tax at a point in time ... relying on the Y-E reconciliation to make adjustments and, now, the increasing use of in-year P6s to get those adjustments made in a more timely manner.
Hi Hugo
Thanks again. It's great to hear incorrect PAYE processing occurs in Whitehall as well?!!!
On your point, a for clarification for the OP...
"The better payroll products can be set to auto-read/process such notices ..."
Many payroll products do but, only if the payroll processor is either... the employer using the employer gateway ID, or... an agent who -and I will happily stand corrected - needs to be *acting* for the employer (i.e. not on a 'file only' basis). The latter would, of course, require a further process, or if initiated by the agent -processes (should codes become 'lost' - in the post, or by the client) - and subsequent bilateral communication on behalf of the employer and the agent! The number of times I receive codes 3, 6 or even 12 months after the event, that clients 'never received' and that have been chased, and re-requested!
I'm afraid, the latter step is the one that so many clients (and some payroll providers) fail to grasp the significant importance of... "you [/we] can file without so why is it needed?".
Agree - on all points.
Your final para illustrates the (t)error engendered by those only focussed on the minimum effort to complete 'ticking the boxes' as an activity in itself ... irrespective of quality or relevance of what was submitted as part of ticking a box.
Unfortunately this is becoming more prevalent as part of the 'race to the bottom' - which is another reason why I fear for the outcome of MTD!