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PAYE inspection - reasonable request?

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I have a client who has been chosen for a random PAYE inspection.    HMRC are asking for a lot of accounting information such as nominal and general ledgers, lists of suppliers, transaction listings with full reference numbers and the names and addresses of suppliers.   

As the inspection is for PAYE, it seems that the request for this info is a bit excessive?  I do not see the relevance of asking for names and addresses of suppliers?  

I do understand that HMRC like to cast a wide net when carrying out PAYE inspections and like to look for things that haven't gone through Payroll.  However, can they ask for anything they like?  Is this excessive?  I just want an opinion really, so I can work out how to approach this.

Replies (13)

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By paul.benny
02nd Jul 2019 10:43

The aim of the inspection is to identify payments that should have been subject to PAYE but weren't. The payroll itself is probably flawless.

Suppliers could include
- 'Self-employed' people who should have been payrolled
- employees receiving round sum expenses
- businesses supplying goods or services to employees that should have been subject to a bik charge
- etc
Transactions listings cover similar ground from a different angle.

So yes, the request is reasonable.

Thanks (2)
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By Rammstein1
02nd Jul 2019 10:45

That does seem excessive to me. The last one I had concentrated on expenses, payroll, DLA, things like that. I wouldn't be inclined to give them all of the information they want off you without a good reason why.

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By Vaughan Blake1
02nd Jul 2019 11:04

The payroll is usually the last and least thing they look at. On the basis that the software is up to date, and there is a system to ensure code numbers are correctly used there is not much else to see. It is all the stuff that should have gone through the payroll or onto a P11D that didn't that they are interested in!

There was a suggestion a while ago that PAYE and VAT visits be combined. I do wonder whether the PAYE folks have a quick look at stuff from a VAT perspective whilst they are at it.

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RLI
By lionofludesch
02nd Jul 2019 11:18

Seems a bit over the top to me.

It's well known that HMRC are far more interested in what's not on the P11s (or their digital equivalent) than what is. But that seems just a bit too much on a first visit. List of suppliers names and addresses ? What's that all about ?

Is there a lot of effort involved ? That's your best route for challenging the request.

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Replying to lionofludesch:
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By Vaughan Blake1
02nd Jul 2019 12:05

I suspect that they will be looking closely at 'suppliers' to see if there are any that should be employees!

If there is not an easy to run off list of suppliers details, then I don't think that HMRC can ask that this be created specially at this stage, they are there to examine the records, and suppliers details should appear on their invoices.

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By paul.benny
02nd Jul 2019 11:21

Turn the question round and ask what might happen if you don't provide the information requested.

I'd also be having a discussion with your client.
- Should s/he be present at the initial meeting with the inspector?
- Is there anything lurking in the records that might give rise to a PAYE liability?
- fees for supporting the inspection and agreeing any liability
- potential penalties
- etc

Thanks (3)
Replying to paul.benny:
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By Rammstein1
02nd Jul 2019 11:48

I wouldn't refuse to give them the information but HMRC need have a good reason to want it. I wouldn't just hand everything over because they request it for a PAYE visit.

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By memyself-eye
02nd Jul 2019 11:34

This will be less about Payroll and ALL about IR35 - the payroll part is a smokescreen

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By Peter Kilvington
02nd Jul 2019 12:20

In a past life, I was the financial controller for an event and corporate hospitality company. We had a PAYE inspection which consisted of 3 inspectors sitting there for 2 days going through all of the invoices. They had never inspected a company in our line of work and started off thinking they had hit the jackpot ... tickets to Grande Prix's, World Cup finals, Champions league finals, helcopter rides; the list goes on. They eventually finished and admitted that they had underestimated the amount of work involved.

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By graeme kempson
08th Jul 2019 11:05

In early 80s was responsible for "computerising in house" payroll of an Accounting Practice, and thus became the interface for the PAYE compliance.
Two items they wanted to follow up. They were both crazy, but one was not the pay to the part time cleaners - self employed for their time, but the £5 or whatever it was for cleaning our towels each week. I did ask them when was the last time a slot machine in a laundrette gave them a receipt?

Ah but what proof did I have that they weren't just doing them at home and they were pocketing the £?? That was the 'quantum' they were prepared to get down to!

Thanks (1)
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By graeme kempson
08th Jul 2019 11:05

In early 80s was responsible for "computerising in house" payroll of an Accounting Practice, and thus became the interface for the PAYE compliance.
Two items they wanted to follow up. They were both crazy, but one was not the pay to the part time cleaners - self employed for their time, but the £5 or whatever it was for cleaning our towels each week. I did ask them when was the last time a slot machine in a laundrette gave them a receipt?

Ah but what proof did I have that they weren't just doing them at home and they were pocketing the £?? That was the 'quantum' they were prepared to get down to!

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By Mikesch
08th Jul 2019 12:09

One of my clients had a PAYE check. They firstly wanted to see whether all PAYE and CIS records were processed and kept correctly and then they checked our supplier and general ledger to see whether anything was missed. The only thing they found was staff entertainment outside of the annual £150 per staff for annual events allowance which has to be paid via a PAYE settlement agreement. So yes, they are very thorough. They knew a lot of things about the company, came well prepared.

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7om
By Tom 7000
08th Jul 2019 18:22

….looking for the self employed cleaner? who should be on the payroll?

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