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SMP advanced payment, then HMRC debt chase letters

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Our clients are mostly your typical one director/shareholder on NIC threshold salary. Occasionally they get pregnant, we help with SMP calcs, then do advanced payment request (as no PAYE liabilities to offset against). All fine so far, and we're typically happy enough that the figures arrived at make sense.

However, on more than one occasion now, a little while into the SMP period, the client starts getting snotty debt collection letters from HMRC. We look at the HMRC portal, and it's a bit of a mess with credits all over the place, but generally speaking all looks square. Overall amount due to/from the client doesn't tend to match the claim.

I'm assuming this is just some weird timing thing (possibly our fault with slightly wrong date on advanced funding form, possibly just HMRC being daft), where maybe the SMP is "earned" a month later than our advanced payment claim suggested. Ie by the end of the SMP period, all should square up nicely, but potentially part way through we're a month out so it superficially looks like HMRC are due some money back. We've tended to suggest clients ignore it on this basis, in anticipation it will resolve before HMRC get too grumpy about it.

This has happened on more than one client now. Just wondering if others experience this and/or can shed some light on it?

Replies (10)

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By Grayson Moore
16th Sep 2019 15:30

We had a similar issue. It was ultimately down to the RTI submissions not correctly reflecting the SMP and advance funding as a box hadn't been ticked appropriately in the payroll software.

Have you checked the EPS submissions to make sure they are correct?

Thanks (2)
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By paul.benny
16th Sep 2019 15:31

No direct experience of this-but reading from a different context, it may be about how HMRC match up payments made to the amounts due. If you pay an amount different to what their system considers due for a particular period, or if the timing doesn't match, their systems my misallocate - with the result that it thinks you're then overdue.

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By Maslins
16th Sep 2019 15:48

Thanks both responders to date:
- Grayson Moore - payroll submitted from FreeAgent, unsure if/how we can check further details. I've checked and we definitely put the "pay" in the SMP box for all relevant months (ie haven't mistakenly put it as "basic pay"/similar).
One thing perhaps worth mentioning...typically in the first and last months of SMP, we do include a basic pay figure, based loosely on the SMP. Eg if timing means the individual gets half a normal SMP payment in the first/last month, we'll equally give them half what their normal basic pay would be. So those months they get both basic pay and SMP, albeit modest amounts of both.

- paul.benny - in this situation (and most we get involved with) there is only SMP, as there's just the one employee on the payroll. So I don't think it can be a mix up between SMP amounts and other PAYE amounts (as there aren't any other PAYE amounts).

I'm hoping it's just a timing issue and will resolve...but the client's getting nervous at receiving aggressive letters. All HMRC PAYE webchat bods been busy all day, and I don't fancy wasting time trying to call them when portal looks ok.

Thanks (1)
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By lionofludesch
17th Sep 2019 09:25

I've had this. I gave them a call about it and we agreed it was all blocks and everyone went away happy.

Thanks (3)
By Wieslaw
17th Sep 2019 10:37

Happens quite regularly in our experience.
From what I understand the SMP funding is shown on the monthly EPS, but does not reconcile with payments received by HMRC, when the employer pays each quarter. Normally the next payment the employer makes in the following quarter reconciles the values.

Thanks (3)
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By claudialowe
17th Sep 2019 10:40

Yes I've had it as well. Lots of phone calls to HMRC, who agree that my payroll figures are correct (Moneysoft). Finally it all comes good in the wash, but lots of aggro along the way :-(

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By clark.hall
17th Sep 2019 11:11

Yes this is a regular issue. I keep detailed PAYE reconciliation records during SMP claim periods. And one reason I charge for additionally for SMP claims - keeping fee to about the same as the 3% compensation

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By Maslins
17th Sep 2019 12:38

Thanks all! Sounds like we're doing things broadly right and it is just HMRC being daft.

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By NYB
17th Sep 2019 13:58

Dealing with this today. Firstly I found out that if a P30 is done on a quarterly basis the EPS must be sent month by month. Secondly HMRC only update twice a month which can cause delay I sent an EPS on the 5th and they update on 6th & 19th. Consequently them and I think it has missed the 6th update and will momitor through. But it is annoying when the client keeps getting letters when the issue has been sorted.
I like the respondent who charges more. I find this advance funding takes a lot of time and record keeping. I shall certainly do this next time round.

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Replying to NYB:
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By Maslins
17th Sep 2019 15:19

NYB wrote:

Secondly HMRC only update twice a month which can cause delay I sent an EPS on the 5th and they update on 6th & 19th.


Ah, maybe this is relevant for our case. We tend to submit payrolls on 20-25th of the month, with processing date of 25th. If that only gets picked up on 6th, then as at the end of the payroll month, they won't show the SMP as having been earned.

Other than us submitting the payroll even earlier (reluctant to do as we submit all client's together, and earlier we do it more risk of grumpy clients wanting late changes), or HMRC sorting their systems, seems we/the client have just got to lump it.

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