I have discovered a coding error in payroll for a couple of starters a few cycles back - basically their starter statements were mixed up, so one was on BR and the other on 944L resulting in underpaid/overpaid PAYE for each. Both were issued P45s on the last payroll.
I have already filed the final FPS and also the year end declarations.
Sage tell me I can 'probably' file an FPS adjustment (roll back employees and redo) - however, the support person mentioned I would also have to refile the year end declarations, although I can't see the logic for that as those answers are unaffected.
The alternative is to wait until next week and file an earlier year update, which avoids the issue of refiling the declarations.
Which should I do?
Also, Sage tell me I shouldn't reissue the P45s - is there a clear black and white rule from HMRC not to reissue where there has been a mistake?
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Replies (14)
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Further FPS
You should file a further FPS showing the correct figures, although the overall figures might not be affected the two individual ones will be. I do not think that you are supposed to issue a revised P45, you should (I believe) write a letter to the employee showing the correct figures. But you then have a problem in having to retrieve the overpayment from the person that has left. The FPS must be submitted by 19th April, otherwise it will need to be an EYU.
Let sleeping dogs lie
If forms P45 have been issued to the two employees affected, it is out of your hands. In due course, HMRC will issue P800 calculations to the two of them showing the over- and under-payment of tax. When their next employer files their P45 details, HMRC will issue the next employers with the correct codes.
Similar position
I am in a similar position and need to decide which option, FPS v EYU, will cause least headaches - EYU is currently ahead as no need to refile end of year declarations (I know that's only a button click, but I don't want the possibility the client's RTI record may be messed up by refiling). I can't see any downsides to the EYU?
Re-submitting EOY declarations
Sending a corrective FPS or EYU does not automatically mean that you need to re-submit your end of year declarations if they have already been sent.
You only need to re-submit the declarations if the changes you make, either on an FPS or EYU, mean that the responses to the original declarations are no longer valid.
As mentioned in the previous replies, you shouldn't re-issue the P45 to the employee, HMRC should pick up any discrepancies and deal with it accordingly.
Regards
Gary
Sage (UK) Ltd
Hi Gary, thanks for the reply - however, I can't see how any rolling back and updating payroll would affect the year end questions (free of tax payments/third party expenses/outside UK/paying third party/P11d/Service company)?
Hi geroge, I agree, it's unlikely that correcting errors would require a re-submission of the declarations but it will depend on what kind of error, or omission, you are re-processing.
Regards
Gary
Sage (UK) Ltd
Hi Gary, the error is as described in the OP, just an incorrect tax code used for a couple of people.
I was more worried that having filed the year end declarations that an FPS adjustment may 'invalidate' the declarations and hence require those to be refiled (I really don't know how HMRC's systems deal with these things).
One of your support staff, knowing the adjustments I needed to make, said I definitely would need to refile the declarations in any case; so in view of the confliciting advice, although I am sure you are correct :) , I think I will wait to file an Earlier Year Update, as that is a simple refiling of an adjustment to the last FPS filed for that year, and does not involve the year end declarations.
I can't see any downside to doing that?
Same here
We had additional CIS suffered to put on after we had submitted the yearend declaration. We were advised by Sage support to resubmit an EPS with the new ytd CIS suffered and then do the yearend declarations again.
Hi geroge and Kazmc,
Sending either a FPS or an EPS after the end of year declarations have been sent will not affect those declarations within HMRC's systems. HMRC only ask that you do re-submit if the they are now invalid due to the corrective submission.
There is absolutely no harm in re-submitting if you wish, but there is no technical requirement to do so just because you have sent a further FPS/EPS.
Whether you choose to make a correction to the previous year's information via an FPS or an EYU makes no difference to whether or not you should re-submit the declarations, so it is up to you which way you prefer to do it.
Regards
Gary
Sage (UK) Ltd
Hi Garry, thanks for the clarification As an aside, the link http://www.hmrc.gov.uk/payerti/reporting/late-reporting.htm#2 under the section "inaccurate returns' states:
"But penalties may be charged after the end of the tax year if there is an error on the final FPS for the year, or a failure to correct earlier errors by the year-end"
I'm not sure if by "year end" they mean 5th April, but that would be silly as the final EPS deadline is 19th April. However, even if we assume they mean 19th April, does that mean filing an Earlier Year Update may incur a penalty?
Error?
I am not sure why you feel your errors have to be corrected with HMRC.
If you actually paid the employees using those codes you have filed correctly and as Euan says it is now down to HMRC to do a calculation and repay one of the employees. They will also decide if they need to pursue the underpayment - if it is within the de minimis they won't do anything to collect it.
If you had reported incorrect figures in comparison with the amounts physically paid to employee I would agree you need to file corrected submissions but that does not seem to be the case
mhtax, the error (e.g. using wrong starter statement) needs to be corrected for the employee and also HMRC so everything matches up.
The filing was correct (in the sense we filed the data processed), but the wrong data was processed and hence correction needed. That is why there is an EYU facility..
HMRC do expect errors to be corrected - see first para at http://www.hmrc.gov.uk/payerti/reporting/errors.htm
"Sometimes though, mistakes will happen - and if they do, it's very important that you correct them."
error
appears to be using incorrect codes but doing it properly.
You have never been able to go back to an employee, never mind an ex employee, and ask for money back for the previous year.
All the examples following your link relate to errors in dates, errors in the amount of pay reported, errors in the classification of payments or NIC.
As long as everything other than the code used was correct I still think no correction is required
Thanks mhtax, I agree there is little in that link relating specifically to a mistake by the employer in using an incorrect tax code, but their general guidance does imply mistakes need correction.
Clearly they allow for cases where the mistake is not corrected, when they refer to errors made in good faith etc in deciding whether to collect tax from employer or employee, but I'd be interested if it is clearly stated that code errors should not be adjusted and HMRC instruction sought instead.