Payroll filing and compliance 2009/10

There are three annual payroll returns and associated payments to HMRC that need to be made during the next three months for the tax year 2009-10. They are:

Due date 19 May 2010
Almost without exception the annual form P35 and associated P14s need to be filed online on or before 19 May 2010. Any PAYE/NIC contributions due for 2009-10 should have been settled by 19 April 2010 (22 April 2010 if you paid electronically).

If you are late in filing these returns penalties will apply. You will be charged a penalty of £100 per 50 employees for each month or part month that your return is outstanding from 20 May 2010 until your returns are filed correctly.(The maximum penalties HMRC can claim are limited to one year.)

To file online you must be registered and have the appropriate passwords. If you have not done this yet we can help. The clock is ticking...

Due date 31 May 2010
You must give your employees a copy of their P60 for 2009/10 on or before this date.

Due date 6 July 2010
After the end of the tax year you need to complete and file your key expenses and benefits forms - a form P11D or P9D for each employee to whom you've provided expenses and benefits during the tax year, and one form P11D(b) to declare the overall amount of Class 1A NICs due on all the expenses and benefits you've provided.

All of these forms must be submitted to HM Revenue & Customs by 6 July. Penalties for late filing of the P11D(b) return are the same as the P35 return - £100 per month or part month from 7 July 2010, maximum penalty period one year.

By 6 July you must also provide your employees with details of benefits advised to HMRC.

What about mistakes on returns?
It is possible to verify your returns before you press the button to file online. This should clear up most of the basic errors. However if it is subsequently discovered that there are still errors in the filed information it will be rejected and you will be notified. Beware as from a penalty point of view your returns are only deemed to be filed on the first occasion they are filed correctly!

Reasonable care

HMRC expects that you take reasonable care in preparing information that underpins entries made on your tax returns.

For all returns made for 2009/10 they are entitled to judge the accuracy of your returns based on three criteria:

1. Lack of care

2. Deliberate mis-statement, and

3. Deliberate & concealed mis-statement

If you underpay tax as a result of an incorrectly filed return HMRC are now empowered to charge a penalty which can range up to a maximum of 100% of the additional tax due following an investigation.

If HMRC due consider that you have taken reasonable care, but they still discover tax has been underpaid, no penalty will be charged.

Benefits in kind, making your life easier

During the next two months those involved with payrolls will be working to prepare the forms P11D which advise HMRC of benefits paid to employees and directors. If your business provides any sort of beneficial payment or gift of goods to employees, generally speaking these are reportable on form P11D and most will be taxable as a benefit in kind - as if they were payments of salary etc.

To make your life easier there are some beneficial payments that you can include in a dispensation. For example the provision of certain business travel for employees. Items covered by a dispensation do not have to be returned on the annual P11D form.(Payments for the use of a company car or van are not included here as they are covered by separate rules.)

Essentially you can apply to HMRC to dispense with the need to include expenses or benefits for which your employee gets a full tax deduction. If the employer does not have a dispensation them all reimbursed expenses must be reported on the relevant form P11D.

For many businesses this could take some of the pain out of this annual chore.

HMRC require that you need to have the following systems in place to qualify for a dispensation:

You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that:

If it is not possible for you to operate an independent system for checking and authorising expenses claims, for example, because you are the sole director of your company and you have no other employees, you will only be able to obtain a dispensation if you:

Once a dispensation is granted it will last indefinitely although HMRC may review from time to time to make sure the conditions under which the original grant was made still apply.

Generally speaking dispensations are granted from the application date. However HMRC may agree to apply the dispensation from the beginning of the tax year in which you apply. As we are now at the beginning of a new tax year, 2010/11, this is a good time to send in a claim for dispensation. Please call if you would like assistance to do this.