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The December 2005 issue of Notes for Payroll Software Developers includes guidance on a number of areas that will affect how employers will file their P14 and P35 returns in April and May 2006.
Common Errors in Employer Annual Returns
An earlier issue of Notes for Payroll Software Developers listed some of the common errors on the returns submitted for 2004/05. A number of other errors have also been identified and the following guidance has been provided:
- two forenames should not be entered in a forename field
- forename fields should contain only upper or lower alphabet letters, hyphen or apostrophe, in the formats specified in the Quality Standard
- surname field should contain only upper or lower alphabet letters, numbers 0-9, comma, full stop, forward slash (/), ampersand (&), hyphen, space, apostrophe and brackets, in the formats specified in the Quality Standard. The first character must always be alpha. No leading or trailing spaces, asterisk, zero instead of O.
- tax codes must have between 2 and 7 characters, no leading zero (except for 0T), no following letters to indicate week 1/month 1 (there is a separate field for this), no 'NI' as a tax code, 'K' always a prefix
- NI number always 9 characters long (even if final character blank), never TN prefix, no HMRC number (e.g. 12J3456), never 'NOTKNOWN' or 'NOT KNOWN' - blank if correct number unknown
- monetary fields always with 2 decimal places, using '.00' in fields where only whole pounds must be reported (e.g. NICs as LEL), no leading zeroes unless value less than £;1, no commas instead of decimal points
- address fields are maximum of 4 lines with up to 35 characters each, post code no more than 8 characters, including spaces, no empty lines in the middle of an address
- only genuine and existing dates for date of birth, no future dates
- all required fields completed, including ECON and SCON where relevant.
Completing form P35 for 2005/06
Form P35 for 2005/06 includes, in the reconciliation section, a new box 26 for recording the tax-free incentive payment, provided for small employers who filed electronically for 2004/05. If the employer requested and received the incentive payment by cheque, this box should be left blank.
The box should only be completed if the payment was credited to the employer's payment record. Those employers who reduced their monthly or quarterly payments in advance of receiving confirmation that their account had been credited should remember to exclude the amount shown as paid to the Accounts Office. Only the amount actually paid to the Accounts Office must be reported.
Employees with very high earnings in the 2005/06 tax year
Last year's P14 did not allow annual earnings of £;10 million or more to be reported as the fields were not large enough. The field lengths have been extended by two characters to remove this problem.
Processing and validating returns on receipt
HMRC's intention for year-end 2005/06 is for all whole returns to be validated on receipt, with a confirmation message or error report provided within one minute. Employers are encouraged again to file their returns as early as possible from 6 April 2006 so that there is time to resubmit if necessary before the deadline. Although it will be possible to file up to 50 P14s or send a single P35 earlier using HMRC's online filing facilities (intended for businesses that have ceased), full validation will only be available from 6 April and any returns sent earlier may still be rejected later.
This year it will also not be possible to file the same return twice using the same electronic filing method. Subsequent changes must be made using the 'amended returns' facility, but not before 19 May 2006.
Not all payroll software had the necessary inbuilt validation routines to prevent inaccurate data appearing on the returns. HMRC recommends, based on industry advice, that all payroll software should include internal validation routines that allow employers to check their data against the rules, both during the year and before submitting the returns. It is not sufficient for payroll software just to check for mathematical errors.
£;250 incentive payments for small employers
Small employers will be notified that their payment record has been credited as soon as their returns have been processed. They will be able to "self-serve" immediately by reducing their next payment to the Accounts Office. If the credit means that they will not make a payment to the Accounts Office for one or more months or quarters, they should send a NIL payslip for the relevant months or quarters.
Part submissions
Users of this facility must ensure that each part has a different identifier. If two or more parts have the same identifier, each file will overwrite the earlier file, an error that HMRC cannot recover.
If payroll software is used to send part submissions that does not support the function, a P35 will be sent with each part. In this situation, HMRC will accept the first P14 batch and the accompanying P35 as the employer's final returns and reject any later submissions.
From April 2006, each part P14 submission will be validated on receipt and any unacceptable batches will be rejected. HMRC is planning to send a message after all of the part submissions have been consolidated and validated in full.
Testing submissions
A full "test in live" service will be available from 6 April 2006, allowing submissions with the test flag set to be validated but not processed. There will be no limit to the size of file that can be tested. However, if the facility is used before 6 April 2006, only connectivity and authentication will be tested - full validation testing will not be available until 6 April 2006.
High volume testing is not available to EDI users, in order to keep transmission costs down. The number of records sent should be between 100 and 1,000. However, the number of times the test facility can be used is unlimited and users should discuss their testing requirements with their Account Manager.
Penalties
With effect from the 2005/06 returns, the penalty for failure to file online will be calculated on the number of P14s sent as part of the Employer Annual Return.
Some employers with a single PAYE scheme, prior to the introduction of electronic filing, used to submit two more batches of P14s, each with its own P35, all bearing the same PAYE reference. This practice is no longer permitted. From 2005/06, employers continuing to do this will be treated as not having made a complete return when the first batch of P14s is received and a non-filing penalty will be imposed.
...back to 15 December 2005
Further information:
Notes for Software Developers
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For Payroll and Human Resource Professionals
