HMRC's Employer CD-ROM 2008 - Further "payroll" facilities added for the 2007/08 year end

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10 January 2008

Payroll software developers are viewing with some concern HMRC's latest improvements to its annual Employer CD-ROM.

The 2006 edition of the CD-ROM introduced the "P11 Calculator", a database facility designed to help small employers maintain a computerised record of the tax and NICs calculations for their employees throughout a full tax year. The objective was to reduce the potential for errors in the use of the paper P11 Deductions Working Sheet. The program is able to provide in-year information for completing P45s for leavers and year-end summaries for completing individual P14s.

The 2007 edition had further improvements, including the electronic equivalent of a P32 Employer Payment Record, providing much of the information needed to complete the year-end P35 Employer Annual Return.

On 7 January, HMRC's Software Developers Support Team announced that the 2008 edition of the CD-ROM (available February 2008) will also provide the facility of filing the P14s and P35 online. As a result, the CD-ROM will provide small employers (up to 9 employees) with the means to set up their employees in a database, calculate their tax and NICs each week, produce year-end summaries and file year-end returns. Although by no means a full payroll system (for example, it does not produce payslips and there are no facilities for handling statutory payments or deducting student loans), many small employers will have everything they need to manage their payrolls on computer, without resorting to paper tax and NICs tables and completing paper returns - and without investing in HMRC-accredited payroll software.

Developers have been told that this "extension in functionality is aimed firmly at the small employer and is not intended for use by agents and other professional bodies" and that it "is being introduced on an experimental basis for one year".

Starting in January 2008 and continuing until September 2008, HMRC will be consulting further "to establish a clearer view of the relative volumes and segments of employers using payroll software or online services; which employer segments would most benefit from the CD-ROM; how the scope and content of the CD-ROM should be limited; and the possibilities of free software being provided by the software market."

HMRC's explanation to developers of the reasoning behind this controversial move is as follows:

"These innovations have been widely welcomed by small employers as an aid to accurate calculations and record-keeping, and HMRC believes that they will also help to demonstrate the advantages of a technological payroll solution to the more "IT-hesitant" small employer who may thereby be encouraged to invest in a payroll software product which could address their needs more comprehensively. The Department has also received ever more strident calls from small employers to provide them with a simple way of transmitting their saved CD-ROM generated data to HMRC online. As things currently stand, if the employer wishes to send in their returns online they would need to print off the P11 and P32 summaries from the CD-ROM and key the figures in when submitting P14s (along with their P35) to HMRC Online Services. This process does not seem in anyone's interests. Forcing employers to interpose an unfriendly paper task between two electronic tasks damages the customer experience and increases the scope for error, while diluting the key message that technology can help small employers manage their complex payroll tasks more conveniently."

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