Firstly, we need to address the distribution payments for employees, the payments of dividends. From the 2014-15 tax year, HMRC was no longer able to manually process details from the employers and employees on to their systems, meaning paper lists of employee dividends can no longer be sent.
These details will now need to be submitted on an FPS return, this involves registering for a new PAYE employer scheme reference number. The reason for this is when HMRC were informed of insolvency, any previous PAYE schemes would have been shut down. With this new reference number details can be submitted. This is done via an FPS. At this point and electronic payment can be made. If an electronic payment isn’t possible, a cheque will be accepted. When submitting the FPS a cessation date will need to be provided, this is the date the employee will receive the payment. The scheme will open and close on this date, and no penalties will be incurred.
When submitting an FPS return, the office holder will need to provide HMRC with information regarding the payments, the information that needs reporting can be found here
For employee distribution payments this information includes an OT wk1 tax code, pay, tax and NIC details, a leaving date (which will be the same as the payment date), a unique payroll ID per employee and a valid NI category letter. In this case a starter date/declaration isn’t needed for the employees and the pay frequency should be inputted as annual. Also note that any year to date figures should reflect this payment, 0.00 should be entered in the employers NIC corresponding to their NI category letter, and also included should be ‘this is the final submission because scheme ceased indicator’. Alongside this, the payment date should be replicated for the date the scheme ceased.
The office holder may also need to make additional payments. In this case, further FPS returns can be sent with the reference number of the PAYE scheme used for the distribution payments previously mentioned. A cessation date must be provided with each FPS return.
Every payment must be treated separately, and a unique payroll ID will need to be used for each. This avoids any duplication of employment records.
For companies trading on in Administration, as of the 6th April 2014 there was no need to set up a new PAYE scheme for HMRC. This removes any waiting times on new reference numbers. In this situation, the company’s current PAYE scheme can still be used following Administration.
Another point that can be cleared up is that involving company voluntary arrangements (CVAs). CVAs that were approved post 6th April 2014 are currently part of a trial being conducted by HMRC to test the use of the company's original PAYE scheme for ongoing trading. Clients should be advised that when entering into a CVA, when submitting an FPS return for the month of approval, any NIC and PAYE deductions are expected, by HMRC, to be paid over from the date of approval.
Now to discuss CIS and RTI penalties. Due to customer feedback, a new timetable has been introduced regarding the new late filing and payment penalties. The introduction of the penalties have been staggered across the year. In April 2014, ‘in-year interest on any in-year payments not made by due date’ was introduced.
In October 2014, ‘automatic in-year late filing penalties’ followed. And in April 2015, ‘automatic in-year late payment penalties’ will be introduced.
In situations where the employer is a contractor, so only needs to submit monthly CIS returns and payment, the existing penalty regime was continued.
If inaccurate returns are made, there is a chance of undeclared tax being produced as a result, this could lead to a ‘tax-geared incorrect return’ penalty, so make sure to take a good level of care when submitting. Every submission is still risk-assessed for potential Employer Compliance review.
Since the 6th April 2014, when reporting a payment to an employee later than the payment date, there is now an option to provide a ‘late reporting reason’. This can be used in circumstances where you believe you have a proper reason for the late report, and could lead to the avoidance of any late filing penalties from HMRC, so take care selecting the category.
For any more information on the previously mentioned, head to this link here