Payroll Taxes

Payroll taxes broadly fall into two categories

Deductions from an employees wages, widely known as pay as you earn (PAYE) and

Taxes paid by the employer based on the employees wages

The deduction from employee wages, are simply meant to cover the payment of income tax, social security contributions, and various insurances
(e.g., unemployment and disability). Whereas the tax paid by the employer is tax related to employing a worker and needs to be paid from the employers
own earnings based on the employee pay.

Real time reporting of payroll data is scheduled to start from April 2013

What does this mean for you as an employer? From April, employers must send through the internet, details of salary, NIC, tax deducted etc. to HMRC each time they pay an employee.

Therefore its highly important that you check all the information on your systems is up to date and that the correct names and National Insurance numbers for all of your staff are recorded. If records are submitted with incorrect details this could result in duplicate or inaccurate records which might lead to incorrect tax calculations or HMRC compliance checks.

Also make sure that your employees are aware of these changes and impress upon them the importance of providing accurate and up to date information.

Errors on returns. Although late notification penalties wont apply for the first year of RTI (these are set to be imposed from April 2014); HMRC will charge penalties under existing rules on employers who make PAYE errors.

HMRC calculates penalties for inaccuracies as a percentage of the additional tax and National Insurance due.

The penalty rates for inaccuracies can be

up to 30% of the potential lost tax etc. if the inaccuracy is careless

up to 70% of the potential lost tax etc. if the inaccuracy is deliberate

up to 100% of the potential tax etc. if the inaccuracy is deliberate and the person attempts to conceal it.

There is no penalty if you can show you have taken reasonable care to report the correct tax etc.
Late payments. Penalties for late payment continue to apply. Employers should keep in mind that RTI will make it simple for HMRC to check that the payments due are being made on time therefore even those a day late can result in a fine.