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All you need to know about HMRC’s PAYE compliance checks

HMRC introduced a new approach to PAYE compliance checks, now known as an ‘employer duties review’, shortly before the pandemic and we are seeing an increase in reviews being carried out.

Under the old system HMRC would notify the employer of the intended review by letter, and a date and time would then be arranged for the Inspector to visit the business premises to both speak with key staff and review any relevant records, i.e. P11Ds, payroll records, contracts of employment, cash books, petty cash records and any credit card/fuel card statements. They would request further information during the course of the review if required.

The new system still starts with a letter from HMRC to the employer and now includes a questionnaire that needs to be completed and returned by a set date to HMRC. This is followed by a telephone interview with HMRC which is basically the equivalent of what used to take place in the office. The new system is far less time consuming for the employer.

Once the review is complete the Inspector may ask for additional information to be provided before sending a full report on the outcome of the review.

We have experience of dealing with HMRC employer duties reviews and if you are selected for a review, we can help you navigate through the whole process and answer any questions or concerns you may have. We also act as a go-between and provide the Inspector with information they request.

How employers can best prepare for a HMRC employer duties review

To mitigate the risk of a review employers should:

  • Manage your risk, i.e. submit all returns on time, make payments on time
  • Identify any areas where you have a concern, i.e. not keeping mileage logs, employing foreign nationals, expenses
  • Consider if you need to approach HMRC to disclose any errors, before HMRC contact you.

If as an employer, you receive notification of a review you should:  

  • Ensure you are able to explain to HMRC why you have used a particular approach
  • Take advice from a payroll specialist who can guide you through the process and compliance checks.

Tax Investigation Fee Protection Scheme

Tax investigations, including employer duties reviews, are time-consuming, stressful and costly. As your accountant, we want to protect you. That’s why we offer a tax investigation service. Our service protects you against the cost of professional fees associated with a tax investigation, as well as keeping time and stress factors to a minimum.

For more information, please click on the following link: https://www.mitchellcharlesworth.co.uk/services/tax/tax-investigations-and-disputes/

If you would like more information about HMRC employer duties reviews or the tax investigation service we offer, please contact Joanne Nieman to the right of this page.

Written June 2022.

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