How to Survive a PAYE and NIC Inspection

HMRC review the records of about 50,000 small businesses each year. Are you ready and compliant? However confident you are that your records are complete and well maintained, a PAYE/NIC inspection might still catch you unawares. The introduction of Real-Time Information provides HMRC with more targeted information on which businesses they might investigate in order to increase the tax yield.

RTI for PAYE

Make sure your RTI submissions are complete and made within the prescribed deadlines. You are required to retain all records and information relating to payroll, benefits, etc. for three years after the tax year-end. Keep these records for six years, the period for which HMRC has powers to investigate your business accounts.

You are now more likely than ever to be subject to a full review of your compliance systems and procedures, so don't leave anything to chance.

Make sure you are not vulnerable to the risk of PAYE/NIC liabilities, penalties, and problems - sort them out now.

HMRC visit will be at your business premises and is likely to check:

PAYE calculations for completeness and accuracy
RTI submissions
Correct use of employee codes
Correct treatment of new employees and leavers
Cash payments where PAYE has not been operated
Expense payments, employee benefits, and their correct disclosure on forms P11D or P9D
Compliance with terms of any dispensation
Compliance with sub-contractors' rules
Compliance with NIC regulations

PAYE Tax problem areas

The following are the main areas where problems may arise:

Gross payments to casual employees
Payments to alleged 'self-employed' persons
Lump sum expenses
Private petrol
Spouse's travel and subsistence
Travel to work from home and vice versa
Trips for purposes other than purely business, e.g. trade fairs, golf, social outings
Home telephone
Entertaining
Expenses for use of home as an office
Club subscriptions
Goods and services provided free or below market value
Meal expenses and lunches in particular
Clothing
Accommodation
Work was undertaken at an employee's home
Medical expenses

Casual labour

Whenever you employ casual labour you must be sure to take great care. Since the introduction of RTI, it is recommended that you should tackle PAYE for casual and short-term employees in the same way as for permanent staff. This includes notifying HMRC of their starting and leaving details when anyone is employed for a week or more.

Whether or not tax or NI is payable, you must keep proper RTI records of payments and persons paid (including address, and, ideally NI number). You must also be satisfied that anyone you employ (even on a short-term basis) has the right to work in the UK.

How can we help?

We can assist in reviewing your wage and salary records with a view to identifying possible areas of non-compliance with PAYE & NI regulations. If a visit is made we can advise on, and assist in, negotiating a settlement with HMRC.