Now is the time to be thinking about some key issues related to the filing of the 2009/10 Employer’s end of year PAYE returns. What about any ‘off payroll’ transactions that might need to be included in the PAYE returns? This might include casual labour, paid through the purchasing, petty cash or employee expense claims systems. Is there a need to include any of these payments on the payroll, or do we need to complete a P38A Employer Supplementary Return for 2009/10?

Casual labour is a different and more dangerous issue in the Construction Industry. Any payments to workers that are included on the CIS300 monthly returns (there are no annual CIS returns) need to pass several tests. Firstly, we have to confirm that the worker is not an employee; we have to verify the worker to determine whether the individual is to be paid gross or taxed at 20% and if the worker is not registered or his details are not matched on the HMRC system, we have to deduct 30%. We also have to decide if the work is within the scheme (construction operations) or excluded from the scheme e.g. the professional consultancy work of a Quantity Surveyor, or an Architect. If the latter, is the worker self-employed, or employed under a contract of service?

What about other payments made gross to individuals treated as self-employed? Has somebody checked this out and perhaps used HMRC’s Employment Status Indicator (ESI) tool to confirm self-employed status is correct? Is there a copy kept on file to show the HMRC employer compliance or status officer when they cals? Have any payments been made gross to a Non-executive director, which HMRC might challenge at a future date?

We are experiencing the worse recession since the 1930’s and a lot of people have lost their jobs. Are we satisfied that any tax-free termination payments made in 2009/10 were dealt with properly, or do we need to check this out? Genuine statutory redundancy payments will be exempt for tax purposes and will not be earnings for Class 1 NICs. Some employers pay more than the statutory amounts, such as one week’s basic pay for each year of service and any such non-statutory redundancy payments will be exempt from tax, subject to the £30,000 exemption limit. There is no limit for NICs and the payments will not be earnings and not liable to Class 1 NICs.

Genuine payments of compensation or damages will be exempt, subject to the £30,000 limit and not earnings for NICs, but should we check that the payments were compensation and not dressed up as such. Payments in lieu of notice and ex-gratia payments will come under scrutiny at any HMRC inspection and care needs to be taken before making such payments gross, without deducting income tax and NICs. Has professional advice been obtained or was clearance sought from HMRC?

Well that’s all for now folks, but thank you for reading my March 2010 Blog.