Preventing and correcting payroll errors
To prevent incorrect PAYE charges occurring
HMRC have devised the following list of common mistakes which can lead to an incorrect employer PAYE charge:
- Re-using of payroll IDs.
- Not including all employee personal data in each submission in the same format. Try not to use shortened versions of first names for example use David or Rebecca rather than Dave or Becky.
- Not setting the ‘Payroll ID changed’ indicator when changing software products (some products do not show a payroll ID to the user). If you are unsure, check with your old software provider. If that isn’t possible, set the indicator anyway.
- Not setting the ‘NIC Refund’ flag correctly on an Earlier Year Update. For tax years up to and including 2019 to 2020, where you’re amending the Employee National Insurance contributions, if the difference is negative (because you deducted or reported too much National Insurance), you also need to set the ‘NIC refund’ indicator to:
- ‘Yes’ if you’ve refunded your employee or no refund was due
- ‘No’ if you still owe your employee a refund (for example because they’ve left your employment)
Correcting payroll errors – 2020 to 2021 and future years
The following are examples of payroll issues that can be corrected by the submission of a further Full Payment Submission (FPS):
- Forgetting to include payrolled benefits in kind
- No leaving date included on an FPS
- Including an employee who has left your employment
- Not including all employees on an FPS
- Forgetting to send an FPS
If you identify an issue with your 2020 to 2021 PAYE charge, and after you have checked your payments are correct, the quickest and easiest way to correct it is to submit a further FPS for the year showing your year-to-date figures. HMRC are aware that not all software products are alike but where you have identified a problem you may need to correct the ‘in period’ figures for the week or month the error first occurred which will then trigger a corrected Month 12 submission.