With payroll year-end fast approaching, your business must find clarity in chaos in order to meet its reporting obligations. Here are the details you need.
Despite everything, HMRC deadlines are the same as always and organisations are expected to record P11Ds, note benefits and expenses, observe the timing of your final payroll run and, of course, pay tax liabilities.
He says: “Start by looking at the practical changes that might affect your deadlines. Check whether you have a week 53, an extra payroll period you haven’t factored in. If you have weekly payroll and you process on a Sunday, it’s really worth looking into.
“Are there any tasks you would normally only work on face-to-face with your employees? If you usually work in an office you can use cloud technology and digital solutions to overcome the problem.
He continued: “It might range from distributions of P60s to the collection of data you need for your payroll year-end final pay run, such as overtime and expenses.”
In general, the best advice is be prepared and leave nothing to the last minute. Watmore recommends covering the basics, such as ensuring you have access to tax codes well ahead of the 6 April deadline for the start of new tax year payrolls.
The same goes for simple, practical measures. A perennial source of frustration is to prepare your information only to find you have forgotten HMRC’s log-in details. So, log-in early to offset problems later.
Don’t wait until year-end, because HMRC staff will be just as busy as everyone else around that time and you might not be able to solve issues as fast as you need to.
Changes to payroll year-end due to Covid
The pandemic has led to a few changes to normal operations, both in terms of procedures and, potentially, the shape of your business.
For example, it’s possible that more people will have left, joined or even re-joined your business in the past 12 months than during a ‘normal’ year. You must account for these accurately and make details clear for HMRC.
Remember, too, that the tax authorities will not supply P60 stationery this year, so it’s a good idea to move to a digital solution if you haven’t done so already. Software providers such as Sage have a range of services offering online documents to save you hassle.
Sage’s Watmore has further advice: “Make sure you check over your reports to see what payments have been made to employees for the work they have done, but also work covered by the furlough scheme.
“Prepare yourself, because there might be questions from employees about the payroll year of values they receive, particularly if their wages have gone down this year.
“You need to plan reconciliation of your HMRC payments, make sure you record accurately what you have paid and claimed for, and check you’ve paid your tax and National Insurance and that your bills are up-to-date.
“If there’s been any adjustment to National Insurance, for Job Retention Scheme claims or against your employment allowances, take this into account when checking your figures.”
Sage is bringing clarity to the confusion with free-to-access information at Sage.com. This includes everything you need to know about changes due to the coronavirus pandemic, but also a Brexit Hub and guides to other areas such as Open Banking and Making Tax Digital.
The support centres are designed for clarity and ease of use, with a range of tools to support businesses in need.
Sage is also meeting the needs of its customers with extended phone support, which includes being available at weekends; live Q&As where users can listen in to useful advice; and webinars, videos and written guides.
Legislative changes to look out for
Mercifully, the government has introduced only limited changes to the law affecting payroll professionals. But, according to Watmore, there are still tweaks to be aware of.
He says: “There is a new Scottish student loan, which is like the ones we already have, and it will still be on an HMRC form, but the rates are slightly different for people employed in Scotland.
“IR35, as applied to off-payroll working, is a big topic. This is mainly for larger businesses with contractors on their payroll. But it might affect you if you run a contractor business too.
“There’s a change to the payroll year-end process itself: the Early Year Update (EYU) is no longer used for correcting submissions to HMRC that you make after 19 April.
“It is being replaced by an updated full payments submission (FPS). But this has been optional for two years anyway, so for many people it won’t change and your payroll software should take care of this.
“One key change is to the National Minimum Wage this year. As usual, there are small increases to the amount people are paid, but most significantly the age bands have changed as well.”
Whereas, previously, people aged 21 to 24 were in the second wage tier, this year those aged 23 and up will move into the top band. That could impact costs, so it’s worth reviewing the rates to understand how your business is affected.
And while many of the details of the upcoming Budget statement on 3 March are a closely guarded secret, it’s important to understand what the various announcements could mean for you.
The year ahead
Change seems to be the only consistent at the moment, so it’s important that your payroll software is not only up-to-date, but adaptable to future unknowns.
For example, the furlough scheme is due to end in April, but it has been extended before and it could happen again. So model for employees returning to work, but also for changing work patterns.
Will your employees continue to work remotely? If so, how will this impact the way information is passed between the business and its staff? This, plus other factors, could come into play.
In general, says Watmore, the key message is to stay vigilant , do your best to understand the turbulent business environment, and stay ahead by preparing early.”.
He adds: “Look at what you might need to change in your processes and how you can embrace software to make life much easier, as well as more adaptive, throughout 2021.
“Around 50% of private sector employees in the UK are paid using Sage software, so when it comes to payroll year-end, we know our stuff and are here to help. Discover more at Sage.com.”
This article was sponsored by Sage, the global market leader for technology that helps small and medium businesses perform at their best