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HMRC explains disputed charges 11 March 2015

Nilson: Seeking clarity

HMRC says payroll managers must appeal disputed charges as soon as they receive them and has outlined a common reason they may occur.

Addressing delegates at Ceridian’s annual conference last week, Phil Nilson, from HMRC’s customer and stakeholder engagement team, explained that disputed charges may occur due to a misunderstanding by payroll managers about how HMRC reconciles payments.

He said: “We used to reconcile annually and you used to send us money during the year. You didn’t send any information relating to that money until the end of the year when you submitted your P14s and P35. Only at that point could we start reconciling the money with the information.

“Now, thanks to RTI we are doing that on a monthly basis, we are doing it tax month by tax month.

“Using tax month one as an example, from 6th April to 5th May, HMRC looks at all the Full Payment Submissions (FPS) you have sent in month one on either the 6th, 7th or 8th of May, and then starts the reconciliation process to try to determine the charge that is due.

“Once you’ve sent your FPSs, in an ideal world, they will be visible to you from the 12th of the following month on your dashboard. So in the example used that would be from 12th May. So, theoretically, you would send in your FPSs and then by the 12th of May you could go online and could see what we think is due from you.

“But, sometimes things come in late and you may need to send information about payments beyond the end of the tax month, but which relate to the earlier tax month.

“This is a vital. If an FPS comes in between the 6th and 19th of May you can put it back into tax month one, where it should be, and the charge will be adjusted accordingly. However, if that FPS comes in after the 19th of the following tax month it won’t go into the dashboard for that month, of tax month one in this case, because the 19th is the cut-off date – the date we want the payment in.

“That may affect your view of what you think is due and we think is due.

“By looking at FPSs it gives us the total amount that is due - but to be taken away from that is anything you want to claw back by way of the Employer Payment Summary (EPS), that should be submitted by the 19th of the following month. So for tax month one that will be the 19th of May. In terms of looking at your online account, if you sent that EPS before the 12th of May it will be reflected by the 14th – you will see it within two days.

“I hope that helps you get a better understanding of what we do.”

Clear dispute

Nilson went on to say it was vital payroll managers specifically highlight when they are disputing charges and to point out that the dispute needs to go directly to the HMRC Disputed Charges Team.

“In terms of disputed charges, there is a Disputed Charges Team and you need to tell them directly you are disputing a charge if there is an issue, you need to make it as blunt as that and to make it clear you are disputing the charge,” he said.

“They have a large workload and I can’t tell you when they will respond, but if it is with them it will be resolved and they should stop sending you any letters.”

Karen Thomson, The Chartered Institute of Payroll Professionals (CIPP) associate director of policy, research, and strategic visibility told Payroll World: “The CIPP is pleased HMRC are sharing with payroll professionals how their systems interpret data and more importantly when it interprets data.

“The unfortunate scenario for payroll is where, due to unforeseen and unavoidable circumstances, the payroll do need to make an adjustment to a previous month e.g. for a leaver they were not notified about after the 19th. For all intent and purposes the payroll processed and submitted a correct FPS and made the payment accordingly, but then had an adjustment. The CIPP and the profession will need to consider all processes to avoid these “mis-allocations”.

“It is therefore vital whenever an adjustment is made the ‘reason code’ is used and is used correctly to avoid unnecessary communications with HMRC and or penalties. As Phil said it is crucial employers appeal penalty notices if they believe them to be wrong immediately. It is also crucial for agents to ensure their clients inform them of any communications received from HMRC, especially where the communication is related to a disputed charge to ensure progress.”

For more on the key topics affecting payroll in 2015 and to hear more from Phil Nilson, join other payroll professionals at the Payroll World Spring Update conference here

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