All employers will have to file their PAYE returns on-line with effect from 5th April 2010, so on-line registration is no longer optional - it is a necessity. This is all part of the ongoing Revenue programme to do away with paper tax returns completely, both for individuals and companies. The programme has not made as much progress as anticipated so far, but PAYE has definitely been one of the success stories, due mainly to the on-line filing incentives and the fact that manual returns were such a labour intensive and time-consuming process for most employers.
The on-line filing incentives were a blatant bribe to persuade employers to give up sending paper PAYE returns and file them on-line instead. The incentives were worth £825 over 5 years and for most small employers it was too good a deal to miss. It was even worth setting up your own company and paying yourself a £10 salary (assuming your tax code was already used for another job) just to claim the annual incentives. At first there were no restrictions at all on how many PAYE schemes you could set up, but it quickly became apparent that some people were forming literally hundreds of companies and PAYE schemes for no other purpose than to claim the incentives. This loophole was swiftly closed down!
Incentives aside, on-line filing of PAYE returns was a no-brainer for the majority of smaller businesses as the process was so much easier than doing it all by hand. For larger employers with fully automated payroll systems it was more of a hassle, as they had to make their software compliant with the Revenue systems, but as anyone who has had to sit down and write out dozens of P14s by hand will tell you, on-line filing has made the task so much easier for the majority of smaller employers. They also help to avoid some of the more common errors that caused a high proportion of the old-style paper PAYE returns to be rejected each year. Sadly the incentives have now come to an end but they achieved their aim in getting most small employers on-line.
So how do you register for on-line filing? Simplicity itself really. All you have to do is visit the HM Revenue & Customs website, click on PAYE for Employers in the green menu on the left and click on Register for new users. The process is then as follows:
- select the type of account you wish to create (usually Organisation)
- tick the PAYE for Employers box
- read the Terms and Conditions and click on Accept
- enter your name and e-mail address (twice)
- choose a password containing at least one letter and one number
- make a note of your User ID (a 12 digit number)
- enter your PAYE reference and Accounts Office reference (from your yellow payslip booklet)
Government Gateway will send a PIN number to the registered address for your PAYE scheme. You will then have 7 days to activate it. Simply log on using your User ID and password, click on Activate Service and enter the PIN. Thereafter, you will only need your User ID and password to access the service. If you lose your User ID or password, you can ask them to send you a new one. One half of the new User ID will be e-mailed to you and the other half will be sent by post to your registered address. Then just put them together to log on and carry on as before.
When you file your PAYE returns (and also in-year forms such as P45s and P46s) you have a choice of using either your own software or the free software run by Government Gateway. If you are using a software package for your payroll it should come with an on-line filing facility and obviously it would be better to use that. You just need to make sure it is on the Revenue's list of approved products. If you use your own home-made payroll system, you will probably be better off using the free software, but this can only be used for up to 50 employees. It will also be necessary to key in all your employee data such as names, addresses, NI numbers, dates of birth, tax codes and starting/leaving dates.
Although on-line filing is now meant to be compulsory for PAYE returns, as ever there are some exemptions. The most important of these is carers. In a rare example of joined-up Government thinking, it was realised that elderly people employing someone to care for them at home might not have access to a computer, so "care and support" employers are exempt provided their employee's services are provided at their home address. Domestic employers operating a simplified deduction scheme (usually for nannies) are also exempt provided that they have not claimed an on-line filing incentive before. The only other exempt group are employers who are practising members of a religious society or order whose beliefs are incompatible with the use of electronic communications.