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Tax Year End

Tax Year End - Getting it right!

Ceridian have been filing end of year forms (on behalf for employers) for more than 40 years now, and during that time have created a simple protocol to ensure that all forms are submitted correctly, and on time.

The important thing is for employers to ensure the accuracy of each payment to HMRC by noting the following rules:

Contracted-Out NICs (ECONs and SCONs)

Ensure the use of correct National Insurance Contribution (NIC) letter for each employee. Remember, the last digit of the National Insurance Number (NINO) is not the category letter to be operated.

A valid ECON number must be used on P35s for any employees who are on the Contracted Out NICs letter D, E, F, G, L, or S.

If you have multiple ECONS for a single tax reference scheme, then only one can be reported. It’s also worth noting that you only need to report the Scheme Contracting Out Number (SCON) on the individual employee P14 employees on letters F, G & S.

NT Tax Codes or NI annotation

If you have any NT (nil tax) tax code or NI annotation cases it is worth checking the validity to ensure the code was applied correctly.

There are three basic reasons why employers operate NT tax codes or NI annotations:

• The employee is not liable to UK taxation (they are not resident or the HMRC has issued an NT tax code).
• The employee’s earnings are below the NIC Lower Earnings Limits (LEL) and where they have ticked boxes A or B on the P46 at employment commencement. If NT or NI was used for this reason, then you need to check for every earnings period, they earned below the LEL. It may be better to use the standard emergency tax code 647L (tick box A) and possibly on a week 1 month 1 basis (tick box B). In this instance NT or NI should not be reported on the employee P14 and the tax code field should be left blank.
• A student who has signed a P38(S) declaration. Any employees who qualify under the P38(S) does need checking to ensure that their earnings have not exceeded the annual single personal allowance of £6,475. If they have then tax should have been deducted on any earnings exceeding this using a code of 0T on a week 1 month 1 basis. If they've ticked box C of the P46 then tax should be deducted using BR on a week 1 month 1 basis.

Tax Reference

A regular problem encountered by HMRC is incorrect Tax References. Instead, partnership references, individual references or even the last employer’s reference of the submitter is sometimes used.

And finally... your Tax Year End checklist:

• Health check your payroll data (ECONs, SCONs, Negative Statutory Values, Directors)
• Check all Contracted Out NI cases that they actually do qualify for the reduced contribution rates
• Check Student validity of the P38(S)
• Check non-standard NI letters (such as reduced rate B, E, G and retirement rate C and CA2700 cases using J, L or S)
• Check missing SCON numbers for F, G & S NICs cases
• Check & verify negative Tax and NI entries (you can have negatives for tax and NI rebate but check that these have not been entered in error)