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PAYE and an employer's responsibilities

By Sam Beattie, Manager, Payroll

Employers have become familiar with the Real Time Information (RTI) processes of PAYE. Given that HMRC has had the information from RTI at their disposal, just how long will it be before government departments start to scrutinise the data?

One key reason for the switch to RTI by HMRC was to deliver employee information in support of Universal Credits, with information being accessible in real time. It is only a matter of time before the data is accessed by other departments (data mining) who are keen to drive their compliance.

The upcoming move to Making Tax Digital will only increase the volume and accessibility of employee data.

The full data specification in RTI is comprehensive, from marital status to nationality and, if available, your passport number, regardless of where the passport was issued. Enquiries about individual workers often originate through payroll records.

One aspect closely aligned with the hire process is that of capturing worker ID and establishing the right to work in Northern Ireland and Great Britain. Once the worker is on the payroll, they become “visible” to HMRC and other branches of government.

A key requirement for all employers in the pre/post Brexit employment market will be how they maintain and record their ‘right to work’ checks for staff. The Rt Hon James Brokenshire, former Minister for Immigration (now Secretary of State for Northern Ireland), stated earlier in 2016 that “illegal workers will face the prospect of having their earnings seized, and rogue employers could have their business closed, their licenses removed or face prosecution if they continue to flout the law”.

With penalties of up to £20k per illegal worker levied against employers, approximately 2,600 such penalties were issued in 2015/16. Increased powers now enable government to initiate criminal proceedings which on conviction can result in a custodial sentence of up to five years and unlimited fines. Employers who flout the rules can also have their businesses closed for 48 hours.

Illegal workers can become personally subject to criminal proceedings and the potential of illegal earnings (reported through RTI) being seized under the Proceeds of Crime Act. Quite how this last measure will impact the PAYE record remains to be seen. Do existing submissions remain valid or would amended PAYE records be required?

Employers will undoubtedly intend to comply with these checks. They should also be aware of the increasing volume of information and misinformation on websites and online forums in this respect.

A sensible starting point for employers is to follow the government’s basic ‘three step rule’:

1: Obtain original versions of documents to examine;

2: Check the validity of the documents in the presence of the worker;

3: Copy and retain a clear and legible copy of each document, recording the date the check was made and by whom.

Full employee details (the RTI data standard) should be entered into your payroll software or HMRC’s Basic PAYE Tools from the outset.

For further information Sam Beattie can be contacted at sam.beattie@ie.gt.com or visit http://www.grantthorntonni.com/Grant Thornton (NI) LLP specialises in audit, tax and advisory services.

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