Reconciliation and reallocation of remittance - your views and experiences

02 June 2015

The number of employers who now use a payslip booklet to pay over their PAYE remittances has decreased significantly in recent years, with online payment services now being favoured for making payments.

Following an increasing number of anecdotal experiences reported by members it was clear that there is increasing difficulty for employers and payroll professionals in reconciling their PAYE remittances which in turn was having a knock on effect on payment allocations for other tax periods.

The CIPP Policy team created a short survey to gather experiences from employers and their agents to see whether this issue was widespread and indicative of an underlying system problem, or whether guidance could be improved to ensure that PAYE payments always reach their intended destination ‘accurately and on time’, which, as we know, is the mantra of every payroll professional.

The survey ran from 16 February until the 16 March 2015 and by the close of play on the 16 March we had received 121 responses, which is a significant number for a survey of this type and which normally forewarns us that problems are indeed being encountered by the majority.

Are you responding as an employer / in-house payroll or as an agent / payroll provider?

120 responded to this question of which 80 (67%) represented in-house payroll operations and 38 (32%) outsource providers or agents and from employers responding who have external pay providers 2 (1%).

Have you had any difficulty changing the reference to use through your online banking channel?

Whilst 81% reporting having no difficulty adapting their reference each month, for example, where they pay early or late and need to use the additional four digits for tax year and tax period, 9% have experienced problems, with certain banks appearing to cause more problems regularly or periodically.

Have you had any experience of your PAYE remittance being allocated to an incorrect tax period?

97 of the 114 responded to this question with ‘yes’ leaving only 15% who had not experienced the remittances being allocated to an incorrect tax period. This appears also to be an increasing issue with an increasing number or misallocations happening year upon year as detailed in the graph below.

Of those who responded with a yes, 79 went on to report on which years they had experienced this issue – clearly this is an increasing issue. Based on the additional comments made for this question, PSA payment reconciliation is s problem for many, however the following comment possibly sums up the general feeling of many “… all companies that I have worked in I have experienced misallocation problems, regularly receive calls from HMRC stating we haven't paid, only to find out the payment has been either mis-allocated to the wrong period or the wrong PAYE reference.”

When we went on to ask what was the reason (or suspected reason) for the misallocation, several issues were noted:

  • Misallocation of payments between PAYE income tax, NICs and student loans
  • P11D class 1A payments incorrectly allocated
  • Misallocation of quarterly payments
  • Misallocation with PSA payments
  • Payments being misallocated where there is a ‘deemed’ short fall in HMRC records
  • Adjusting for Employment Allowance
  • Correct references seemingly ignored
  • Recovery of statutory payments
  • Outstanding issues that were first established during the RTI pilot
  • Human error.

Whatever the issue, and the reasons are many and varied, one concern is clear, that information being submitted to HMRC on FPS, EPS and EYU is not always being fully and accurately recognised and reconciled with the corresponding payments.

Our final question asked how could HMRC guidance be further improved? And whilst 51% of the 80 respondents felt that more examples of what may have gone wrong would be helpful, there were also 44% of respondents who instead chose to provide a comment, all of which provided overwhelming support to the opinion that guidance wasn’t the issue but mis-allocation of payments by HMRC was.

The need for a dedicated helpline providing consistent answers and staffed by experienced and knowledgeable professionals at HMRC was seen to be a must “HMRC guidance can further be improved if the staff can be consistent with what advice they give out. It seems like each time you speak with an advisor you get different answers to the same problem.”

A huge thank you from the Policy & Research team to everyone who took to the time out of their busy days to respond to this survey let us hope that your time commitment provides the return of improved service in the future.

The CIPP attend the RTI penalties and appeals which is a sub group of the Employer Payroll Group (EPG). It was established on a time limited basis to oversee the roll out of automated late filing and late payment penalties along with the delivery of the automated penalties and appeals service. The survey data along with all comments has been given to HMRC through this forum.