Looking ahead to April 2014 - SCON update for Software Developers

09 January 2014

You will be very much aware that as from April 2014 it will become mandatory to include the SCON (Scheme Contracted-Out Number), on the Full Payment Submission (FPS) where you have a Contracted Out Scheme and use the appropriate National Insurance letter; HMRC said absence of the SCON would result in the submission failing validation.

The software industry along with the CIPP and other interested stakeholders have lobbied hard against this proposal as the industry felt that the pension providers could provide this information much more readily. HMRC have had discussions with the CIPP and other software providers as to how they can ensure FPS submissions get through where the employer has tried very hard to obtain the SCON but to no avail. We are pleased to report that payroll software developers have been informed of a ‘reserve plan’ (and we use this term advisedly) in the event that the employer is unable to track down the SCON reference.

We would remind you that by now you should have made inroads to locate any missing SCON references where they exist. In the event you do still have records with missing SCONs you should make every effort to obtain them, which can be done by contacting your pension provider.

Guidance has been issued to the software community to inform them that in the unlikely event that a SCON remains missing as at 6 April, they will be able to utilise a standard BUT temporary number in the correct SCON format to ensure validation is achieved and a return is not rejected as a direct result of a missing SCON. This is not an ideal solution but as the requirement to include a SCON reference where categories D, E, L, N or O have been used, it is a compromise from HMRC on behalf of the payroll industry, which is welcomed by the CIPP.

Most if not all software will by now have been updated or will be in the process of being finalised for the approaching tax year and you will be anticipating news of your software release in accordance with your normal annual cycle of software updates. Be aware that guidance at this late stage whilst welcomed will need to be worked through for solutions to be developed for each payroll software product.

HMRC guidance to software developers also suggests that where multiple SCONs are in operation for an employee there will only be space for a single SCON to be submitted. In this case HMRC guidance states that the most prominent number in use should be selected.

Be aware that it is highly likely that all software will by now have designed their solutions for this issue for 2014 and we are aware of at least one software product that will select a SCON on a random basis. We recommend that you spend time familiarising yourself with your software updates as they come through to you to know how your software works, in the event that this requirement impacts on your processes.