Corrections to payroll for tax year 2020-21
15 April 2021
As widely reported, the Earlier Year Update (EYU) is no longer a valid submission type for making amendments to the tax year ending 5 April 2021 (2020-21). Corrections relating to that tax year will need to be made using a Full Payment Submission (FPS).
Within the latest edition of the Employer Bulletin there is clarification on several points relating to the submission of an additional FPS to rectify earlier years’ payroll data.
Late reporting reason
Late Reporting Reason H should be applied to all FPS submissions that are used to correct earlier payroll information. This aligns the process with submissions that were received on, or prior to, 19 April.
Payment dates to report
The layout of the FPS remains unchanged and should be updated with the latest payroll information, for example, payment date, monetary values, leaving date etc. As the FPS will be an adjustment to the pay in the tax year then the payment date should be equal to, or later than, the last payment date reported in that year to ensure HMRC records are updated correctly.
An example is provided:
- An employee is employed all year and the final FPS for the year is submitted on 30 March 2019, with a payment date of 30 March 2019. It is then discovered in June 2019 that an error occurred in the Month 11 FPS. The FPS sent to make corrections should include the final pay date of 30 March 2019 and amended monetary values
Correcting employee NI submissions
Following April 2021, for corrections to employee(s) National Insurance (NI) contributions for 2020-21 and subsequent years which involve a negative amount, but in situations where an employer is unable to refund the employee(s), an FPS should be submitted and HMRC written to, to adjust the charge and refund employees. This scenario could potentially arise where an employee has left employment.
When writing to HMRC, the following needs to be included:
- The subject: ‘Overpaid Employee National Insurance Contributions’
- The employer’s name, address and PAYE reference number
- The name, date of birth and NI number of the relevant employee / employees
- The tax year of the overpayment
- How much NI was overpaid / needs refunding
- Why the overpayment occurred
- Why the employer was unable to pay a refund
HMRC can be contacted in relation to correcting employee NI contributions at the following addresses:
One employee correction:
HM Revenue and Customs, National Insurance Contributions and Employer Office, BX9 1AN
More than one employee correction:
HM Revenue and Customs, National Insurance Contributions and Employer Office, BX9 1BX
HMRC will contact employers when the refund and adjustment have been made, and the adjustment will also be reflected on Business Tax Accounts.
The process for correcting tax years prior to 2020-21 has not changed.
Correcting Seasonal Worker payroll using Basic PAYE Tools
The ‘irregular payment’ indicator needs to be selected on all submissions for any Seasonal Workers on payroll from April 2021. This will mean that any future corrections that need to be made using a further Year To Date FPS are reported correctly.
If the ‘irregular payment’ indicator is not selected on an earlier submission, and there is the need to make a correction, then the question ‘Do you wish to submit this correction immediately?’ should be answered with yes. This can be found on the ‘Add an Employee Payment’ screen, within the ‘Other Details’ section.
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