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PAYE scheme requirements


service. This applies to limited liability partnerships with ten or fewer employees and to clubs, including charities and community-run organisations. Having registered as an employer via the email route, it is necessary to enrol for PAYE online.


Some specific categories of employers, including limited companies with more than nine directors, must register by calling HMRC’s New Employer Helpline. Details of the categories of employers who must take this route are listed on the HMRC website (see www.hmrc. gov.uk/getting-started/register.htm#3). Other employers whose payroll affairs are unusual and require specialist attention must register through an HMRC office. The categories of employer to whom this applies are also listed on the HMRC website at the above address.


What happens next? Once a new employer has registered with HMRC, they will receive a letter in the post which is headed `New employer registration and reference numbers’. This is an important letter because it contains the new employer’s PAYE reference and Accounts Office reference. The letter is normally sent out within five working days of registering with HMRC. The Accounts Office reference is


thirteen characters long and takes the format 123PA00123456. It is the reference to which payment of PAYE and NICs are made. The PAYE reference comprises two parts. The first part is in the form of three digits which is the tax office number of the office that deals with the new employer’s PAYE affairs. The second part of the reference is separated from the first by a forward slash and comprises the tax office employer reference. For example, a PAYE reference 123/AB456 would indicate that tax office 123 is the office dealing with the employer’s affairs and the employer reference for that employer is AB456. The PAYE reference is used in all contact with HMRC on payroll matters. The letter also includes a link to


HMRC’s getting started guide for new employers (see www.hmrc.gov.uk/payerti/ getting-started/new-employer.htm).


PAYE Online PAYE Online is HMRC’s online PAYE service for employers and new employers


...EMPLOYERS NO LONGER NEED TO FILE IN- YEAR AND END OF YEAR RETURNS...


need to sign up for this as well as registering with HMRC as an employer. Employers who use the online


registration service to register as an employer do not need to enrol separately for PAYE Online as this is done as part of the online registration process. However, employers who register by email, via the New Employer Helpline or at a HMRC office, will need to enrol for PAYE online once the PAYE reference and Accounts Office reference have been received. To enrol, employers need to visit the HMRC home page (www.hmrc.gov.uk) and select the `Register’ button, then select `Organisation’ and, on the next page, click on `PAYE for Employers’. Having accepted the terms and conditions, the employer is required to enter his name and email address and to create a password. It is important to keep a note of the password as this is needed to access the service. The employer will be given a User ID, which again should be noted down or a screen shot taken as this too is needed to log on to the service. The last stage in this part of the process is to enter the employer’s PAYE reference and Accounts office reference.


Regardless of whether the employer was enrolled automatically for PAYE Online as part of the new employer online registration process or whether the employer enrolled for the service separately, it is necessary to activate the service before it can be used. An activation code is sent out by post and should arrive within seven days. The code has a 28-day shelf life and if it is not used within this period it expires. Should this happen it is necessary to request a new code by logging into PAYE Online, selecting `activate’ and `request a new PIN’. Once activated, the service is ready for use. The PAYE Online service is still relevant under real time information (RTI). Although employers no longer need to file in-year and end of year returns, they do need the user ID and password to submit RTI submissions. The service can, however, be used to send expenses and benefits returns and to receive tax codes and notices. It can also be used to view


the current tax position and to set up email reminders.


Automatic cancellation of a scheme Once a PAYE scheme has been set up, it must be used within 120 days or it may be cancelled automatically by HMRC. If there has been no activity on the scheme after 120 days, HMRC will review it to see whether it is actually needed. A scheme will considered not to be active, and therefore not needed, if all of the following apply: l no PAYE returns have been made in that time l no payments have been made to HMRC l the employer has not registered the scheme as an annual PAYE scheme with HMRC whereby employees are paid annually l there is no evidence that the employer wished to claim repayments of construction industry scheme (CIS) deductions suffered l the employer has not received an advance from HMRC l the employer has not had any periods of CIS liability l there is no evidence that payments have been made to employees, and l there is no evidence that the employer has paid any expenses or benefits to employees.


If all of the above apply, HMRC will cancel the PAYE scheme and will write to the employer to advise him that the scheme has been cancelled. If the employer still needs the PAYE scheme it is important that they contact HMRC to arrange for it to be reopened. Once the scheme has been cancelled it is no longer possible to make any submissions under it. If submissions need to be made, the employer may run the danger of incurring penalties if these are made late.


Next steps


Once the scheme is up and running the employer is set to pay employers and report to HMRC. It is important that the employer is familiar with the compliance obligations associated with PAYE as penalties for getting it wrong can be high.


PP


PayrollProfessional 25


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