When HMRC asks for more PAYE than you have deducted from your staff’s wages it is often the result of double-counting somewhere in the process.

A persistent bug in the PAYE system is caused by the HMRC computer creating a duplicate employment record which it then uses to demand PAYE for wages which have not been paid.

For example William Smith earns a regular salary of £2,000 per month. On the first payroll return he is correctly recorded as William Smith. However on a later return his name is abbreviated to Bill Smith. The HMRC computer will assume that William Smith and Bill Smith are two different people. As the employment record for William Smith has not been closed the computer will generate a PAYE charge on the basis that you have paid £4,000 in total that month to William and his doppelganger Bill.

To avoid HMRC creating duplicate employment records:

  • use consistent employee names;
  • use a unique payroll number for each employee;
  • do not re-use employee payroll numbers;
  • where an individual re-joins your payroll after leaving, give that person a new payroll number and reset their year-to-date payment information to zero;
  • only include the start date on the first FPS when a new employee joins – do not alter that start date later;
  • use the ‘irregular payment pattern’ indicator for any employee who is paid infrequently.

Be particularly careful with payroll numbers. If you are using new payroll software for the first time or are merging two payrolls, meaning new payroll numbers are needed, use the payroll ID ‘change indicator’ box in your PAYE return. We can help you with this.

If you receive a demand for additional PAYE please contact us without delay.

Schedule a free appointment to see how we can help you understand your national insurance contributions (NIC).