Overview
HMRC carries out PAYE investigations into businesses with employees. The purpose of the investigation is to establish whether the business has operated PAYE correctly.
A PAYE investigation is almost always carried out by way of a visit to the business premises to look at the business books and records; there are usually two HMRC officers present. In addition, HMRC will want to question the people who actually operate the PAYE system in the business to find out exactly how they run the system, and whether they deal with all situations correctly.
Not only will HMRC look at the normal payment of wages and salaries, they will also check how expenses and benefits are recorded and reported, whether people treated as self-employed should have been treated as employees (called status enquiries), and less regular transactions such as redundancy payments. If appropriate HMRC will also check the operation of the Construction Industry Scheme, and look in detail at how the business deals with people brought in from or sent to other countries on a temporary basis.
HMRC will use the opportunity to obtain information which could be useful to their colleagues in other sections of HMRC. So, for example, there could be useful information concerning VAT or the income tax or corporation tax affairs of the business. Information could also be found that affects the personal tax affairs of some employees; of particular interest to HMRC will be the tax affairs of the proprietors or directors of the business. It is not unusual for a PAYE investigation to lead to a VAT investigation, a Personal Tax Investigation or a Company Tax Investigation.
Although most businesses now have a computerised payroll which deals with the normal weekly or monthly payrolls, the detail of the input into the computer system relies on the interpretation of the individual dealing with it. This can lead to inadvertent mistakes, perhaps because a junior employee inputting the data is not aware of the potential tax consequences.
The introduction of Real Time Information on 6 April 2013 introduced obligations upon employers, and HMRC will be keen to see that all employers are operating the system properly.
How can WLH Tax Help?
Many areas of PAYE are complex. If HMRC find errors in the operation of PAYE in your business then they will be looking to recover any underpaid tax and NIC – perhaps going back over several years – together with interest and possibly penalties.
WLH Tax specialises in tax investigations and we have ex-HMRC PAYE inspectors working for us. We can answer HMRC’s questions about the operation of PAYE in your business, and try to contain the consequences of any errors that are found. WLH Tax will negotiate any additional tax liabilities proposed by HMRC, with a view to minimising the financial liabilities as far as possible.
If HMRC is intending to carry out a PAYE investigation into your business, or have already started a review, then please contact us for a free, confidential and no obligation discussion. We are happy to have an initial free of charge meeting with prospective clients.