ECH22540 - Yield Recording: Current and Open Year Adjustments
You should always advise the employer on making adjustments at
the earliest possible moment. These should be documented on the
case papers and followed up in writing.
If there is a delay in advising the employer on making an
adjustment the reason(s) should be well documented on the case.
Current Year Adjustment
An EC compliance check has only one current year, the year
in which the check commenced (
ECH9005). Employer adjustments made in
that year should be claimed and extrapolated to reflect a full year
(
ECH9045).
A current year adjustment can only be recorded if an
irregularity has been identified which will be corrected to ensure
that the return will be correct.
See the attached examples
If it is considered necessary to check that the employer has
carried out guidance provided to correct a current year adjustment
and it is found that it has not been done, you should
- recover the amount of tax, NIC and interest due
- consider a penalty for any incorrect return submitted, and
- enter on ECS as an Employer Amendment ( ECH22510)
You should only claim yield to reflect the additional amount accounted for on ECS, for example:
- A current year projected yield of £1500 was claimed at the end of the last compliance check
- Your current check discovers that the employer failed to carry out guidance provided resulting in an amount of £2000 now being recovered by EA
- Amount claimable on ECS is £500 (even though the amount recovered is £2000).
Where you identify underpayments in remittances to us the
underpayment should be quantified and a referral made to DMB on
form ECR205 along with any payment obtained. You cannot claim for
current year tax and NICs which has been deducted but not paid to
us except where no PAYE scheme exists (
ECH22515) or a return has been
outstanding for 12 months or more (
ECH22520).
Open Year Adjustments
Where irregularities are identified for an open year the
employer should be advised to make adjustments so that a correct
return is submitted (
ECH9050).
Where, exceptionally, open year irregularities are included
in a settlement you should record
- all tax and NICs included in the settlement
- all interest included in the settlement
- all penalties included in the settlement
In a long running case it is possible that an issue may not be resolved in time for an employer to adjust records before returns for subsequent years become due. You must
- not encourage an employer to delay or fail to submit returns and
- if an employer expresses this intention, make the penalty situation clear to them – ECH21020 and ECH21025
Where an employer has submitted returns which later turn out to be incorrect you should
- collect any underpayment by Class 6 settlement or formal determinations
- advise the employer to make adjustments for the year in which the issue is resolved
- calculate the underpayment up to the time that the adjustment was made and estimate the underpayment for the remainder of the tax year ( ECH9045)
- consider penalties in accordance with ECH21040 (care should be taken when considering negligence/carelessness as it may have been reasonable for the employer to delay payment until the matter was resolved ECH9040)
- record all the tax, NICs, interest and penalty on ECS
- record the amount of the adjustment for the year in which the issue is resolved as a current year adjustment on ECS
If the employer has delayed submitting the returns and the years remain open you should
See
ECH14660 regarding CIS issues
Note: The yield described above which is claimable
will be counted for both internal and external reporting
purposes.
