At the Employer Consultation Sub-Group meeting on 10 July 2007, all attendees agreed to a correction to paragraph 3.1 of these minutes. The correction was incorporated into these minutes on 10 July 2007.
MKn - Margaret Knights (Chair)
CH - Chris Hind (BCC)
PJ - Paul Jackson (Payroll Alliance)
MB - Matthew Brown (CIOT)
YL - Yvette Lamidey (IPP)
NG - Norman Green (LogicaCMG, BCS)
JP - Jackie Petherbridge (PSPG)
AM - Alan McCulloch (HMRC)
AL - Andy Longfellow (HMRC)
JS - Josie Skipp (HMRC)
PN - Phil Nilson (HMRC)
SL - Simon Lidster (HMRC)
AF - Alyson Fairbrass (HMRC)
SS - Sam Shelley (HMRC)
ST - Shawn Turnerr (HMRC)
SM - Sue Manley (HMRC)
MR - Matthew Reid (HMRC) - Minutes
Margaret Knights (Chair) apologised for the cancellation at short notice of the meeting that was scheduled for 27 February.
The minutes of the previous meeting on 6 December 2006 were agreed.
Only two outstanding action points are still being considered. They are:
CH mentioned the feedback on P35 amendments where an amendment to a P35 is
not possible on the HMRC Return and Forms service. CH explained that this
situation arises when P14s are submitted separately using commercial software.
AP1 - CH concluded that he and AL will take this matter forward separately
and the provide feedback at the next meeting.
MK talked through the main headlines of the draft ‘Carter deferral and impacts’ paper that had been given to all attendees as a handout.
MK emphasised that although the announcements in the Budget deferred the implementation of in-year filing for one year, the end of year mandation and incentives remained unchanged.
JP asked if it was acceptable for an employer to obtain P45/P46 information from an employee by mail or over the telephone – MK confirmed that it is.
YL stated that certain industries (the ‘hospitality’ industry was given as a possible example) do not provide information until the end of the tax year and asked whether any feedback had been received by HMRC from them. MK replied that she had not received any feedback from anyone following the release of the proposals, although she agreed there were issues with some sectors regarding the timely submission of data. MK reiterated that all employers will need to provide the mandatory fields (name, date of birth, gender etc) from April 2009. MK confirmed that if an employer did not have this information and had not received a P45(3), they must complete a P46 and operate code BR – there were no exceptions to this. MK stated that in order to meet the requirements of the Home Office ‘right to work’ legislation, employers would need to obtain the national insurance number and/or the date of birth of an individual. JP stated that this needs communicating to all employers now. YL added that the external communications also helped the new procedures to permeate through to HMRC’s own staff.
MK advised that from April 2008 employers will be required to provide a P46 when an employee reached the Lower Earnings Limit (LEL), not the Earnings Threshold as before. YL stated that HMRC communications should encourage this to happen from now on.
MK stated that most questions raised by software developers concerned the IT interface between 2008 and 2009; software developers were concerned about how to move forward. MK said the main message given to HMRC was for them not to lose their momentum – software developers do not want to lose their progress so far in producing products and we should all benefit from this in the longer term.
MK stated that the new HMRC stationery would now not be introduced until 2009 (see item 3.6). This will affect the validation of the forms submitted until then, but that HMRC wants to encourage any updated versions of the forms (with date of birth, gender etc) to be submitted now. Therefore any updated software users should be able to send new versions of the forms with ‘date of birth’ and ‘gender’ etc as optional fields. This will avoid any lack of momentum in the software products that have been produced so far.
MK confirmed that infrastructure changes were needed to help the other changes come about, but that she was not sure when these would be. MK also confirmed that she was waiting for a response from HMRC’s IT partners about error response messages. New error response messages were needed and if they were not introduced in 2008, they would be in 2009.
MK said that the steer given by the IT industry was that final details given to software developers by June or July 2007 would be in time for the 2008 software packages. YL’s opinion was that the IT industry could deliver this. AL stated that time needed to be given to software developers to produce this in time for October 2007 when test services will become available. NG said in his opinion the final products would become available in January 2008 – ahead of the beginning of the tax year.
MK described the new product called Rules Interface Management (RIM). MK said that they are basically technical details which enable software developers to monitor validations. But MK added that RIM could only be delivered if the infrastructure is changed, which means that the change could happen in 2008 or 2009. MK confirmed that there would be no reduction in the service as a result.
MK stated that Test Services (TPVS) will become available in October 2007. A ‘test in live’ service will be released in March 2008. MK confirmed that this would be a future subject in Notes for Software Developers. In spite of the problems with the current ‘test in live’ service, the different error messages had been identified – ‘9001’ for a test submission, and ‘9004’ for a real submission error.
JP said that she felt the ‘test in live’ service was a waste of time, which YL agreed with. PJ asked why if the employer submits the test version, the software could not translate this into a live submission. MK said that HMRC was developing what employers and agents had requested during consultation.
YL, JP and NG were all of the opinion that the ‘test in live’ service should be scrapped as employers do not want to test in-year forms and that ‘test in live’ was misleading some employers into thinking they had actually submitted their returns – hence the issue of the penalty notices that had arisen. JP said that as employers will be able to submit in-year forms on paper during 2009 without a penalty (only a warning letter), many will do this anyway. CH said he was hesitant to scrap the ‘test in live’ facility. He emphasised the number of problems that had been identified by employers and HMRC by the last ‘test in live’ facility, and he believed that this was very useful – it would identify many errors before the ‘go-live’ date.
AL confirmed that the ‘test in live’ service would be provided anyway, but that it would be an optional extra on the IT system. He said that HMRC was doing this to assist with the infrastructure changes. CH was adamant that some employers, and payroll bureaux in particular, wanted to know that the new systems would work before they went live. He said that if a ‘test in live’ service was not provided they would end up trying to duplicate the new systems themselves anyway. NG did not agree with this and said that it meant that the ‘test in live’ service worked, and not whether the live system worked – HMRC was unable to guarantee that the two versions were the same. NG said that any differences between ‘test in live’ and the live service could complicate the changeover for employers. MK asked whether it would result in tests that would not be transferred to the live service. Both JP and NG said this would be the case. AL disagreed, but confirmed that this could be the case for employers that duplicated the new system themselves, as CH had suggested. AL reiterated that any such systems would need HMRC accreditation.
YL stated that developing a ‘test in live’ service would only benefit 10% to 20%. MK and CH agreed that this was a substantial amount of end users, which would mean that providing it would be worthwhile. JP commented that all development is eventually extra cost to employers as software providers charge for it in the end. Based on CH’s earlier comments, YL suggested that the ‘test in live’ service was provided to payroll bureaux only, and not to other employers.
AP2 - MK concluded that HMRC would need to take the matter and investigate the options available.
MK stated that she had become aware of the number of large employers that were using HMRC’s Online Return and Forms service - PAYE, which slows down the system to the detriment of all users. MK explained that one major benefit to large employers was the ability to use the HMRC system over several branches, rather than a software package for the employer as a whole. MK confirmed that the system had been designed to be used by small employers only. She summarised the steps HMRC was considering to avoid large employers using the system – for example, having to limit the number of live PAYE records that could be held under each PAYE reference or introducing an archive system. MK said that the aim was to ensure that there was no detrimental affect on the small employers using HMRC’s service. JP suggested that this was an opportunity for software developers to produce a similar package for large and medium-sized employers. MK stated that this was not for HMRC to suggest. JP then suggested that HMRC itself could produce a similar system designed for large employers to use. MK stated that it was not appropriate for HMRC to be involved as this is a commercial market. MK confirmed the work that had been done by HMRC in providing volumetrics that showed peak user times, and recommending to employers the times to avoid. YL stated that the volumetrics published by HMRC last year were incorrect and that the system had been a lot slower than advertised.
AP3 - MR will check the published details.
MK stated that as a result of the Carter deferral, new HMRC stationery was not intended to be available until 2009, but that there had been requests for this to be introduced sooner on a sliding scale. MK confirmed that the new stationery would only become available in April 2008 at the earliest. A discussion followed giving feedback on the draft of the new forms that had been sent to sub-group members since the last meeting in December. CH had provided feedback by Email to Tracey Lockyer. SM confirmed that work was ongoing with HMRC Forms Unit, but that the meetings planned had been temporarily postponed following the Carter deferral.
AP4 - MR confirmed that he would pass CH’s feedback on to SM to take up with HMRC Forms Unit.
YL and PN both stated that the message to employers about destroying their old stocks of stationery would need to be strong. MK confirmed that the message would be strong and that it would be reinforced by the fact that old versions of the forms would be rejected from April 2009.
MK summarised the penalty paper (annex 1). She stated that although penalties would affect large and medium-sized employers from April 2009, any failing to submit forms online from that date would only be issued with warning letters for the first three quarters of 2009-10. The forms will then just be rejected for correction by the employer. MK confirmed that there were currently no penalty regulations in place to be used against small employers from 2011 onwards. MK also confirmed that plans for an automated penalty for failure to submit in-year forms at all by a large or medium-sized employer had been dropped, but that any failure would now be passed to HMRC Compliance teams to deal with under the existing regulations.
AL stated that there was no update to give on payroll standards. MK asked whether a revised date for consultation on accredited products had been set. YL confirmed that a date had been set for it and that she would advise this later. MK said that the date for consultation did need to be set for October 2008 as there was a risk that some employers could purchase a product during 2008-09 that was not in-year enabled. NG made the point that some software providers could take advantage of the one year’s deferral in making some employers purchase a package that would then require an upgrade later on. MK stated that it was desirable for software packages, particularly for small employers, to be ‘future-proof’. But MK stated that it was not for HMRC to ask for this.
MK advised that several PAYE scenarios had been fed through Simon Parsons from IREEN, and that the main PAYE scenarios were on the chart (annex 2) giving the situation, the tax code to operate and the legal position. Other scenarios given by YL and NG were when a P46 is submitted by the employer and a P45(3) is subsequently provided by the individual, as well as this situation when a P6 is received from HMRC giving a different tax code.
AP5 - MK agreed to update the paper and Email it to the sub-group members.
MK admitted that another common scenario was also caused when a P6 was issued by HMRC staff without previous pay and tax information on it. AM confirmed he would take this issue forward to ensure that HMRC guidance emphasised the importance of handling these cases correctly.
MK confirmed that much of Simon Parsons’ feedback had been prior to the Budget announcement and consequently had been superseded by it. But she answered his point about whether forms needed to be sent online from 6 April 2009 if they were concerning events that had occurred in March 2009. MK stated that all forms must be sent online by all large and medium-sized employers from 6 April 2009. MK reiterated that all online versions would also need to meet the quality standard from 6 April 2009 onwards.
JP stated that some scenarios were not practical as they represented additional cost to the employer - in particular, issuing a P45 immediately an employment ceases. MK said she realised the problems employers faced with transposing manual information onto an IT system, but she confirmed that the additional one year’s deferral was all about allowing employers additional time to overcome these problems and reviewing their own internal processes where necessary. After further examples were given of the delay in issuing a P45, MK agreed that “without unreasonable delay” (Reg 36), could be interpreted as any point within the monthly payroll cycle.
MK then confirmed the final point that an employer must complete a P11 for an employee if they receive a P45(3) from that individual.
The revised penalty paper had already been covered under item 3.
AL confirmed that there was no further update for the ‘test in live’ service as it had already been discussed under item 3.
AL confirmed that there was no further update available at present and that this had already been discussed under item 3.
SL said that following the Budget announcement, and in the light of the discussion today, HMRC was anxious to maintain momentum for the changes. SL asked for any feedback attendees had on the communication approach so far, and for any suggestions they had for the communication of future changes.
JP said that HMRC communications had emphasised the benefits to employers of filing online. She said that any future communications did need to be handled carefully as it is difficult to see the benefits for small employers – she was of the opinion that the changes would actually cost small employers more (CH agreed with this). PN stated that from the involvement he has had with employers, he was unsure that employers had received the message about the pending changes anyway, and that communications would need to be more robust. YL suggested that a ‘high-profile’ media campaign by HMRC was the best forum to ensure that awareness is heightened amongst employers. YL also suggested ‘pop-ups’ on the internet. CH suggested that the production of the CD-Rom was dropped as all of the information on it exists on the internet, and that it was not widely used. PN disagreed with this and stated that HMRC surveys showed that the CD-Rom was widely used and appreciated as a product by employers. MB said that HMRC would need much persuasion to get agents (which would include payroll bureaux) to file online. JS confirmed that there was a wide range of agents that do not use online facilities. SS also confirmed that agents do resist submissions to HMRC online, unlike individuals who prefer it. JP also suggested that many employers already file their VAT returns online and that this could be a vehicle to get the message to them. Similarly, MK confirmed the overlap between employers and the directors of companies who file their self assessment personal returns online.
AF stated that the online recruiter events were continuing to raise employers’ awareness of the changes.
PN confirmed that feedback from EmployerTalk had shown him that most employers were unaware of the in-year online changes that were coming.
SL confirmed that the VAT, CT and Self Assessment crossovers should be exploited as communication opportunities and thanked everyone for their contributions.
YL asked whether the timing of the NI deficiency notices had been reviewed for 2007-08. SS confirmed this as an ongoing issue that is still be considered within HMRC.
MK stated that there would be a review of the MPPC Employer Consultation sub-group membership shortly. MK confirmed this was to ensure that organisations could be correctly represented by members that were still fulfilling their roles and have not moved on from them.
AP6 - MR will take this forward.
MK suggested the next meeting be held on Thursday 24 May 2007.
