Payroll record keeping

Produced by Tolley in association with Vince Ashall

The following Employment Tax guidance note Produced by Tolley in association with Vince Ashall provides comprehensive and up to date tax information covering:

  • Payroll record keeping
  • Pay
  • Pay related records
  • Retention of records

Payroll record keeping

Under SI 2003/2682, reg 97, “ employer must keep, for not less than 3 years after the end of the tax year to which they relate, all PAYE records which are not required to be sent to [HMRC]...”. Reasons for keeping the records include:

  1. being able to calculate tax and NIC

  2. ensuring compliance with legislation

  3. proving that employees have been paid any statutory pay that they are entitled to

The GOV.UK website gives guidelines on the retention period for other payroll related records.

Records which must be kept include those relating to pay rates, tax and NIC deductions. Employers should keep records of training, employment history and terms and conditions of employment.

Although payroll records should be retained for the current tax year plus the previous three years, many employers keep these records for six years. A major reason for this is that some payroll records, such as business expenses claims, are also ‘accounting’ records. Under the Companies Act 2006, accounting records need to be kept for six years following the end of the company’s accounting period.

Basic information needs to be kept in relation to employees. As a minimum, this should include:

  1. name: surname and full forenames

  2. home address

  3. date of birth

  4. national insurance number

  5. gender: some employers are wary of collecting this, in case it breaches certain aspects of equality legislation; a person’s gender is required as it is a mandatory data item on many returns that have to be submitted to HMRC such as the full payment submission (FPS); it is also needed to ensure that the correct retirement age is applied and the consequent change in NIC letter is made (see the Retirement age guidance note)

The format of the records is not specified, but they need to be in sufficient detail to be able to prove compliance. Most, if not all, computerised payroll systems will keep the necessary records. The basic form that HMRC refer to for the calculation of tax and

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