What are employer compliance checks?

By Tolley in association with Lesley Fidler
What are employer compliance checks?

The following Owner-Managed Businesses guidance note by Tolley in association with Lesley Fidler provides comprehensive and up to date tax information covering:

  • What are employer compliance checks?
  • The purpose of employer compliance checks
  • Selection of employers for checks
  • What areas are covered?
  • The commencement of a check

The purpose of employer compliance checks

The purpose of an employer compliance check is to satisfy HMRC that all earnings and benefits have been identified and reported correctly by an employer, and that associated payments of income tax and NIC have been made within the statutory time limits. The checks will also consider whether statutory payments and deductions are correct. In the case of large employers (those to which a Customer Relationship Manager has been assigned by HMRC), Know Your Customer visits may be made by HMRC. These are outside the scope of this guidance note.

Selection of employers for checks

HMRC’s Risk and Intelligence Service (RIS) are generally responsible for identifying the cases for compliance checks, which are selected because a risk has been identified. However, some compliance checks are carried out in Local Compliance as part of HMRC’s random enquiry programme. Disgruntled former employees or former spouses / partners (of both the business and personal variety) of owners can be a source of HMRC information, although RIS officers are well aware that such information may be incorrect and motivated by non-tax considerations. Employers may wish to consider what could have prompted a check and ensure that they address the issue in their initial meeting with HMRC, since the officer conducting the check is told of any risk that has been identified.

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Although at one time it was generally thought that an employer could expect ‘a PAYE review’ every six or so years, this is no longer the case and some employers may not be selected for review for many years, if ever.

What areas are covered?

Employer compliance checks include the operation of statutory payments and deductions such as statutory sick pay (SSP), statutory maternity pay (SMP), statutory paternity pay (SPP), statutory adoption pay (SAP), shared parental

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