What are employer compliance checks?

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

The following Employment Tax guidance note Produced 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 ― in other words, on time and in the right way ― 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 Compliance 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) identifies the cases for compliance checks. This is to remove any bias from the process. Whilst cases are usually selected because a risk has been identified, random selections are also made. Disgruntled employees or partners (of both the business and personal variety) of business 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.

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 shared parental pay (ShPP), statutory paternity pay (SPP), statutory adoption pay (SAP), apprenticeship levy (in the case of the largest employers) and student loan repayments. They do not extend to attachment of earnings orders or

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