From last month, interest will be charged on all Paye and subcontractors' deductions that have not been paid for the 1992/93 tax year and all previous years. This is on top of any penalties that may be imposed for incorrect or late returns.
With the Revenue intent on being more rigorous in pursuit of those who make errors or pay late, what is the small company to do to avoid trouble?
Blick Rothenberg, a small firm of chartered accountants in London, has come up with a solution: a table of the correct way to treat the 10 most common payments, other than basic salary, that employers make to staff. For instance, it says that vouchers should be included in the payroll if they can be exchanged for cash but not if they may only be exchanged for goods or services.
Likewise, private medical schemes should be included if the employee arranges the scheme and the company pays or reimburses the premium or part of it, but not if the company arranges a scheme and also pays the premiums.
Surendra Shah, a partner in the firm, said: 'The whole area of what should and should not be included in gross pay can be confusing and it is easy to make mistakes. This is particularly so when dealing with payments to employees in a form other than basic salary.'
Warning that accounting for Paye and National Insurance could become as problematical as the small business nightmare of VAT, he added: 'Few employers realise the extent of the problem, which lies in the amount of detail you have to consider, the stricter attitude taken by the authorities and the severe penalties for genuine mistakes.'
Businesses that are late in submitting the end-of-year return form, the P35, face an initial penalty of pounds 1,200 per 50 employees, with a further penalty of up to pounds 100 a month per 50 employees. If the form is incorrect, a penalty of up to pounds 3,000 may be imposed.
For the P11D form, the initial penalty is up to pounds 300 per form, and a further penalty of pounds 60 per form per day. If the form is incorrect, the penalty may be up to pounds 3,000, irrespective of whether the error was by neglect or intent.
Copies of the table are available by sending a fax to Mr Shah at Blick Rothenberg on 071-935 6852.Reuse content