Last Minute Special Offers

Below are some reduced price courses only available to our newsletter readers:

# If you book both of the Aberdeen courses together you can save a further £50. In total you will save £150 by booking both courses.

*Prices exclude VAT.

Telephone: 01295 225500

News Items – at 1st May 2007

Electronic Filing of Year-end Returns

Guidance for employers suing NICs aggregation

HMRC has provided a workaround for employers whose electronic Returns have been rejected because they use aggregation when calculation NICs.  Some employers are receiving error messages 7130 and/or 7140, which relate to the value reported in NICs columns 1a and 1b.  HMRC’s instruction, for the 2006/07 year end filing, is to enter £1.00 in column 1c for the affected employees to ensure that the value is greater than “0”.  The correct validation should be in place for 2007/08 Returns.

Further information:
2006-07 PAYE Returns: Aggregation  http://www.hmrc.gov.uk/paye/returns-aggregation.htm

Electronic Filing of Year-end Returns

Understanding ‘success’ and ‘failure’ messages

Last week’s newsletter included an item about non-filing penalty notices issued by HMRC where employers had submitted test year-end Returns rather than live Returns.  The information provided in the article came from HMRC’s own announcement and, in addition, from an exchange of correspondence with HMRC and discussions with a payroll system developer.

One reader responded immediately to the news item by asking whether HMRC’s 9004 “success” message would arrive by email from HMRC or be sent to her payroll software developer.  She asked: “Has everyone except me received this second response?”

In addition to the technical guidance provided by HMRC for developers, brief details for employers about the messages sent in response to electronic submissions is provided on the “Online filing 2007” page of HMRC’s website.  Following lengthy discussions with a payroll software developer, this article will attempt to clarify further the messages that are sent to employers when they send forms and returns electronically to HMRC over the Internet from payroll software.

Submitting electronic Returns and the Government Gateway
Many Government departments conduct business electronically with their “customers”.  The department that makes the greatest use of electronic business is HM Revenue & Customs, with 18 different services currently available, including the filing of VAT, self-assessment, corporation tax and PAYE Returns.  To make use of these services, customers must register with the Government Gateway and be issued with security access codes, usually a 12-character User ID and a password.

Before sending a PAYE year-end Return to HMRC using payroll software, the employer must enter a valid tax office number, PAYE reference, Gateway User ID and password into the payroll system.

The Government Gateway is an electronic “gateway”, through which messages are passed between customers’ computers and the computers of the relevant Government department.  In the context of PAYE returns, when an employer uses a payroll system to submit a year-end Return over the Internet, it reaches the Government Gateway and is allocated a unique reference number, called a “correlation ID”.  The Gateway checks the security codes included in the submission and, if they are recognised, the Return is passed to HMRC’s computer systems.

If the employer stays online, the payroll system repeatedly sends a request to the Gateway (a process called “polling”), asking if HMRC has responded yet to a submission with that particular correlation ID.  When HMRC has checked the Return, an appropriate message is sent back to the Gateway and, if the employer’s computer is still “polling”, the message is sent on to that computer.  If the employer is no longer online or the payroll system is switched off, HMRC’s message is held at the Gateway.  The next time the employer’s payroll system goes online, it asks again if there has been a response and the Gateway then sends the message to the employer’s computer.

The nature of this return message is considered later.

Validation and the Quality Standard
For a year-end Return to be accepted by HMRC’s computer systems, it must pass very stringent validation checks, known as the “Quality Standard”.  In theory, the employer does not need to worry about validation as the software developer should have designed the payroll system so that information entered into the system and information submitted to HMRC cannot fail to meet the validation rules.  In practice, however, errors can still slip through, perhaps because the developer’s validation does not cover every eventuality (e.g. required information is missing or invalid characters can be entered), or the employer by-passes the validation to make changes (e.g. by manually changing historical payroll data), or the employer enters incorrect information (e.g. the tax office reference is input incorrectly).

The procedures that have to be followed to prepare a year-end P35 and P14 submission will vary from one payroll system to another but the stages are likely to be:

1. Check that the employer’s details are correct, such as the tax district number, reference and name and, if relevant, the employer’s ECON
2. Setup the employer’s submission details, including the Gateway User ID and password
3. Enter non-payroll values as relevant, such as advance funding, incentive payments, CIS deductions
4. Check the P35 values, run the payroll system’s own validation checks, and answer the Checklist and Declaration questions
5. Submit the Return to HMRC, or schedule it for later submission.

The Return is sent over the Internet as what is called an “XML” message.  XML is a standard, highly-structured language that is used to share information between systems, particularly over the Internet.  The following is a small extract from a full XML submission for a year-end Return – it can easily be identified as the Checklist and Declaration from form P35.  If the employer’s payroll system provides the facility, the full XML message can be viewed and checked before submission.

When the message is received by HMRC’s computer systems, it is checked against the Quality Standard validation rules and, depending on whether or not the validation rules are met in full, two messages are sent back to the employer, either

• an XML “success” message and a “success” email, or
• an XML “failure” message and a “failure” email.

The XML “success” messages
If there are no problems with the employer’s Return, a “success” message, also in XML format, is immediately sent back to the Government Gateway and, as already explained, is sent to the employer’s computer when the payroll system asks for HMRC’s response, perhaps immediately, perhaps a few hours or days later. When it arrives, the payroll system files the message somewhere accessible on the computer.  Unless HMRC’s systems are particularly busy, such as the day immediately before the filing deadline, or HMRC has announced a delay, as it usually does just before the start of the new tax year, and if the employer’s computer is still online, the employer should find that the “success” message arrives almost immediately after submission.

A number of other situations must be considered:

• The payroll system may permit a test submission to be made, in which case HMRC validates the Return when it arrives but does not process it further.  If the employer receives a “success” message, the same Return must be sent again, this time as a live submission.  If a “failure” message is received, the errors identified must be corrected before resubmitting it.
  If the employer can view the XML message itself, it is easy to check whether the submission is being sent live or as a test.  The message includes the line “<TestMessage>0</TestMessage>” if it is a live submission, or “<TestMessage>1</TestMessage>” if it is a test submission.
• If the employer is sending the Return in parts, e.g. three P14 submissions, followed by the P35 submission, each part submission is validated on receipt and, if everything is correct, a “success” message is sent back for each part.  Each P14 part submission is held back, pending receipt of the P35.  When the P35 is submitted and the number of P14 part submissions already received matches the number of parts specified on the P35, the P35 totals are validated against all of the part submissions and, if it checks out, a final “success” message is sent to the employer.
• After the “success” message has been sent, the submission is then passed on for full processing.  At that point, the initial submission is treated as the employer’s final Return and cannot be replaced.  However, a part submission can be replaced by another with the same “unique ID” right up until the P35 is validated.  Similarly, if the P35 is sent before all of the P14 part submissions are sent, it can be replaced by a further P35.

Each of these situations has its own “success” message.  There are five different messages covering six different situations, as follows:

• Test submission – 9001: This submission would have been successfully processed if sent under non test conditions
• P14 Part Replacement – 9002: This submission has replaced the one previously submitted using the same "unique ID"
• P14 Part – 9003: This P14 submission has been accepted and is awaiting further processing
• P35 Part – 9004: The EOY Return has been processed and passed full validation
• Complete – 9004: The EOY Return has been processed and passed full validation
• P35 Part Replacement – 9005: This EOY Return submission has replaced the one previously submitted using the same Employer Reference and Tax Year.

The following is a sample XML “success” message:

The important words can be seen in the “Message code” towards the end of the message – “9004 The EOY Return has been processed and passed full validation”.  The “Correlation ID”, which links the message with the employer’s original submission, can also be seen.

The way in which the “success” message is presented to the employer varies from one payroll system to another.  One of the advantages of XML messaging is that it provides developers with the flexibility to present the message to users in different ways.  Some systems may simply display the full XML “success” message.  Others may indicate where the file is located on the computer so the employer can open it using a browser.  Others may simply quote the “Message code”.

The XML “failure” messages
An XML “failure” message is sent if the submitted Return does not meet the validation requirements of the Quality Standard in any way.  It is sent in the same way and as quickly as a “success” message, first to the Gateway and then to the employer’s computer when it is online.  Examples of “failure” messages are:

• The data does not meet the standards – 5012: This field contains an invalid character. Please try again and if the problem recurs contact your software supplier
• Expected data is not present for a particular element (field) – 5016: Entry required
• Mandatory data is not present, or unexpected data is present, or the XML is badly structured – 6010: Your submission is not in the correct format - please contact your software supplier and quote Error Code 6010.

Additional error codes are included in the message to indicate the particular elements in the Return that contain the fault.  However, if the error is in the P14 for a particular employee, the message does not identify the employee, only that the error occurs somewhere in the Return. 

Error messages should be investigated and handled immediately as an employer is not treated as having met the mandatory electronic filing requirement – it currently applies to employers with 50 or more employees – until a live submission is received and a “success” message is received from HMRC.  If an employer has any difficulty in correcting an error, the developer should be consulted.

The “success” and “failure” emails
In addition to the XML messages that are sent back to the employer’s computer, HMRC also sends a confirmation “success” or “failure” message by email to the employer’s registered email address.

The “success” email states:

The “failure” email states:

It will be noted that neither email message gives any detailed information.  The wording of the “success” email is the same, irrespective of the type of Return that was submitted.  The wording of the “failure” email is the same, no matter what the actual errors were.  Only the XML “failure” message provides details of the actual errors.

Due to difficulties experienced by employers in understanding the “success” email in the context of test submissions, HMRC recently changed the wording to that shown above. 

The email messages are still far from clear.  One speaks of “successful receipt”, the other of “unsuccessful submission”.  Both emails are issued after validation but HMRC, in its guidance, states that the “success” email is not confirmation that the Return has passed the Quality Standard checks, only that the submission has been received. But that is contradicted by the wording of the “failure” email.  We have asked HMRC to review further the wording of the email messages.

Further information:
ERIC XML Response Message Structure  http://www.hmrc.gov.uk/ebu/paye_techpack/eric-resp-eoy-0607.pdf

Payroll deadlines during the next month

May 3 – This is the date by which any changes to the provision of company cars in the three months to April 5 must be reported using form P46(Car).

May 5 – This is the final day of tax month 1.  Tax and NICs etc for payments made in the tax month to May 5 are due for payment to the Accounts Office by May 19, or by May 22 if paid electronically.

May 18 – (May 19 is a Saturday) – For employers required to pay tax and NICs etc to the Accounts Office monthly, this is the deadline for payment to be received by the Accounts Office, unless made electronically.

May 18 – (May 19 is a Saturday) – This is the deadline date for filing, in paper form or electronically,

• form P14 End of Year Summary
• form P35 Employer Annual Return
• form 38A Supplementary Return

May 22 – For employers required to pay tax and NICs to the Accounts Office monthly, this is the deadline for electronic payments to be cleared into the HMRC bank account.  Payments through BACS must be initiated by May 18 at the latest.

May 26 – The date after which non-receipt by the HMRC of year-end returns P14s, P35 and P38A will result in late-filing penalties.

Payroll FAQ's

Statutory Leave Notice Requirements

What control does an employer have over an employee’s return to work date?

Many employers arrange temporary cover for the absence of an employee during maternity or adoption leave.  It can be difficult to manage the period for which a temporary worker is engaged where there is uncertainty over the date on which the absent employee will return to work.  What control the employer does have over the situation can be jeopardised if the employer fails to meet the statutory notice requirements for maternity and adoption leave.

There are three distinct notice requirements – two that must be met by the employee and one by the employer.  In the order they occur, we can call them (1) the “employee’s initial notice”, (2) the “employer’s confirmation notice”, and (3) the “employee’s early return notice”.  There are also additional employee notice requirements for maternity and adoption pay purposes but only the notice requirements for maternity and adoption leave are discussed here.

Employee’s initial notice
An employee must inform the employer, no later than the end of the 15th week before the expected week of childbirth (i.e. the “qualifying week”) or within seven days of the adoption matching date,

• in the case of maternity leave, the expected week of childbirth
• in the case of adoption leave, the expected week of placement, and
• in either case, the date from which the employee intends to take the leave.

If the employer requests it, this notice must be given in writing and the MATB1 or matching certificate must be provided.

The employee may subsequently give notice to vary the date from which the leave will start, doing so at least 28 days before the date that is being varied, or 28 days before the new date, whichever is the earlier, or as soon as is reasonably practicable.

Employer’s confirmation notice
Within 28 days of receiving the employee’s initial notice, the employer is required by law to inform the employee, in writing, of the date on which the 52-week period of maternity or adoption leave will end.  If the employee later varies the date from which leave will start, the employer must inform the employee of the new end of leave date, doing so no later than 28 days after the start of leave.  Failure by the employer to give written confirmation notice can have serious implications, as will be seen.

The confirmation notice requirement is often met by giving the employee a detailed document that spells out all aspects of the employee’s maternity/adoption leave and pay entitlements.  However, the only statutory part of such a full document is the requirement to provide the date on which the employee’s full entitlement to leave ends.  From that information, the employee must be able to determine the return to work date, i.e. the first normal working day following the date on which leave ends.

Employee’s early return notice 
Having given initial notice to take leave and having received the employer’s confirmation notice, the employee is entitled to take the full 52-week period of leave.  Even if the employee plans an earlier return to work date, the employer cannot enforce it.  The employee has full control over whether to stay on leave for the full 52 weeks or return to work earlier.  The employer may provide incentives for an earlier return, such as higher contractual maternity or adoption pay, but, if the employee decides to stay at home for 52 weeks, there is nothing the employer can do about it.

There is no requirement for the employee to give notice to return to work after 52 weeks – only to turn up for work on the first working day after the end of leave.  However, an employee wishing to return to work before the end of 52 weeks must give 8 weeks’ notice of return, although the employer may choose to waive that requirement.  The intention of the 8-week notice period is to give the employer sufficient time to bring the contract with the temporary worker to an end.

During maternity or adoption leave, the right of the employee to wages or salary under the employment contract is suspended.  That right resumes automatically after 52 weeks’ leave but, if the employee gives early return notice, it does not resume until the end of the 8-week notice period.  As a result, if an employee wishes to return to work early, the employer is entitled to refuse permission to return until the 8 weeks is up.  At the end of the 8 weeks, the employer is contractually obliged to resume payment of wages or salary.  However, if the date on which the employee wishes to return is within 8 weeks of the end of the 52-week leave period, the employer may only delay the return until the end of the 52-week leave period.

If, having given 8 weeks’ notice to return early, the employee wishes to make a further change to the agreed return-to-work date, the employee must give notice at least 8 weeks before the agreed date, or 8 weeks before the new date, whichever is the earlier.

However, failure by the employer to give written confirmation notice prevents the employer from enforcing the 8-week early return notice period.  That law assumes that an employee who has not been given the date on which the leave ends does not know when to return and so may return at any time, without giving notice.  The employer may not, in that situation, delay the return to work for 8 weeks.  The employee can simply arrive at work and the employer is contractually obliged to resume payment of wages or salary.

If, having been informed of the date on which leave ends, the employee does not arrive on the next working day and does not explain the absence, the employer may treat the absence as unauthorised and implement internal disciplinary procedures.  If the employee is sick on the return to work day, normal contractual notification rules must be followed.

Readers Newsletter Forum

If you have any HR or payroll related questions that you think other people who receive this newsletter will be able to answer, please email us and we will add your question to our newsletter.

An area dedicated to readers of the newsletter to enable you to:

• share your comments or views on anything in the newsletter
• to ask a question of other readers, or the tutor team
• to relate a humorous event or story related to HR or payroll
• to provide a useful tip, or seek advice on a software problem
• or maybe to simply provide recruitment information

contact: daniel.ruffle@hrdps.co.uk or reg@hrdps.co.uk

Click Here if you wish to unsubscribe