Overpaid PAYE for your employees?

Pennywise

I thought I'd give a warning to any other employers out there.

If you have overpaid your quarterly (or monthly) PAYE payments to HMRC, you have to actually write to them to ask for a refund. I have been told that the HMRC don't actually send out statements showing any overpaid amounts, and what's worse, they don't automatically carry them forward to the next PAYE tax year either, so if you don't claim it, you may never see YOUR money again as it will be left to languish "on account" in the HMRC bank account. I have been told this by the HMRC staff when I telephoned them on behalf of one of my clients where I discovered overpayments when preparing their annual accounts. Needless to say, the client was pleased I'd checked as I got a few hundred pounds back for them!

Compare this to their demands and very prompt threats of court action if it turns out you've underpaid (even by small amounts) and you'll appreciate they're not playing fair at all.

Going back a few years, once you submitted your payroll annual return (P35), the IR would send a statement showing whether you've overpaid or underpaid, but now they don't - they just send demands if you're short. A lot of employers won't know that the IR owe them money so I would urge all employers to check their P35s for the last couple of years and compare them to the amounts actually paid to the IR - if you find you've overpaid, write in and claim a refund before it's too late and it's all forgotten.

Savvy_Sue

Pennywise wrote:

If you have overpaid your quarterly (or monthly) PAYE payments to HMRC, you have to actually write to them to ask for a refund.

I'm sure you're right about this at the end of the tax year, but when I was running payroll for an out of school club I was advised by the IR helpline (as it was then) that they didn't actually check whether what you were paying them was correct until the end of the year. In fact they have no way of doing this, because they don't know how much you're paying any of your staff during the course of the year.

What this means is that if you find you have overpaid before the end of the tax year, you can just underpay the following month or quarter. Of course if your figures jump up and down on an apparently arbitrary basis they may decide to look into the reasons for this, but in our case our staff bill was massive through the summer, and a lot lower every other quarter (and we were small enough to be able to pay quarterly).

Pennywise wrote:

Going back a few years, once you submitted your payroll annual return (P35), the IR would send a statement showing whether you've overpaid or underpaid, but now they don't - they just send demands if you're short. A lot of employers won't know that the IR owe them money so I would urge all employers to check their P35s for the last couple of years and compare them to the amounts actually paid to the IR - if you find you've overpaid, write in and claim a refund before it's too late and it's all forgotten.

And whoever's doing your payroll may not keep a close enough eye on this either: a few years ago the payroll company for where I work were still writing everything by hand, and transposed a couple of figures in the bill we were due to pay, so we ended up underpaying! We're using a different company now...