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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: commencing the compliance check: the importance of the walkthrough and testing the systems: visit cases

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

You should undertake a Walkthrough test of each system operated by the employer/contractor and record the systems tested (see COG905085).

You should:

  • walkthrough/test an appropriate number of records to satisfy yourself that the system in operation enables the employer/contractor to meet his statutory obligations
  • tailor the checks undertaken to address the information obtained during the talkthrough.

When selecting the records to test you should pay particular attention:

  • to any risks identified
  • by taking into account and dealing with any new risks identified at the talkthrough or walkthrough, and
  • to any times when the system is more at risk (busy periods, key individuals, new systems etc), for example:

    • to seasonal workers at holiday resorts, Christmas time.

The Walkthrough tests are designed to:

  • make sure that all payments and benefits have been correctly treated for tax and NICs purposes and properly reported
  • make sure employers are fulfilling responsibilities under Collection of Student Loans (CSL) legislation
  • make sure employers are fulfilling responsibilities under National Minimum Wage legislation
  • make sure Statutory Payments schemes are being correctly operated
  • make sure the employer is entitled to any Employment Allowance claimed (see EC Testbank)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • assist the employer or contractor in continuing to fulfil these obligations
  • educate the employer or contractor on how to follow the Regulations where appropriate
  • detect and deter any impropriety involving tax and NICs by HMRC staff.

Several of the Payroll Walkthrough tests have a dual purpose in that they also provide assurance to Parliament that employers/contractors are complying with a range of statutory obligations or that action will be taken to make sure of future compliance.

The format for recording Walkthrough tests is not prescribed but there must be a full audit trail.

Payroll walkthrough templates are available via SEES on which to record several of the walkthrough tests. However, where you decide that the use of templates or a template is not appropriate for the Walkthrough test being undertaken, you must:

  • make sure that the test is recorded with the same level of detail.

For each risk, once the caseworker has tested the systems and these are found to be robust and reliable, at this point the risk can be finalised.

If from evidence and caseworker’s assessment the controls indicate the employer’s systems are not robust then further testing is needed. The purpose of this is for the caseworker to establish scope of inaccuracies and quantify amounts lost.

Extending testing

  • Employer Compliance methodology is adaptable and flexible.
  • When risk or risks identified, with high compliance revenue, need to examine sufficient records to confirm and quantify.
  • Low grade risks - Caseworker can decide not to sample further or just carry out additional small sample especially where potential compliance revenue is low.
  • Consideration on pursuing items - The EC caseworker must take into account

    • trivial benefits guidance
    • de-minimus limits
    • NIC Contributory principle.

All risk areas must be discussed with the employer at the meeting to determine why and how the inaccuracies arose.

Significant decisions to pursue, not to pursue or change levels of testing will need to be documented with a note of the circumstances surrounding the decision.