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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: inaccuracies: employees for whom code number not known - inadequate records

Where the employer has inadequate payroll records, you should

  • draw the employer’s attention to the Employer Helpbooks which explain what records should to be kept.

You should confirm that

  • where the employer reports PAYE in real time, the Real Time Information (RTI) starter checklist (or equivalent) is held and all employees are included on the payroll
  • for a non-RTI employer, employees for whom a form P46 is not held, did not work for more than one week
  • payments above the PAYE threshold were made to employees who worked for one week or less
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)  
  • if a form P38A (up to and including 2012-13) is required by HMRC.

When investigating such payments you should

  • carefully examine any records that are held
  • avoid accepting explanations at face value
  • ask pertinent questions about

    • how pay is calculated
    • the nature of the work carried out
    • the method of recruitment
    • the true nature of the payments
    • the identity of the recipients
    • whether as many workers were needed to do the work as the employer claims
  • ask where the work was carried out with a view to establishing if the location of the work is readily accessible to a pool of casual workers for example waiters/waitresses for functions.

Where you

  • discount that the payments went to regular employees, but
  • consider that there is liability in respect of employees for whom codes were not known

you should

  • compute the tax and NICs due
  • obtain sufficient evidence for Regulation 80 determinations (COG915150) and/or Section 8 NICs decision (COG915155)
  • remind the employer that records of the names and addresses of employees and the amounts paid to them are required to be maintained for

    • the PAYE/NIC system to be operated correctly, and
    • accurate returns to be made
  • where appropriate seek a settlement from the employer.

When concluding the case, you should advise

  • RIS caseworker by Cross Tax referral form of

    • the instructions given to the employer, and
    • an opinion of whether the employer is likely to maintain the required records in future