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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: compliance revenue recording: current year, future revenue benefits, consequential compliance revenue and open year adjustments

Where an inaccuracy is identified in a current year you should at the earliest opportunity advise the employer that an adjustment is required. These should be documented on the case papers and followed up in writing.

If there is a delay in advising the employer on making an adjustment the reason or reasons should be well documented on the case.

Current Year Adjustment

An EC compliance check has only one current year, the year in which the check commenced (COG906510). Employer adjustments made in that year should be scored and extrapolated to reflect a full year (COG906590).

From April 2013, employers are required to submit a return ‘on or before’ a payment is made to an employee. As EC will predominantly be dealing with closed return periods, it is not anticipated there will be the opportunity to claim current year adjustments.

A current year adjustment can only be recorded if an inaccuracy has been identified which will be corrected to make sure that the return will be correct. For example, you agree an adjustment with an employer/contractor and close your case before HMRC receives the RTI return; you may record notional compliance revenue (FRB) for this current year adjustment period.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) COG18215(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Future Revenue Benefit

Future Revenue Benefit (FRB) is the estimated monetary amount that will accrue to the Department as a direct result of our compliance activities.

The overriding principle for claiming FRB is that it should be only recorded when you believe there will be a future impact on departmental revenues. The key to whether future revenue benefit can be claimed and to what degree, for example, the number of years, will depend on the behaviour that gave rise to the error and the action HMRC are taking to address it. Additionally, FRB is only applicable if the business is likely to continue trading and tax or other duties still remains.

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  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000) COG911010(This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000) COG914080(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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(This content has been withheld because of exemptions in the Freedom of Information Act 2000) COG18200(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Consequential Compliance Revenue

Consequential compliance revenue relates to periods where during the course of the compliance check a return is received, which include omissions identified as part of the check and subsequently corrected by the employer, and is treated as cash collected. This is because the return containing any corrective action is received before the case is closed; and there is certainty regarding its impact. FRB, on the other hand relates to returns that have not yet been received.

For example, during your compliance check you identify additional payments made to employees not included on previous Full Payment Submissions (FPS) in the current year. You instruct the employer to submit the correct year to date pay and deductions on the next FPS. Where the FPS is received before your case is closed, you can claim consequential compliance revenue.

Open Year

For years up to and including 2012-13 where you identify underpayments in remittances made to HMRC the underpayment should be quantified and a referral made to DMB, see COG904735 along with any payment obtained.

From 6 April 2013, on receipt of RTI information, HMRC will calculate how much the employer is due to pay each month, see COG904240. If payment is not made, DMB will be responsible for collection of any outstanding payments.

You cannot score compliance revenue for current year tax and NICs which has been deducted but not paid to us except where no PAYE scheme exists (COG915580).

Where a return is outstanding see COG915590.

Where inaccuracies are identified for an open year the employer should be advised to make adjustments so that a correct return is submitted (COG906600).

Where, exceptionally, open year and/or open tax period inaccuracies are included in a settlement you should record

  • all tax and NICs included in the settlement
  • all interest included in the settlement
  • all penalties included in the settlement.

In a long running case it is possible that an issue may not be resolved in time for an employer to adjust records before returns for subsequent years and/or tax periods become due. You must

  • not encourage an employer to delay or fail to submit returns and
  • if an employer expresses this intention, make the penalty situation clear to them - COG914045 - First 12 months of lateness and COG914050 - Over 12 months of lateness.

Where an employer has submitted returns which later turn out to be incorrect you should

  • collect any underpayment by Class 6 settlement or formal determinations
  • advise the employer to make adjustments for the year in which the issue is resolved
  • calculate the underpayment up to the time that the adjustment was made and estimate the underpayment for the remainder of the tax year (COG906590 - Caseflow - How to calculate current year liability)
  • consider behaviours and penalties in accordance with CH401100 (care should be taken when considering behaviours as it may have been reasonable for the employer to delay payment until the matter was resolved)
  • record all the tax, NICs, interest and penalty on Caseflow
  • record the amount of the adjustment for the year in which the issue is resolved as Future Revenue Benefit on Caseflow
  • consider Future Revenue Benefit when appropriate.

If the employer has delayed submitting the returns and the years and/or tax periods remain open you should

  • follow the guidance at COG915590 - Scheme open

consider penalties in accordance with COG914045 - First 12 months of lateness and COG914050 - Over 12 months of lateness.

See COG910130 - Open Months Inaccuracies, regarding CIS issues.

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