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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
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Employer returns: capture employer return - up to 2004: pre capture checks - up to 2004 (Action Guide)

Note: This Action Guide should be used for tax years up to 2003-04 only.

When you are required to capture an annual return, follow steps 1 - 42 below. This Guide is presented as follows

Steps 1 - 5

Step 6

Steps 7 - 10

Step 11

Step 12

Steps 13 - 20

Step 21

Step 22

Steps 23 - 40

Steps 41 - 42

For details of how to access any of the Employer Business Service functions, use PAYE057.

Initial action

If you are reviewing form(s) P14 only, go to step 11

Otherwise

  1. Check that the return has been signed, recorded as received and is an official P35 employer annual return
  • If the return has been signed and recorded as received go to step 5
    • If you are reviewing a form P35MT (up to 2004) ensure that receipt of the return has been noted on the ‘Reporting End Of Tax Year Data Electronically’ list held within the ‘Electronic P14 Register’ employer-related electronic file
  • If the return has been signed but not recorded as received follow PAYE41041
  • Where there is no signature on the return, go to step 2
  1. Use Function VIEW EMPLOYER INDICATORS to identify whether the year related UNSIGP35 indicator was set for the previous tax year
  • Where the indicator appears go to step 4, otherwise
  • Go to step 3
  1. Use Function AMEND EMPLOYER INDICATORS to set the year related indicator UNSIGP35 for the year on the return

  2. Photocopy the return

  • Send the return back to the employer / contractor, asking them to sign the form and return this to you immediately, and then
  • Continue to capture the return details using the photocopied form
  1. Your next action depends on the type of return held
  • If you are reviewing form P35(EP), go to step 6
  • If you are reviewing form P35(TAS), go to step 7
  • If you are reviewing form P35(PS), go to step 12
  • If you are reviewing form P37, go to step 13
  • If you are reviewing form P35 (Offshore Protocol), go to step 21
  • If you are reviewing form CIS36 or SC35, go to step 22
  • If you are reviewing form P35 or P35MT, go to step 23

Form P35(EP)

  1. Sort the forms P527 and / or P528 into alphabetical order, these must be sent to the PAYE section after capture

Note: These forms do not need to be counted for capturing purposes.

  • Then go to step 42

Form P35(TAS)

  1. Review the entries on the back of the P35(TAS) to identify
  • The number of basic rate contracts. Shown as type ‘B’
  • The number of higher rate contracts. Shown as type ‘H’
  1. Compare these figures with the entries made on form(s) P440
  • Where all the contracts are shown on the P440, go to step 10
  • Where some contracts are missing. go to step 9
  1. If you have established that some contracts are missing, you must write to the employer to request that the missing details are reported on an additional P440
  • Use Function AMEND EMPLOYER INDICATORS to set the POST indicator
  • BF your file for 4 weeks

Note: When this information is received it must be dealt with as an additional return.

  1. Find the employer-related electronic file ‘Taxed Award Schemes’
  • Review the sub folder relating to each contract shown on the return
  • Identify any contracts which expired in the year for which the return relates
    • Where no contracts expired, go to step 41, otherwise
  • Delete the expired contracts from the list held in the employer-related electronic file, and then
  • Go to step 41

Form(s) P14

  1. Complete a form P37, using green ink, as follows
  • Make a note of the scheme type on the front of the return. This must be one of the following
    • DCNI
    • DPGEN
    • DPNI
  • Copy the following entries from the P14
    • The taxpayers name and NINO
    • Details of all the deductions shown
  • Go to step 41

Form P35(PS)

  1. Review all form(s) P14 to identify those which do not have ‘X’ entered in the box ‘NI Contribution Table letter’ on the P14
  • Enter ‘X’ in that box on the P14
  • Go to step 33

Form P37

  1. You must ensure that you hold all the cards P12 for each employee
  • Review the cards P12 received ‘in-year’ and remove any which refer to this employer
  1. If more than one card P12 is held for any employee add the figures on each P12 to reach a total figure for each quarter

  2. Review the NIC table letters shown at the totals for the quarter

  • Where there is only one letter shown, add up the weekly or monthly figures for each column, otherwise
  • Where there is more than one letter shown
    • Add up the weekly or monthly totals for each NIC table letter in columns 1a, 1b, 1c, 1d and 1e, and
    • Add up the weekly or monthly figures in columns 2, 3, 4, 5 and 8
  1. Make an arithmetic check of each column. If the employer has not entered a total for each column add up the amounts and use green ink to enter these now
  • If the totals are correct go to step 17, otherwise
  • Strike through the incorrect figure using green ink and enter the correct total, and
  • Write to the employer to tell them where any error arose and what the revised figures are
  1. Use green ink to complete a form P14 for each employee for whom you hold a P12
  • Note the form(s) P14 Pro-forma
  • Enter the total figures from the P12
    • If different NI contribution letters are shown on the card P12, show the different letters and corresponding amounts as separate items on the P14
  1. Separate the form(s) P14
  • Attach the Inland Revenue copy to the P12
  • Keep the NICO copy with the P37 to await the P228
  • Send the P60 to the employee with a copy of the Draft Letter P60 / DOME (Word 24KB)
  1. When using Function CAPTURE EOY RETURN DETAILS to capture a return you will be required to enter the number of returns or forms P14 received
  • Count the number of form(s) P14
  • Use green ink to enter this figure in the top right hand corner of the P37

Note: Each multiple of 300 forms P14 is equal to one bundle. Where there are 300 forms P14 or more, a P130B sheet must be completed for each bundle of 300 and the remaining balance. For more information see PAYE41031.

  1. Use the information held on the Pro-forma P14 to complete the back of the P37
  • Use the entries referring to Statutory Sick Pay (SSP) to calculate whether an entry is needed in the ‘SSP Recovered’ box
  • Use the entries referring to Statutory Maternity Pay (SMP) to calculate anySmall Employers Relief (SER) (Word 31KB) and enter this in the ‘NIC Compensation on SMP’ box, then
  • Go to step 41

Form P35 (Offshore Protocol)

  1. Review the front of the return to identify if questions 1 to 3 have been answered
  • If all of the questions have been answered, go to step 33, otherwise
  • Go to step 29

Form CIS36 / SC35

  1. Review page 2 of the CIS36 or the front of the SC35 to identify if the questions have been answered
  • If all of the questions have been answered, go to step 41, otherwise
  • Go to step 29

Form P35 or P35MT

  1. Check the return for an entry in the Total Tax Credits Paid box
  • If an entry has not been made, go to step 28, otherwise
  1. Check the amount of tax credits the employer was authorised to pay to their employees. Use TCS Function EMPLOYER FUNDING APPLICATIONS
  • Select ‘View’ on the toolbar menu and select ‘Payment Via Employer Details’ from the drop down menu
  • Select the PY checkbox to select the previous year. The start and end dates will be displayed
  • Select the [OK] button. The Payment Via Employer Details screen will be redisplayed
  • Obtain the figure for Tax Credits Authorised from the Totals for Funding Period box

Note: If a transfer, merger or succession has taken place, you must add together the tax credits authorised for each employer reference.

  • If TCS shows any amount of Tax Credit Authorised, take no further action to reconcile the figures on TCS and the return, even if the amounts do not agree
  • Continue to capture the return, go to step 28
  1. If TCS shows 0.00, no PVE has been authorised and you must make one attempt to telephone the employer for an explanation of the discrepancy
  • If the employer confirms that the figure entered on the return is incorrect and that no tax credits were paid, go to step 26
  • If the employer confirms that the return is correct but tax credit details are held against a different employer reference on TCS, go to step 27
  • If you are unable to contact the employer or they are unable to agree the TCS figure, go to step 28
  1. If the employer confirms that the figure entered on the return is incorrect and no tax credits were paid
  • Make a note of the agreed revised figure (0.00) in green ink next to the Tax Credits Paid box on the return
  • Use Function AMEND EMPLOYER NOTES to record a note of the telephone conversation
  • Go to step 28
  1. If the employer confirms that the return is correct but tax credit details are held against a different employer reference on TCS
  • Contact the TCS Business Helpdesk (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • Provide them with both employer references and any other information they may request
  • Business Services (BASS) will arrange for TCS to be updated with the correct details
  • Go to step 28
  1. Review the return to identify if questions 1 to 6 have been answered
  • If all of the questions have been answered, go to step 33, otherwise
  • Where some or all of the questions have not been answered, go to step 30
  1. Use Function VIEW EMPLOYER INDICATORS to identify if the year related indicator UNQUEST was set for the previous tax year
  • Where the indicator appears, go to step 30, otherwise
  • Where the indicator does not appear, go to step 31
  1. Photocopy the return
  • Send the return back to the employer / contractor pointing out which questions have not been answered and request they provide you with an answer to those questions as soon as possible
  • Continue to capture the return details using the photocopied form
  1. Use Function AMEND EMPLOYER INDICATORS to set the year related indicator UNQUEST for the year on the return

  2. Photocopy the return

  • Send the return back to the employer / contractor pointing out which questions have not been answered and request they provide you with an answer to those questions as soon as possible
  • Continue to capture the return details using the photocopied form
  1. Your next action depends on the type of return that you are reviewing
  • If you are reviewing a form P35MT, go to step 34
  • If you are reviewing a form CIS36 or SC35, go to step 41, otherwise

When using Function CAPTURE EOY RETURN DETAILS to capture a return, you will be required to enter the number of returns or forms P14 (worksheets in the case of form P35 (Offshore Protocol)) received

  • Count the number of form(s) P14
  • Use green ink to enter this figure in the top right hand corner of the return

Note: Each multiple of 300 forms P14 / worksheets is equal to one bundle. Where there are 300 forms P14 or more, a P130B sheet must be completed for each bundle of 300 and the remaining balance. For more information see PAYE41031.

  • Go to step 41
  1. Retrieve the ‘Electronic P14 Register’ employer-related electronic file
  • Find the relevant employer on the ‘Reporting End Of Tax Year Data Electronically’ list held within the employer-related electronic file
  • Check and tick the permit number shown on the list
  • Check whether the invoice has been recorded as received
    • If yes, go to step 35
    • If no, note the employer-related electronic file that form P35MT has been received and go to step 41
  1. Compare the totals shown on the form P35MT against the totals shown on the Magnetic Tape Invoice
  • Where the amounts agree, go to step 41
  • Where the figures do not agree, go to step 36
  1. Check the ‘Reporting End Of Tax Year Data Electronically’ list to see how many invoices are expected and whether they have all been received
  • If any are outstanding, note the employer-related electronic file that form P35MT has been received and go to step 41
  • If all invoices are held go to step 37
  1. In the event that the figures do not agree you must pursue the discrepancy
  • Send a copy of the Stock Letter P35MT / Invoice (Word 30KB) to the employer and keep a copy of the letter with your papers
  • Note the employer-related electronic file that form P35MT has been received and go to step 41
  • BF your papers for 4 weeks
    • If at the BF date you have not received a reply, go to step 38
    • On receipt of a reply, go to step 40
  1. At the BF review send a reminder to the employer and BF your papers for a further 4 weeks

  2. At the BF date if there is no reply you must

  • Send a copy of the letter issued to the employer to the Debt Management Office, and
  • Use Function AMEND EMPLOYER INDICATORS to set the INSTIND(1) indicator
  1. When you receive an explanation of the discrepancy from the employer you must review the information
  • If the invoice shows the correct amounts, the employer’s reply must be accompanied by either an additional or correction return to account for the discrepancy
    • Follow PAYE41041 to record receipt of any ‘additional’ return
    • Go to step 41 to review any notes made when checking prior to recording receipt of the return, before continuing with the capturing process for both returns
  • If the P35MT shows the correct amounts
    • Use green ink to prepare pro-forma form(s) P14 if there is a change to the microfiche entries
    • Go to step 41

Notes made whilst recording receipt of the return

Various notes may have been made on the return when checking prior to recording receipt of the return and whilst recording receipt of the return

  1. You must review the return to identify whether any notes have been made
  • Where there are no notes entered, continue to capture the return
  • Where the return shows this type of note, you must follow the guidance below
  1. In all cases you must review the notes made and then
  • Identify the reason why the note was made
  • Follow the instruction which relates to the note(s) on the return, and
  • When you have completed the required actions, continue to capture the return unless you are specifically instructed otherwise

Below tells you what actions you must take for each message shown. The messages are grouped into the following areas

Scheme Status

This area covers

This area covers

This area covers

Scheme Status

CEASED

Is there a note on the return that confirms the Debt Management Office has already seen the form?

  • Yes - continue to capture the return
  • No - pass the return to the Debt Management Office for their review

PSC {.dash}

Do you hold both return forms P35 and CIS36?

  • Yes - proceed to capture the returns
  • No - search for the outstanding return from those on hand
  • If the other return is not found, capture the return received but ensure you
    • Set the Inhibit UP/OP indicator whilst capturing
    • Do not enter any details relating to the other return. For example if CIS36 is missing do not capture the box showing CIS36 tax deducted on the P35

SUCCESSION {.dash}

  • Make a note on the top of the return ‘Succession’ in red
  • Obtain all return forms for the year of succession
  • Use Function VIEW EMPLOYER SCHEME HISTORY to determine the status of the employer record for the year of the return
  • If the employer record has been ‘succeeded by’ another employer reference
    • Ask Banking Operations to reallocate all charges for the year of succession to the correct BROCS record, and
    • Send the return(s) to the correct office with a note of the action taken
  • If the employer record has been ‘transferred from’ another employer reference
    • Use Function VIEW BROCS to check that charges have been allocated to the correct BROCS record for the year of the return
    • If monies are still allocated against the old BROCS record send a memo to Banking Operations requesting that the monies are reallocated to the new BROCS record, otherwise
  • Use Function AMEND EMPLOYER INDICATORS to unset the CIS36 / SC35SUCC for the year if necessary (CIS36 or SC35 only)
  • Use Function CAPTURE EOY RETURN DETAILS to process the return(s) in the normal way

P229

  • Link the return with the P229
  • Enter the pay and tax details
  • Return the P229 to the PAYE section
  • Note P14 ‘P229’ in red ink

AMSO {.dash}

  • Note return ‘AMSO’ in red ink
  • If you hold a P38A note its receipt in the employer-related electronic file ‘Market Research Employers’

ENFORCE {.dash}

  • Take no further action

POST

  • Use Function VIEW EMPLOYER NOTES, check the employer record pad and post on hand to review the information recorded
  • Identify why the indicator was set
  • Take any urgent action needed prior to capturing the return

SPEC {.dash}

87X

  • Take no further action

C154

  • Take no further action

ADVANCE

  • Use Function VIEW BROCS (Format 3 - Postings Summary - code PAD) to identify the total of advances made for employee refunds
  • Compare this with the return figure
  • If the figures are the same - write ‘OK’ in green next to the figure on the return
  • If the figures are not the same - write ’Employer has made an error in accounting for advances’ in green on the top of the return

AUDREP {.dash}

  • Review the report from the Employer Compliance Office (ECO)
  • Has the employer carried out the ECO instruction
  • If so - continue to capture the return
  • If not send a report to the ECO giving details of the employer’s failure to comply

INSPRUL {.dash}

  • Use Function VIEW EMPLOYER NOTES and check the employer record pad to review the information recorded

Where you establish that the employer has not carried out the Inspector’s instruction

  • Send a report of your findings to the PAYE section

LUMPSUM {.dash}

  • Use Function VIEW EMPLOYER NOTES and check the employer record pad to review the information recorded. Review any report from the PAYE section to identify the employee
  • Find the microfiche entry / P14 for that employee
  • Use the tax tables to check that the correct tax was deducted
  • If there is any discrepancy notify the PAYE section

POTREG49 {.dash}

  • Note the return for immediate capture

RECPRO {.dash}

  • Take no further action

REG49DET

Consider if a Regulation 80 Determination is appropriate

RNA

Contact the employer

  • Ask for the amount of any refund not made
  • Confirm this was included in the total tax for ‘This employment’ on the P14 / microfiche
  • BF your papers for 4 weeks
  • Continue to capture the return

If the employer confirms the refund not made is included on the P14 / microfiche

  • Attach the reply to the return

If the employer did not include the refund not made on P14 / microfiche

  • Prepare a Pro-forma return and P14 and capture this as an additional return

TRADISP {.dash}

Make a prominent note to carry out tax table checks on all forms P14 after the return has been captured

WRONGOP {.dash}

Make a prominent note to carry out tax table checks on all forms P14 after the return has been captured