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How to find out if you have underpaid PAYE?

Have you underpaid your PAYE? We have come across a potential problem if using SAGE payroll.

If you have used SAGE Payroll, or SAGE Instant payroll, to claim this year’s £2000 Employment Allowance, you may have underpaid your PAYE. This is not due to any error in the software – it is due to omitting one step in the P32 process.

How can this happen?

In Company Settings, you will have ticked the “Eligible for Employers Allowance” box if this applies to you..

Subsequently, when running your P32 reports, there is a tick box which asks if you want to record the payment. If you routinely tick this box, or use the Collector of Taxes wizard to record payments, then all will be well.

However, If you don’t tick this box, then SAGE will continue deducting any Employer’s NIC paid each month from the total amount due – over and above the £2000 limit. We are aware of several companies this has affected, and have been advised by HMRC that many more have also encountered this problem.

Harlands discovered this early for one client because we produce Management accounts for them and realised that their PAYE had been underpaid. However, you may not be aware of this issue.

Case study:

• In Month 5 £916.00 Employers nic was paid, and the P32 showed this as a deduction against Gross NIC
• In Month 6 £915.00 was shown
• In Month 7 £933.00 was shown
• This totals £2764 which has been deducted from Gross NIC, meaning that £764 has been over claimed. Failure to put this right and inform HMRC of the reason for the underpayment could result in interest charges.

How can you check?

If you think this may apply to you, check your individual P32’s upon which you have based payments. See what the total of your employment allowance adds up to. If it’s £2000.00 then all is probably OK. If it’s more than that then you may have a problem.

If you are a small employer and haven’t reached £2000.00 yet, then this issue may still apply to you.

Click here to see how to correct it

This was posted in Bdaily's Members' News section by Harlands Accountants .