How to Survive a PAYE/NIC Inspection

However confident you are that your records are complete and well maintained, a PAYE/NIC inspection might still catch you unawares. If you use a computer payroll they will not spend time checking the calculations as they used to, they will put more effort into going through expense payments looking for any private element and for cash taken out that is not supported by receipts. Here are some pointers to help you:

Your records must provide details of all relevant benefits for the tax year to 5 April.

Even if you are registered for VAT, your P11D ( Annual statement of benefits paid to employees ) records have to be VAT inclusive.

You must include travel, subsistence, and entertaining in the information you enter on forms P11D, even if incurred for business purposes (unless you have an official Revenue dispensation).

HM Revenue & Customs and the Contributions Agency are likely to challenge all doubtful claims on the business mileage limit. Where you do not provide fuel for private motoring that is assessed on the employee, keep full mileage logs for every vehicle, whether owned privately or by the company - an inspection team would ask for evidence of business mileage. Keep separate figures for each car where there is a change during the year, or where more than one vehicle is available to a director/employee.

The fuel scale charge is an 'all or nothing' benefit, so if the business pays for any private fuel and is not fully reimbursed by the employee, the employee must accept the corresponding private fuel benefit and you must report it on a P11D.

For all categories of expense/benefit, pay careful attention to anything incurred in the name of an individual director/employee, but paid or reimbursed by the business. NIC problems will arise if you do not treat this properly.

You are required to retain all records and information relating to payroll, benefits, etc. for three years after the tax year end - but keep them for six years, the period for which the Revenue has powers to investigate your business accounts.

You are now more likely than ever to be subject to a full review of your compliance systems and procedures, so don't leave anything to chance.

Make sure you are not vulnerable to the risk of PAYE/NIC liabilities, penalties, and problems - sort them out now. If you need any help, contact us.

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