PAYE Annual scheme diaster

For many years we have operated annual payroll schemes for owner managed companies where full directors' salary is paid each March.  In 2013/2014 HMRC RTI software was initially unable to deal with this scenario, and if no FPS was lodged for 3 consecutive months;-  at best, the employee was treated as a leaver, and at worst the scheme was actually closed down.

For 2014/2015 these problems appear to have been resolved.  We therefore phoned the HMRC payment enquiry helpline and converted 20 payroll schemes back to an annual basis.

Yesterday we received letters from HMRC (no address, phone numbers, or contact details), entitled "Removal of quarterly or annual payment status"

"Our records show that you have previously paid your PAYE .....deductions annually.

You have submitted more than one Full Payment Submission showing deductions and payments to employees for different periods during the tax year.  This means you no longer qualify to be an annual payer during the tax year........."

No FPS submissions have been made at all for 2014/2015 and we spent hours yesterday trying to get any sense from HMRC. Our call was redirected on a number of occasions but we were still unable to get any explanation.

Has anyone else had the same experience? How on earth can I contact anyone at HMRC who can sort out the problem?

  • Thank you for your posting. Please would you, and anyone else reading this who has encountered problems with annual schemes, send details with employer name and reference to peter.bickley@icaew.com so we can send them to HMRC who will investigate whether anything went wrong at their end and if so devise a fix. HMRC inform us that to date they have found that the cases that they have seen are not following the appropriate guidance and have been submitting more than one FPS in the year, thus resulting in HMRC’s systems switching off the annual flag.

    Following issues with annual schemes last summer, resulting in HMRC putting in place a fix, HMRC issued guidance on annual schemes which we publicised in one of our news items. We would draw attention to the following:

    An annual scheme must meet all of the three conditions below:

    • all the employees are paid annually, and
    • all the employees are paid within the same, single tax month, and
    • the employer is only required to pay HMRC annually

    Once a business is registered as an annual scheme, neither a NIL payment nor a period of inactivity employer payment summary (EPS) is required for the 11 months of the tax year where no payments are made to the employees.

    If an employer submits FPS for more than a single month in the year, HMRC will automatically cancel the annual payer status for that year and following years. They will issue a letter to the employer advising the status cancellation and the debt management processes will revert to expecting filing of RTI returns and payment on a monthly basis.

    Schemes not registered as annual schemes should submit a NIL payment EPS/period of inactivity EPS in respect of each month in which no payments are made to employees. This applies also to schemes where the employer/agent intends to apply for a scheme to become an annual scheme but has not yet done so – in which case they need to submit a NIL payment EPS/period of inactivity EPS for the months in which no payments are made to employees until the registration has been accepted as an annual scheme.

    To register a PAYE scheme as annual call HMRC’s Payments Helpline on 0300 200 3401. You will need your Accounts Office reference.

  • For queries in relation to employer annual schemes apparently it is better to telephone the payment enquiry line on 0300 200 3401.