Switching payroll, why your data can sometimes misalign with HMRCs records

And what you can do about it

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Switching payroll software or service provider during the tax year involves moving all of your records from one system to another.

Sounds straightforward enough but there is some complexity around making sure the data is correct and everyone’s Year To Date figures are up to date, it also involves making sure that any unique identifiers for your employees match what HMRC currently holds in their systems.

Most companies issue their employees with a payroll ID or works payroll number. This number is either given by the payroll administrator or gets generated by an HR system or by the payroll software itself. This is pretty standard and there’s nothing complex in this. However, what’s not so well known is that some payroll systems generate an additional system ID that is used to identify individuals when information is submitted to HMRC. This employee identifier is then what gets used by HMRC to match your payroll records to theirs each pay period.

This is all fine and doesn’t cause any issues except when it comes to changing payroll service provider or payroll software. If a company’s first submission to HMRC with the new system or provider doesn’t include these different identifiers, HMRCs systems get confused and often generate duplicate employees. The knock-on effect is that employees tax codes get updated for no reason and PAYE accounts can then misalign.

The best way to stop this happening is to establish if this separate identifier has been used and, if it has, make sure that these details are added to the first submission with the new system or provider.

If there is no way of knowing and a payroll is submitted through a new system or provider, the next best thing to do is to check with HMRC, after the first submission has been made, that everything is in order and that there have been no misalignments. If there is an issue, you will be able to notify HMRC that you have changed system or provider and ask them to rectify their records and your PAYE account appropriately.

Catherine Pinkney

Posted on Monday 2 Jul, 2018, 2 years ago

August 7, 2020

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