Beyond the balance sheet

What you need to know about HMRC payroll investigations

Ercan Demiralay 14/3/2018 2 minute read

Ercan Demiralay FCCA explains why you need to prepare for a possible investigation of your payroll by the Revenue.

A total of £819m of additional tax was collected last year courtesy of HMRC payroll investigations. This represented a 16% increase on the additional tax revenue generated in 2015/16. It's been reported that much of the work HMRC conducted focused on organisation's incorrect classification of their workers as self employed.

The gig economy (also known as the sharing economy) has really come under the scrutiny of the taxman. As part of this HMRC are sifting through the details of payrolls and according to Personnel Today, "even the most trivial of expenses are now being investigated". The warning is a stark one, employers are being targeted!

What you need to do to prepare your payroll for an HMRC visit

What to do about a payroll investigation by the Revenue?

Previously we've written about the need to prepare for HMRC's PAYE compliance visits. The point is the government still runs a budget deficit and given the existence of the tax gap, the pressure is on HMRC to increase tax collection. 

For some time now, HMRC have been conducting inspections of businesses to gauge the level of payroll compliance. Their scope has increased recently and so your chances of receiving a visit have become more likely. We've seen a number of these ourselves amongst our client base as HMRC drives to ensure PAYE compliance.

You can find a list here of the PAYE items the revenue are likely to check along with the areas of stress where payroll discrepancies are likely to arise. The risk of issues being discovered is probably quite high and HMRC will calculate the tax and NI lost over the last 6 years. However, that timeframe can be extended and penalties applied at their discretion. 

It would therefore be wise to get a professional review of the wage and salary data in your organisation to identify any likely issues prior to a potential visit. If you've already been inspected then be sure to consider advice should you need to negotiate a settlement.     

Payroll invetsigations

The content of this post is up to date and relevant as at 14/03/2018.

Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.


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