What Is a P32 Employer Payment Record?
The devil is in the details.
It’s a saying that spreads far and wide across all aspects of life. Yet when it comes to having positive control when running your business and keeping track of your finances - it applies tenfold.
Businesses face a large amount of taxes, deductions and other fees. This means it can be difficult to keep track of what has been paid and what hasn’t been paid.
Fortunately for UK businesses, the P32 Employer Payment Record exists to help employers keep a track of their payments.
But what exactly is a P32 Employer Payment Record? And where does it fit in with Real-Time Information? We’ll take a closer look at all of this and more.
Here’s What We’ll Cover:
What Is a P32?
The P32 is the Employer Payment Record. It is a summary of the amount that you have paid each month to Her Majesty’s Revenue & Customs, or HMRC.
The P32 details all of the PAYE amounts that have gone through your payroll. It also includes all student loan amounts deduction and National Insurance contributions. Although there are many files to submit, there is no P32 substitute.
The information that the P32 contains is sent through as part of your FPS and EPS since RTI was introduced. But what is RTI, FPS and EPS?
What Is RTI?
Real Time Information, or RTI, was introduced in 2013. It meant that UK employers now need to send information to HMRC every time they pay their employees. This is opposed to waiting until the end of the year to submit the information.
To comply with RTI, you need to make two types of submissions. These submissions are:
- A Full Payment Submission, or FPS.
- An Employment Allowance Payment Summary, or EPS.
What Is a Full Payment Submission?
A full payment submission, or FPS, is the main and most common submission type. It consists of employee payments and deductions. These are required each time an employer makes any form of payment to one of their employees.
It contains all of the information about your employees’ pay. It also includes whether any new employees have joined the company and whether any have left the company.
As an employer, you will need to submit an FPS every time you make a payment to one of your employees. To properly comply, the submission must be made either on or before the date that the employee is paid.
Once received, HMRC will then use this submission to calculate how much PAYE and national insurance contribution amounts liability is due from you each tax month.
What Is an Employer Payment Summary?
An employer payment summary, or EPS, is only needed to be submitted when you need to advise HMRC of any alteration to this liability. You would also submit it when you need to inform them of a nil payment.
This submission should be made to HMRC when or before the relevant monthly or quarterly liability payment is due.
What Happens if I Fail to Comply With RTI?
As a business owner or employer, it is vital that you submit your FPS on time.
If you are late, if you didn’t send the expected number of FPSs, or if you fail to send an EPS when you didn’t pay any employees within a tax month, then HMRC will penalise you.
The penalties that HMRC charge are scalable based on the size of your business. This is calculated in terms of employee numbers. The penalties are as follows:
- 1 to 9 Employees: £100
- 10 to 49 Employees: £200
- 50 to 249 Employees: £300
- 250 or more Employees: £400
Do I Have to Comply With RTI if I Have Casual Employees?
If you have seasonal, temporary or casual employees then you still have to include them as an employee in your payroll. This means that you also have to submit information to HMRC every time one of these employees is paid.
If you are taking on a casual, seasonal or temporary member of staff, then you should treat them exactly the same as you would a full-time employee. They should either give you their P45 form, or fill in a starter checklist.
If any of these employees then leave the business, you will need to ensure that they have received their last payment. You also need to make sure that they have been marked down for HMRC as a leaver.
This information will then be included in their final FPS. This will notify HMRC that they are no longer working for the business under your employment.
What Is a P45 Form?
A P45 is a form that an employer will give to their employee when they leave their employment.
It is essentially a way of passing tax and payroll information from the old employer onto the new employer. It also works as a form of tax record for the employee.
Before the introduction of RTI, a paper copy used to be sent to HMRC but now it gets sent via electronic payroll reporting.
A P45 form will contain the following information:
- Employee Identification
- Taxable earnings in the current tax year and any tax paid
- Tax code
- The previous employer’s PAYE tax references.
However, P45s don’t show any National Insurance deductions or any pension contributions.
What Is a P60 Form?
A P60 summarises similar employment and tax information as a P45. But instead of being given as you leave a job, it is the form that is kept when you are continuing to work for your employer.
As an employer, you have a legal obligation to provide your employees with a paper or electronic copy shortly after the 5th April, or the end of the tax year.
A P60 form will contain the following information:
- Employee identification
- The current tax year
- Taxable earnings for the tax year
- Any tax paid
- National insurance paid for the tax year
- Tax code
- The employer’s PAYE tax references
A P60 form doesn’t show any pension contributions.
As an employer, it is important to invest some time in carrying out an audit of your employees’ payroll data. This is to ensure that it’s accurate and up to date.
With the introduction of RTI, it makes it much easier for HMRC to notice if your records don’t match up. If you are creating duplicate or inaccurate records then this may result in incorrect tax calculations. This will then trigger an HMRC compliance check and potential fines.
Understanding the many employer forms goes some way to helping avoid any situations that can end up with fines and penalties. So making sure that all of your forms and records are in check should be a matter of priority.
One way to ensure a smooth and easy process is by using accounting software such as FreshBooks.
Are you looking for more business advice on everything from starting a new business to new business practices?
Then check out the FreshBooks Resource Hub.