Ask the Expert: How do I tackle the end of the UK's tax year? Ask the Expert: How do I tackle the end of the UK's tax year?

Ask the Expert: How do I tackle the end of the UK's tax year?
30 Apr 2016

Q. I am completing year-end in the UK for the first time and don’t really know where to start. What’s involved and what can I do to help ensure I don’t miss anything out?

Tax year end is quite different since the introduction of RTI but there are still processes that have to be completed by 19 April for HMRC as well as getting your payroll system ready for the next year.

The best advice is to prepare a checklist that includes deadlines and details who is responsible for each action. This will help you to manage internal and external resources, to focus on the specific tasks and help you feel more comfortable with the process.

Your list will vary slightly depending on whether you have an in-house system, use a payroll bureau, cloud based/Software as a Service (SaaS) or an outsourced service provider/partner.

Items you will need to consider are:

Reconciliations: As part of the normal payroll processing you will have reconciled your payroll each pay period and so will go into year end with relatively clean data. Complete a final check to ensure you have balanced both your payroll control accounts and HMRC’s accounts. Check that all messages from HMRC have been acted on re RTI files and ensure that items such as off cycle payments and recovered overpayments have been updated within the payroll system.

Backing up systems: You will need to arrange back-ups before you begin closing the year, once you have closed and when it is open and ready for the new tax year. These should be kept separately to your daily back-ups in a secure area. It is important to take these specific back-ups since they are ‘point in time’ and so should anything happen with the processing you can go back to the ‘clean’ version.

The daily back-ups are not sufficient if you have closed and opened a tax year during the day and the system goes down at 4.30pm and is unrecoverable. It’s very likely that as part of the tax year-end process your system or system notes will prompt you to take these actions at each stage.

Software updates: Depending on the solution you use, there will be a specific order in which the updates must be done (remember to build in testing/checking of each stage, too) i.e. it may be necessary to process the update before processing the tax year end since there is new software needed to do this correctly. Again it depends on the type of system you run as to who does what task. So make sure you establish this in advance and add it to your checklist, booking the time with the relevant people.

For example, your provider may update the software but you update certain tables such as statutory limits and rolling over accrual fields.

RTI: Either on your last FPS or EPS for each tax reference. Remember to set the final submission indicator either on your last FPS or EPS for each tax reference number.

Most systems use the FPS but some payroll functions prefer to use the EPS to allow the submission of additional items if required, for example, an off cycle payment before the end of the tax year. Remember the final FPS/EPS must be submitted by 19th April.

You can send as many FPS and EPS files as you want whilst making adjustments up to this date. Any files after this date will be EYU messages.

Include in your plan processing the P9 notifications and updating the system with tax codes for the year based on the P9X and issuing P60s to your employees by 31st May. This is not an exhaustive list to work to but should help in your preparations. There is help on the GOV UK site.

Q. I am completing year-end in the UK for the first time and don’t really know where to start. What’s involved and what can I do to help ensure I don’t miss anything out?

Tax year end is quite different since the introduction of RTI but there are still processes that have to be completed by 19 April for HMRC as well as getting your payroll system ready for the next year.

The best advice is to prepare a checklist that includes deadlines and details who is responsible for each action. This will help you to manage internal and external resources, to focus on the specific tasks and help you feel more comfortable with the process.

Your list will vary slightly depending on whether you have an in-house system, use a payroll bureau, cloud based/Software as a Service (SaaS) or an outsourced service provider/partner.

Items you will need to consider are:

Reconciliations: As part of the normal payroll processing you will have reconciled your payroll each pay period and so will go into year end with relatively clean data. Complete a final check to ensure you have balanced both your payroll control accounts and HMRC’s accounts. Check that all messages from HMRC have been acted on re RTI files and ensure that items such as off cycle payments and recovered overpayments have been updated within the payroll system.

Backing up systems: You will need to arrange back-ups before you begin closing the year, once you have closed and when it is open and ready for the new tax year. These should be kept separately to your daily back-ups in a secure area. It is important to take these specific back-ups since they are ‘point in time’ and so should anything happen with the processing you can go back to the ‘clean’ version.

The daily back-ups are not sufficient if you have closed and opened a tax year during the day and the system goes down at 4.30pm and is unrecoverable. It’s very likely that as part of the tax year-end process your system or system notes will prompt you to take these actions at each stage.

Software updates: Depending on the solution you use, there will be a specific order in which the updates must be done (remember to build in testing/checking of each stage, too) i.e. it may be necessary to process the update before processing the tax year end since there is new software needed to do this correctly. Again it depends on the type of system you run as to who does what task. So make sure you establish this in advance and add it to your checklist, booking the time with the relevant people.

For example, your provider may update the software but you update certain tables such as statutory limits and rolling over accrual fields.

RTI: Either on your last FPS or EPS for each tax reference. Remember to set the final submission indicator either on your last FPS or EPS for each tax reference number.

Most systems use the FPS but some payroll functions prefer to use the EPS to allow the submission of additional items if required, for example, an off cycle payment before the end of the tax year. Remember the final FPS/EPS must be submitted by 19th April.

You can send as many FPS and EPS files as you want whilst making adjustments up to this date. Any files after this date will be EYU messages.

Include in your plan processing the P9 notifications and updating the system with tax codes for the year based on the P9X and issuing P60s to your employees by 31st May. This is not an exhaustive list to work to but should help in your preparations. There is help on the GOV UK site.