HMRC Disputes

Employer Compliance Reviews (ECRs) or PAYE Investigations are the most routinely conducted enquiry operated by HMRC, representing a real risk to any employer incorporated or unincorporated. This investigation focuses purely on PAYE and National Insurance.

It is not uncommon for employers to pay less attention to their payroll, NIC operation and expenses and benefits in kind position as it a complicated but small area of tax and HMRC enforcement.

Pound for pound, this area represents one of the highest cost to yield ratios for HMRC in their regulatory work, showing the large sums that can often be generated by HMRC’s investigators here.

HMRC actively police this area though, concentrating their efforts on:

The general operation of PAYE and National Insurance

• Expenses
• Redundancy, notice payments and/or termination policies
• Expatriate workers, secondees and interns
• Benefits in kind and non-cash benefits, payment and remuneration
• The Construction Industry Scheme (or CIS) – operation and returns
• Employment Status or self-employed workers

An ECR usually starts as a “light touch” and apparently “low risk” audit check by HMRC, often with employers thinking that it is such low risk they do not need to involve their advisors.

However, caution is needed as HMRC’s Officers undertaking this work are experts in this very niche area and their “light touch” routine check is aimed at finding common mistakes so that they can widen their scope into the general accuracy of the employment tax position of the business as a whole. Additionally, for any mistake found, HMRC Officers would normally then expect to use that as the basis for the collection of back taxes for 4, 6 or even 20 years.