New Tax Year, New Standard

By: Simon Parsons


New Tax Year, New Standard

Many readers will be aware that I have been a critical friend of the payroll standard for many years. Personally involved in consultations for the creation of the original standard, it fell short of relevance for many employers and only touched on the basics. However, it allowed predominantly PC software and Internet services aimed at Small Enterprises to gain some official listing and free publicity.
Over the past year, and with the development of compulsory in-year requirements, the scope of inclusion has drifted towards larger and more specialised employers (yes, Pension payrolls are employers in the eyes of HM Revenue & Customs) and more towards the mainstream software and service providers for whom the original Inland Revenue Payroll Standard was not intended.
The main issues were applicability and a lack of inclusiveness, and in fairness to the past year of consultation process, HM Revenue & Customs has improved the Payroll Standard, making it more relevant, applicable and inclusive to the Payroll market and industry.
Some current standard-compliant products could have been considered as failing the basics of the Payroll Standard requirements themselves. Many do not actually offer electronic payments to HMRC and only offer links to information about the payments.
The types of concern or issues to specialists were:


  • Requirement for the calculation of National Insurance Contributions (NICs) even for pension payers who have no NICs liability.

  • Requirements of contracted-out variations in calculations even for employers who have no contracted-out pension scheme.

  • Requirement for Directors NICs even when the employer has no Directors (such as public sector, charities, partnerships, mutuals, etc).

  • Requirements for the filing of the P35 by the software, when this is an employer obligation and requires additional non-payroll information.


  • Requirements for the electronic payment of disbursements to the Collector of Taxes by the payroll software, even if these would normally be handled by a central finance function.

  • Monthly/Weekly employers' software was required to also calculate 2 weekly and 4 weekly rules.

  • Etc.

On other items, the standard could have been considered short:

  • No requirement for in-year message capability (and none is still required until 2010 even though compulsion applies from 2009)

  • No requirement for multi-location employers for the handling of multi/part P14 submission

  • Etc.

With extremely capable and feature rich payroll/pension, services and Bureaus in effect excluded from achieving the former Payroll Standard, and following extensive industry and employer representative consultation, HM Revenue and Customs have revised and enhanced the Payroll Standard to enable it to be more relevant, applicable, and robust for the needs of the Payroll Industry as a whole.
The new all-singing, all-dancing HMRC Payroll Standard has been launched for the 2008/2009 tax year. New logos and options are now featured to enable employers to identify relevance for their needs and purposes.
We now have the:

  • Payroll Standard

  • Pensioner Payroll Standard

No longer are pension payrolls required to calculate NICs or Directors' NICs, or deal with payroll frequencies that are irrelevant, yet the providers of such services may now be recognised and listed as meeting this new standard. This must be a positive move for the Pension Payment industry as many of the prior standard accredited list would fall short of the Pensioner Payroll requirements (they would not do the job).
Equally, the Payroll Standard has been split into elements with a Core standard applying to all listed products and 'optional features' of:

  • 2 weekly, 4 weekly pay frequencies

  • Directors National Insurance

  • Contracted-out Pension Deductions

No longer does extremely capable and specialised software have to meet elements that just don't apply. Local authority payrolls are no longer required to calculate Directors' NICs for them to now receive accreditation. Small employer products no longer need to calculate frequencies that do not really apply to their particular market niche or offer contracted-out pension scheme deduction calculations where the employer has never had one.
Equally, a relaxation of some of the prior elements of the standard (some which were strictly policed and others which were not) have been applied - although software needs to provide information to employers for the completion of the P35 annual declaration. These can be completed via the free HMRC service as a single record submission and the compulsory requirement of the actual software making this submission has been removed from the requirements of meeting the payroll standard. This is also the case with regards to the practice with payments to the collector of taxes; the stated requirement has been revised to match what was actually happening with many accreditation list products. However, the preparation of electronic P14 files (Internet or EDI) remains compulsory.
Some additional requirements also form part of the new standard requirements at specific future points:

  • From 1 April 2009, products must be able to calculate Statutory Adoption Pay and the associated entitlement to Statutory Paternity Pay (the current standard had no such requirement!)

  • From 1 April 2010, recognise the electronic submission of P45(1), P45(3), and P46

So with the exception of the in-year filing anomaly (check your supplier carefully), this newly launched HMRC Payroll Standard is more accurate, relevant, applicable and especially inclusive to the payroll and pensioner payroll industry and market place as a whole - at last!

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