Enable Ltd : EDI Case History
Brighton-based Enable Ltd offers a range of nationally available niche payroll services for small employers including PayRole for small businesses and Nannytax for domestic employers. At the end of the tax year 2002/2003 we were the first payroll service in the UK to file all of our clients year-end PAYE returns electronically by EDI.
Late January each year used to mark the time when thousands of P35 Employer's Annual Returns would arrive at our offices for the PAYE schemes of the thousands of small employers using our Nannytax payroll service, and our other niche payroll services. Every one had to be opened, sorted and filed with the appropriate client records, ready for manual completion, checking and submission to HM Revenue & Customs by mid-May, along with P14's for each employee of every client.
Our payroll manager and other members of our payroll team would plan ahead for many evenings and weekends of extra work to ensure this onerous task was completed on time. And of course every single client payroll on our payroll software had to be checked and balanced against manually calculated P35 entries to remove any errors which would potentially result in overpayment or underpayment notices.
No wonder we expressed considerable interest when HM Revenue & Customs identified us at an early stage as a company who would particularly benefit from electronic filing, if we were prepared to take on the responsibility of initiating the process - with their encouragement and advice. The potential benefits, for both ourselves and our clients, were obvious. No more paper P35's and P14's, no more manual payroll balancing against them, and no need to post dozens of packets of year-end returns to different tax offices all over the country, - with an inevitable aftermath of additional work following-up and double-checking returns several months into a new tax year.
On the other hand, set against this rosy prospect of a semi-paperless future, there were our concerns about the risks involved and the potential damage to our commercial reputation for delivering an effective service if things backfired. We were aware that in the first few years of Self-Assessment filing by Internet, the Revenue received some bad publicity. Therefore we decided to cover ourselves by preparing for electronic filing in parallel with keeping all paper forms and records that would enable us to file returns manually if we hit any major problems with electronic filing.
We were also reassured by the awareness that it was very much in Revenue & Customs' interest to support our electronic filing initiative as all the P35 and P14 data is automatically downloaded straight into their own computer system. This saves their own staff having to manually input the data from several thousand year-end paper forms. This gave us some confidence that if we encountered any obstacles in the process we would get their full co-operation in ironing them out - and this indeed proved to be the case.
We felt that with the unique nature of our business with so many separate PAYE schemes to file, the preferred filing method would be EDI rather than FBI.
With EDI clearly identified as the preferable option, we set about selecting a software provider from Revenue & Customs' shortlist to enable us to translate our own current payroll software formats into ones recognisable by Revenue & Customs' own PAYE computer system. Over a period of several months, and with the help of regular conference calls between ourselves, Computastore - our payroll software provider and Revenue & Customs' Online Services - who also liaised with the Contributions Agency on our behalf to ensure that our clients' National Insurance Contributions data was also correctly posted electronically - the various issues and processes were ironed out to the point where we were able to run our first tests.
Testing procedures revealed specific problems, such as that only data with upper case characters was accepted, and that PAYE scheme references had to have three digits for recognition, involving our insertion of a zero prefix to two digit scheme references. Our general advice to any would-be EDI user would be to choose as wide a data sample as possible for test posting, as using minimum data may show that the transmission process is generally working but may not show up more detailed anomalies which might prove more problematic or time-consuming if they showed up at a later stage.
Live filing resulted in prompt email acknowledgement from the Revenue of each P14 received. 'Unclean' data, such as originally mis-keyed PAYE scheme references were quickly identified and sent back to us for investigation. The speed and overall increased efficiency of posting electronic data and identifying incorrect data at year-end is a definite plus point for electronic filing.
Outstanding client issues, such as under or overpayments, are flagged up a lot faster with electronic filing, with consequent potential savings in interest payments on underpayments and quicker reimbursement of overpayments. Although the amount of time and expenditure involved in switching to electronic year-end filing was significant in year one, we have no doubt that in future years EDI filing represents both improved efficiency in providing Enable's range of payroll services to our clients as well as potential time and cost savings.
Having filed successfully by EDI we have, of course, also put all of our small employer clients in the fortunate position of benefiting from HM Revenue & Customs incentive payments totalling £825 available to them over five years starting in April 2005, which we have no doubt will be music to their ears.
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