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Why is a PAYE healthcheck needed?

A PAYE healthcheck is where an employer asks a third party, often an accountancy firm providing tax advisory services, to under-take a review of an employer’s payroll and benefit procedures to ensure that they are delivering the right results in terms of compliance with HMRC’s rules on tax and NIC on employees’ pay, expenses and benefits. It is designed to minimise the risk of interest and penalties and to improve compliance.

Some organisations shy away from the idea of having a PAYE risk review as it is often seen as being an unnecessary cost. Other organisations take the view that if there are problems with their payroll and benefit procedures, these will surely be identified by their auditors as part of the annual audit process. However, a detailed examination of the client’s payroll, benefits and expenses is not a requirement of an audit, particularly as the audit concept of an error being ‘material’ does not apply in tax. Therefore,employers should not assume that a lack of comment from their auditors