HMRC reconciliation

There can be situations where the liability HMRC expects you to pay is different from the amount you've processed in Sage 50 Payroll. If this occurs, there are some checks you should make.

Let's take a closer look.

When did the discrepancy occur?

To get started, check the liability due on your P32 for each tax month, and compare this to the liability HMRC expects for each tax month. This highlights which tax months you need to focus on.

Has an Employer Payment Summary (EPS) been missed?

A common cause for a difference between P32 and HMRC liability is if you didn't send an EPS to recover statutory parental payments when it was required.

What causes this issue?

When values for statutory parental pay appear on your P32 your software deducts this from the liability due on the P32. However, the full liability is sent on the FPS to HMRC. You must submit an EPS to deduct the statutory payment from the balance due in your HMRC account.

How can I check this?

Check the relevant P32 reports to see if your liability has been reduced by statutory payments. If so, check if the value of any statutory payments on the P32 reconciles with the amount that appears to be underpaid in your HMRC account.

You can also check if the EPS was sent in Sage 50 Payroll, by clicking e-Submissions, then e-Submissions Log, and check this list.

How do I resolve this?

If one or more EPS submissions weren't sent when due, you can simply submit one now. The EPS submits a year to date figure for parental payments, so while it can't correct your liability with HMRC for a particular previous tax month, it can correct your HMRC liability for the tax year to date.

Find out how to send your EPS in our guide covering when to submit an Employer Payment Summary (EPS).

Reconcile reports

If the EPS wasn't the cause, you should reconcile your reports next.

For any tax months where you've identified a discrepancy in your HMRC liability, you must print and check the values in the Payment Summary History Part 1 - By Employee. You must then reconcile the totals on this report to the totals on the P32, to verify your P32 values.

It's easy to run this report:

1. Select the relevant employees on your employee list.
2. Click Reports, then click the Employee category.
3. Scroll down to find Payment Summary History Part 1 - By Employee, click Print or Export as required.
4. In the Processing Date section, enter the date range for the tax month you'd like to check.
   TIP: For example, for month 1 of the 2022/2023 tax year enter 06/04/2022 and 05/05/2022.
5. Click OK.

This report gives you the total payments and liabilities in each pay period, for each employee, as they are currently processed in your software. With this, you can check if each employee's payments are processed correctly.

If payroll isn't correct

If you find any employees have incorrect payments processed you must reprocess these.

• If you need to correct the most recent period you've sent in an FPS, you must follow the steps to correct a mistake in your payroll. Once you've reprocessed, ensure you submit an FPS adjustment to correct the figures that HMRC hold. How to submit a full payment submission (FPS) adjustment >
• If you need to correct one or more pay periods prior to the most recent one you've sent on an FPS, reprocess your employee's payments from the incorrect period back up to date. When you next process a payroll, the FPS you send as normal includes the correct year to date values for all employees. It's not possible to adjust an FPS for a period prior to your most recent submission, so you must ask HMRC to use the year to date values on the latest FPS to correct the liability they hold. 

If payroll is already processed correctly

Proceed to the next section to Check your submissions.

Check your submissions

Your software keeps a log of your submissions to HMRC, with a detailed view of your FPS values available in the FPS viewer. To access this, click e-Submissions, then FPS Viewer.

In the window that opens you can see a list of FPS submissions to the left, which includes the date and time that each FPS was sent. You can click any FPS in this list to view the details submitted for each employee to the right, or you can find the total values sent on the FPS for tax, NI and more in the bottom right of the FPS viewer.

You must find any FPS submissions for the tax months in question and reconcile the totals submitted against the liability due on the P32.

If the values submitted match the P32

Contact HMRC to explain that the values submitted on your FPS match your P32, and ask for any further information available on the discrepancy.

If the values submitted don't match the P32

This indicates a change has been made in your processing since it was originally submitted, and that an FPS adjustment wasn't sent to notify HMRC of this change.

• If this occurred in the period you've most recently processed you can send an FPS adjustment.
• If this change was made in an earlier period you must contact HMRC and ask that they use the year to date values on your most recent submission for the relevant employees.

TIP: As a further check, you can also reconcile each employee individually using the Payment Summary History report against the FPS viewer.