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HMRC Payroll Standard Accreditation
29-08-2009
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Our resident payroll and legislation experts John Black and Neil Tonks reveal the journey to HMRC Payroll Standard Accreditation and assess whether it was really worth it?
Background
HMRC introduced the Payroll Standard in 2000 "To help small employers to decide which payroll software product or service will support their business needs". In particular it was designed to give purchasers of "off the shelf" payroll software confidence that it would satisfy HMRC standards for calculation of PAYE and NICs.
Very quickly HMRC decided there should be no barrier to all software becoming accredited and encouraged every supplier to apply to the scheme. Nevertheless, many software providers in the market in which MidlandHR competes did not initially feel the need to pursue Payroll Standard Accreditation, on the basis that their reputation in the market place was well established.
A few years ago it became apparent that most Invitation to Tender (ITT) documents MidlandHR responded to asked about HMRC Payroll Standard Accreditation. Although our answer was (a "qualified") no, it ultimately did not seem to matter in terms of whether or not we got the business.
But over the last couple of years, accreditation has become more important to some of our prospective clients and so our Board made the decision that we would seek accreditation.
Getting started
To help software developers get started, HMRC have a section on their website devoted to Payroll Standard Accreditation. This contains much of what you need to know about the overall process (and especially the testing involved) before you apply.
One crucial aspect is ensuring your product at least supports all the necessary features. There is a set of mandatory requirements that constitutes the "core" standard and three optional modules. There is also a simplified Pensioner Payroll Standard for payrolls that only pay pensioners. We decided to go for full accreditation on all options.
Preliminary Testing
A really useful feature of the process is the access to online test data which enable users to self-test their product against very similar tests to the "official" ones.
But we are not talking about a handful of tests here! The HMRC testing process is very rigorous - reassuringly so. And to be fair, most of the tests are perfectly valid. Nevertheless, setting up the data, running the tests and checking results is very time consuming. Nor is it just a question of the number of tests; some involve quite complex scenarios.
The online test data is in three parts. Part 1 covers a series of logical Tax and NI calculations before moving on to:
- Directors' NI scenarios
- Tax and NI on holiday pay
- Weeks 53/54/56
- Attachment of Earnings Orders, DEOs and Earnings Arrestments
- Pension contributions
- Student Loan deductions
- Over 300 general validation tests (e.g. to ensure only valid NINOs are submitted to HMRC)
Part 2 - Lifecycle tests, involving the running of a payroll for a complete year, leading up to P14/P35 production. Changes during the year include:
- NI category changes
- Joiners & leavers
- Statutory payments (SSP/SMP/SAP/SPP)
Part 3 - In depth statutory payment scenarios involving calculation of entitlements and making payments.
Once you've successfully completed all the online tests you are ready to tackle the actual HMRC tests which they forward on request.
Actual Tests
All the above tests are repeated but with the values changed. The big difference is you don’t have access to the answers! The statutory payment and validation tests are checked by HMRC during a site visit once they are satisfied you have provided the correct answers to all the other tests.
This phase felt like sitting an exam but with one huge difference. Some exams only require you to get 40% of the questions right to pass. You need 100% to pass the Accreditation tests! Rightly so - payroll demands high standards.
Finally the day came when MidlandHR and our product (iTrent) joined the list of "Accredited Payroll Software products/services and suppliers" - http://www.hmrc.gov.uk/ebu/acclist.htm.
Accreditation lasts for 12 months and software must undertake an accreditation renewal each year. Whilst this should be nothing like as time consuming as the initial accreditation it will still ensure software remains up to date.
Was it worth it?
Beforehand I was a little sceptical of the value of accreditation but having been through the process I've seen first hand just how comprehensive it is and so I'm much better placed to appreciate its worth. This is not an award that HMRC give away, but the Payroll Support Team that operates the scheme is very helpful and fair.
And of course we can now say "yes" to the ITT questions as well as having demonstrated to our existing customers our commitment to quality.
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