How to Run Payroll Without Falling Foul of HMRC

Running payroll might seem like just another task on your growing to-do list. But when handled incorrectly, it becomes more than a task, it becomes a risk.

If you're a business owner in the construction or film industry, managing staff wages, tax codes, and reporting deadlines can quickly become overwhelming. With HMRC’s strict requirements and the financial consequences of errors, it’s essential to approach payroll with clarity and confidence.

Let’s break it down in a way that supports your business.

Why Payroll Errors Are Costly

It’s not uncommon for small businesses to underestimate the complexity of payroll. The most common issues we see include:

1. Late submissions to HMRC

2. Incorrect tax code usage

3. Missing employee details

4. Overlooking pension enrolment requirements

5. Failure to keep accurate records

These mistakes can lead to penalties, employee dissatisfaction, or, in some cases, unwanted audits. The pressure builds when you realise that getting it right isn't optional it's a legal obligation.

What HMRC Expects from You

1. Register as an employer with HMRC before the first payday

2. Report payroll information in real time via Full Payment Submission (FPS)

3. Deduct income tax and National Insurance from wages

4. Keep detailed records of employees’ pay, tax, and deductions

5. Submit your Employer Payment Summary (EPS) for periods with no payments or adjustments

6. Provide payslips to staff with all required legal information

7. Enroll eligible staff into a workplace pension scheme

This list might feel long, but each step has a specific purpose. HMRC uses this information to ensure that employees are taxed correctly and that businesses are meeting their responsibilities.

What Construction and Film Businesses Should Be Aware Of

Many construction companies work under the Construction Industry Scheme (CIS), while film production teams often have short-term contracts and freelance arrangements. Each of these requires different treatment under HMRC rules.

Understanding whether a worker is an employee, a subcontractor under CIS, or self-employed with their own responsibilities is critical. Misclassification here can trigger investigations, backdated liabilities, and significant fines.

How to Stay Compliant

You don’t need to become a payroll expert, but you do need systems that reduce risk. Here are a few recommendations:

1. Use a Reliable Payroll System

Choose software that’s recognised by HMRC and suited for your industry. It should handle real-time submissions, generate payslips, and calculate taxes automatically.

2. Keep Records Up to Date

Maintain accurate employee data, contract details, hours worked, and payment records. Poor recordkeeping often leads to filing errors.

3. Stay on Top of Deadlines

HMRC requires real-time submissions. Missing these deadlines especially repeated misses, can result in monthly penalties. Build a calendar or automate reminders.

4. Get Help if Needed

Outsourcing payroll or consulting with a payroll advisor doesn’t mean giving up control. It means protecting your business, ensuring compliance, and gaining back time to focus on core operations.

Payroll is a critical function in your business. While it may seem straightforward, it’s one of the most heavily monitored areas by HMRC and also one of the most common sources of small business penalties.

Getting it right protects your business, your staff, and your peace of mind.