Payroll insight
Regulators website has detailed guidance to help employers/advisers dealing with pay arrears. Interest and penalties HMRC reserves the right to charge interest on late payments of PAYE income tax. Depending on the case, HMRC may or may not decide to take action using its charging powers. Interest is usually chargeable from 19 April following the tax year in which the PAYE should have been paid. As far as penalties goes, it is within HMRC’s powers under schedule 56 of the Finance Act 2009 to issue penalties for late returns. Under real time information (RTI) there are risk-assessed penalties covering PAYE, class 1 NICs, construction industry scheme and student loan deductions based on the number of late payments in a tax year. Penalties for incorrect returns are dealt with under schedule 55 based on the number of employees with a surcharge if the failure continues for more than three months.
No penalties would be likely to apply if the employer has declared and paid the PAYE/NICs in the periods corresponding to when the earnings arrears were treated as ‘received’ under RTI, as the employer will have complied with the requirements as set down in the Regulations. However, if the employer subsequently fails to report or pay the PAYE on the arrears on time, penalties may apply under the above provisions. Other implications Employers and advisers should be aware that making payments of arrears will be likely to have a knock-on effect in other areas of the employees’ lives – to the extent that some may question why they received them in the first place. State welfare benefits and tax credits are particularly prominent and in terms of these it is important that the employees understand they need to inform the Department for Work and Pensions and HMRC that they have received a pay arrears award. If their benefits
and tax credits are affected, they may find themselves subject to recovery proceedings, fines and penalties. Debt agencies and local authorities may also need to know if an employee received a pay award. Conclusion Payments of pay arrears are something of an administrative nuisance. The disparity in treatment between income tax (PAYE) and NICs does little to simplify the tasks which an employer must overcome to correct pay retrospectively. Unfortunately matters are made even more complicated because there is more than one government department involved due to the mix of legislation covering employment law and tax law. Sometimes this leads to confusion, duplication and certain aspects falling through the gaps between the agencies. Employers that have to pay arrears of awards should prepare to utilise additional resources to ensure they tread carefully through the maze. n
Holiday pay and leave
Half day course
Case law continually produces changes to employees’ statutory holiday leave and pay entitlement, which are covered in this informative course, alongwith the various types of leave and the calculation of pay.
This course covers: l Understanding the legal framework l Calculating entitlement and handling requests l Calculating holiday pay l What to include in holiday pay l Handling part-time, shift, casual and agency workers
l Carrying over entitlement l Entitlement during other leave l Sickness absence l Future developments l The changing definition of holiday pay
Book online at cipp.org.uk or email info@cipp.org.uk for more information.
cipp.org.uk CIPP_UK cip .org.uk @CI P_UK
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Issue 50 | May 2019
| Professional in Payroll, Pensions and Reward |
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