Payroll insight
noted that the consultation closes on 16 January 2020.
calculation may be used. Where:
treated the number of days of unworked notice as 42 and assumed basic pay (BP) is £3,000 per month. The examples show the difference in the amount subject to tax/NICs depending on the number of days within the relevant month. It can be seen that use of the 30.42 average days in a calendar month is advantageous other than where the formula applies the 31-day month. £3,000 × 42 ÷ 31 = £4,064.51 £3,000 × 42 ÷ 30.42 = £4,142.01 Public sector exit cap Finally, since no public sector article on termination would be complete without such a reference, we can advise that there is still no news following the consultation on the public sector exit cap earlier in the year. Unlike the changes covered above, these proposals are hugely controversial and political. In the current environment and with the general election requiring ‘purdah’, it is hard to envisage any change actually happening in the foreseeable future. Never has the expression ‘No news means good news’ been more pertinent! n £3,000 × 42 ÷ 30 = £4,200 £3,000 × 42 ÷ 28 = £4,500
● the last pay period of the employee relevant to the PENP calculation is a month, and ● the employee’s salary is paid by twelve equal monthly instalments, but ● the employee’s notice is expressed to be a whole number of days or weeks, employers may substitute 30.42 (being 365 ÷ 12) as the value of ‘P’ in the PENP calculation, where this is to the advantage of the employee. ...recently acknowledged this anomalous position and has described a non- statutory-based solution...
PENP update Moving to a related subject, there is an interesting postscript to the previous legislative change affecting termination payments, namely the post-employment notice pay (PENP) provisions, which were introduced with effect from 6 April 2018. In cases where an employee is paid by twelve equal monthly instalments, but the employee’s notice period is expressed in days or weeks, the formula prescribing the calculation of PENP for termination awards gives differing results depending on when in the year the notice is given. This is because the provisions require the use of the number of days in the pay period immediately preceding the trigger event i.e. the resignation/giving of notice. For a monthly-paid employee, the number of days could therefore be 28, 29, 30 or 31. HMRC has recently acknowledged this anomalous position and has described a non-statutory-based solution within its October Employer Bulletin (http:// bit.ly/2VTxNNP). It advises that, where applicable, the following alternative
By way of working examples, please see the PENP calculations below. Please note that, in these examples, we have
‘P60 error’ mislead taxpayer A First-tier Tribunal (Tax) has refused the taxpayer’s appeal against a penalty assessment of £694.15
the figure shown in the return – taxable pay of £167,605.48 – was only part of the total income. He had additionally received £139,116.92 income from Dunhill Pontefract PLC for the period 5 April to September, along with employment benefits of £6,699 which had not been included in the tax return. Although the appellant agreed the figures of income and benefits in kind, he stated that he had only repeated the figures shown in the P60 certificate and that he could not understand why the employer did not include all of his pay. However, the reason the P60 certificate did not include earnings from April to August 2016 was because in September
2016 payroll arrangements were moved in-house, whereas previously these had been outsourced to external accountants. In consequence, the appellant’s pay as you earn reference changed from ‘567/ VZ 53163’ to ‘567/A6283’. The form P45 which Dunhill received from the accountants had the appellant on a month one basis tax code throughout the period April to August 2016 and therefore the earnings were not included. HMRC concluded in its review that the appellant did not take reasonable care when making his 2016/17 self- assessment return and as such the penalty was issued in accordance with the legislation. n
imposed by HM Revenue & Customs (HMRC) for a prompted deliberate inaccuracy in his tax return for the tax year ending 5 April 2017 (Ringo Scheithauer v Commissioners for HMRC http://bit. ly/32LqF84). The penalty was obtained by multiplying the potential lost tax revenue of £4,627.73 by 15% (the minimum penalty), reflecting HMRC’s view of how much assistance the appellant gave in the enquiry. In November 2017, HMRC opened an enquiry into the appellant’s 2016/17 self- assessment return. HMRC established that
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| Professional in Payroll, Pensions and Reward |
Issue 56 | December 2019 - January 2020
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