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contractual pay for the same period of leave. If the employee works a KIT day they must be paid at least the national minimum/living wage for the hours worked, but it is for the employee and employer to agree what will be paid for the work prior to the work being performed. As the payment of SMP is for seven calendar days it would be best practice to divide the SMP by seven and offset the value of a day against any KIT day payment. An employer could choose to be more generous and pay the SMP without offsetting it against the payment for the KIT day. Q: An employee has provided a MATB1 certificate which is incorrect. What is the process that should be followed? A: As the MATB1 is incorrect you will need to ask the individual concerned to provide proof of the correct date. This can be in the form of a letter from the doctor or midwife confirming the correct date; alternatively, as the document is obviously incorrect then under the circumstances it may be best practice to request a new MATB1. Q: A new employee has a Scottish address. Should a Scottish tax code be applied to the payroll record automatically? A: The process relating to new joiners and Scottish rate of income tax (SRIT) will be as follows: ● Where there is a new starter, and there is no indication of an individual’s tax status, the default will be a UK tax payer. ● HMRC will be responsible for any in- year address changes and will, as part of their processes amend an individual’s tax code. ● There will be no specific SRIT emergency tax so there will be no change in week 1/month 1 processes; the default tax code will be the UK tax code until HMRC advises differently. ● Any under- or overpayments, as now, will be corrected through the normal end of year reconciliation process. Q: How should overseas workday relief (OWR) be operated, and is there any documentation regarding withholding tax from an employee who is eligible for OWR and how to process this through the payroll? A: OWR is a tax relief available to
non-UK domiciled taxpayers. This relief allows them to treat their unremitted employment earnings relating to the duties performed overseas as not taxable in the UK provided certain conditions are met. An individual can claim OWR in a tax year where they meet all of the following conditions: ● they are considered as not domiciled in immediately following three consecutive tax years for which they were not UK resident, or one of the two tax years after such a year ● they are taxed on the remittance basis during this tax year ● they have employment duties during the tax year which are carried wholly or partly outside the UK, and ● they are paid in an offshore bank account. An employer can apply under section 690 of the Income Tax (Earnings and Pensions) Act 2003 for a direction from HMRC to operate PAYE only on the percentage of the employee’s total earnings that are for work in the UK. This applies to all payments made by the employer including termination payments and share based remuneration. Under section 690 they may then apply PAYE only to the proportion of their earnings that relate to UK work. Note that: ● the percentage will be based on the employee’s workday history or as anticipated for an individual starting employment during the tax year ● an application under section 690 cannot be made for previous tax years ● Class 1 NICs are payable on 100 per cent of the earnings ● if the employer has to apply the percentage limit to previous earnings in the current tax year, it will be necessary to correct the year to date entries in the next full payment submission report sent to HMRC. Application for a s690 direction must be sent to: Self-Assessment, HM Revenue and Customs, BX9 1AS. For further information, see: ● Guidance Note: Overseas Workday Relief (OWR) – http://goo.gl/VEkfDf ● HMRC’s PAYE Manua l – http://goo.gl/ jyHVqn. n the UK throughout the tax year ● they are a UK tax resident ● this tax year is the first tax year
At CIPP Consult, our experienced and qualified consultants specialise in reviewing payroll operations with a ‘fresh pair of eyes’ to recommend innovative improvements to processes and ways of working; leaving you to focus on ensuring that your employees are paid ‘on time and accurately’. For more information on the range of services we can offer, please visit cipp.org.uk or email consult@cipp.org.uk . Delivering tailored solutions for the payroll profession
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Issue 24 | November 2016
| Professional in Payroll, Pensions and Reward |
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