MY CIPP
The CIPP's Advisory Service team provides answers to popular questions
Pension records retainment Q: We have recently created a new company, and would like to know what the specific retention periods are for pension records? A: By law, employers are required to retain records detailing pension contributions paid to the company pension scheme for at least six years. Employers are also required to retain other types of records for as long as they remain relevant to the running of the scheme and are required for the scheme to operate. Keeping this information provides proof that the correct contributions were paid into the fund should a dispute arise. For reference, see: https://bit.ly/35tAFdq. NMWunderpayments Q: My client has recently discovered several national minimum wage (NMW) underpayments. Can you confirm if we’re required to report these underpayments to Her Majesty’s Revenue and Customs (HMRC)? Calculations are performed for compliance purposes, but there are occasions where the payroll team aren’t informed of hours worked, so underpayments occur. A: It’s an offence under The National Minimum Wage Act 1998 for employers to pay their employees below the NMW or national living wage (NLW). If employers discover they’ve paid a worker below the correct rate, they’re required to correct this and pay any arrears immediately. HMRC provides an NMW and NLW calculator, which an employer can use to check if a worker has received the correct rate of pay in line with NMW legislation. The calculator can be accessed here: https://bit.ly/35nWsmL. Where a self-review has been carried out, and arrears for underpayment of NMW have been identified and paid, HMRC should be informed. HMRC will then help in confirming that any arrears have been correctly identified. The form used in making a voluntary declaration can be obtained by emailing voluntarydeclaration.nmw@hmrc.gov.uk. Employers can be reassured that, other than in exceptional cases, there’ll be no public
naming or financial penalties associated with any paid arrears that are declared to and accepted by HMRC using the voluntary declaration process. For reference, see: http://ow.ly/msyu30scu3Y. CMS order deductions Q: We understand when calculating the 60% minimum earnings for a child maintenance service (CMS) order, an employer can base the deduction on the net amount after tax, National Insurance contributions (NICs) and pension deductions. Can you please clarify the correct treatment of any unpaid arrears of this CMS order, for example, should unpaid arrears be carried forward and taken in a following month or not? A: HMRC guidance states any unpaid arrears (shortfall) of a CMS order should be carried over to the next period. The employee’s protected earnings rate or protected earnings proportion will remain at the relevant level each pay period, so pay shouldn’t be taken below that amount. For reference, see: https://bit.ly/3pzkPVR. PILONpayment error Q: An employee was made redundant last year via a settlement agreement. It’s been noted that the payment was incorrectly taxed. The pay in lieu of notice (PILON) payment was paid tax-free when it should have been subject to tax. The £30,000 limit had already been used in the redundancy payment. The company would like to pay the tax on behalf of the employee, but would there be any consequences because of this mistake with HMRC? A: If an employer fails to deduct the correct amount of pay as you earn (PAYE) from an employee’s earnings, the employer is liable for the amount under-deducted. The underpayment should be recovered from the employer, not the taxpayer, unless HMRC makes a PAYE direction. Where the employer took reasonable care to comply with PAYE regulations and a mistake was made in good faith, they can make a request for the employee to pay the
tax, however, the employer isn’t required to make this request. Where employers wish to pay the shortfall in tax, the employee’s record should be amended using an earlier year update or full payment submission, and the employer should make a balancing payment to HMRC. If an employer is paying tax on the employee's behalf, it should be grossed up. For reference, see: https://bit.ly/3HvwpqY. What happens to payments of statutory maternity pay when a business becomes insolvent? SMP payments during insolvency Q: A client will cease trading in the coming weeks and currently has employees on maternity leave. What are the company’s obligations and options regarding the future payments of statutory maternity pay (SMP) for these employees? A: If a business ceases to trade, they must continue to pay any outstanding SMP payments until the employee has received their full entitlement, or their entitlement ends for some other reason. If a business becomes insolvent after the beginning of the qualifying week, and before the start of the employee’s pay period, HMRC will pay the employee’s SMP. If a business becomes insolvent during the SMP pay period, then HMRC will pay the employee’s SMP from the week in which the business became insolvent. Employees should be advised to contact HMRC, and the business, liquidator or similar should tell HMRC to ensure employees are paid as soon as possible. For reference, see: http:// ow.ly/3T3k30scunu. The apprenticeship levy Q: Our client is asking about apprenticeship levy calculations. Is the calculation based on the gross pay (including expenses) or on the gross taxable pay for each pay period? We would really appreciate any guidance you can provide on this topic.
| Professional in Payroll, Pensions and Reward | April 2022 | Issue 79 6
Made with FlippingBook - Online magazine maker