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the system with prefix ‘S’, or do we just apply the standard tax code relating to the statement that they have selected and wait for HMRC to notify us via a P6 coding notice? A: The ‘S’ prefix for Scottish tax codes should only be actioned on the advice of HMRC. So, even if you know that the employee resides permanently in Scotland you would not enter the ‘S’ to the tax code until you have received a P6 notice from HMRC. If the employee has provided a P45 form and this does indicate a ‘S’ prefix then it is okay to operate this Scottish tax code on the employee’s record for the new starter on this occasion. Q: On our payroll this month we have an employee who will be going off on maternity leave. In the months we use to calculate her average weekly earnings (AWE) for statutory maternity pay (SMP) she was only paid SSP, therefore she has not earned enough to be entitled to SMP. We think this seems very unfair as she was off sick and only in receipt of SSP that she does not get SMP from us. Can you please clarify the rules? A: Unfortunately, if she doesn’t meet the AWE criterion she won’t qualify for SMP. You can only use the actual earnings in the relevant period to determine the AWE. You will have to issue a SMP1 form to the employee and she may be able to claim maternity allowance from the Department for Work and Pensions. The time frame is wider for maternity allowance i.e. the test period is 66 weeks up to and including the week the baby is due and it is over thirteen weeks instead of eight. The thirteen weeks do not have to be in a row and the employee has to earn at least £30.00 per week. Q: We are currently updating our expenses policy and wondered if you could assist. Currently employees are claiming business expenses and they are being reimbursed amounts tax and National Insurance contributions (NICs) free through the payroll but without receipts. Is this acceptable? A: Best practice would state that receipts should be provided (where possible) to support business expense claims. Generally, employers are within their rights to refuse to pay the claims if receipts are not provided to support the claim. Expenses can potentially be claimed if
they are not receipted but you must be confident that they are genuine business expenses which have been incurred wholly and necessarily in the performance of their duties. For example, you make a journey via the London Underground and could not keep the ticket or get a receipt – the expense could be reimbursed as long as you could demonstrate that they did make the journey. If the proof cannot be provided HMRC would see this and therefore it would not be tax allowable. They may also consider that the individuals could have negligently or fraudulently made claims and you would then be going down the penalty route – which could mean HMRC potentially imposing a penalty of 100% of the tax lost plus interest. The guidance on gov.uk states as follows. If you reimburse an employee’s travel expenses – you will need to keep a record of when and why the employee travelled, and where possible keep receipts as evidence. Checking expenses You must have a system in place to check payments you make at benchmark or bespoke rates. Your employees aren’t allowed to check their own expenses, so someone else within your company needs to do this to make sure they’re legitimate. Tell your employees to keep proof of their expenses, e.g. receipts or bills, in case you need to check them. Evidence To prove that they are expenses actually incurred by employees in carrying out their work you must be able to provide evidence of the actual business expense. The type of evidence will depend on the item of business expenditure. For example, evidence could include: a log of business phone calls or visits; credit card bills; receipts; work diaries showing the employee’s engagements; a representative survey of the costs involved (that is a scale rate). You can see that best practice would dictate that claims should be receipted (where possible). HMRC’s Employment Income Manual sets out what HMRC would look for (https://bit.ly/2HmzkDe). n
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Issue 42 | July - August 2018
| Professional in Payroll, Pensions and Reward |
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