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pay? I understood that the average is calculated over the twelve weeks prior to the employee taking their holiday, and if there is a week where they were absent sick we would ignore that week and move back a further week . I’m told that the statutory requirement is that calculation is a twelve-week average over the period immediately prior to their holiday no matter what. Is this correct? A: The calculation for the twelve-week average for holiday pay should only be used when an employee works varied hours, has no fixed hours, earns commission and carries out overtime on a regular basis (including voluntary). When an employee takes their holiday, you should go back to the twelve weeks in which the employee ‘worked’. Any weeks that the employee was off sick or was in receipt of statutory sick pay only, or on holiday for the complete week, are to be excluded and you should go back to include twelve weeks the employee worked. The ACAS guide details the rules on what to include and how to process: https://bit.ly/2A6hHXu. Q: Our expense policy states that we do not pay home-to-work mileage and our claiming process requires employees to enter either a private mileage figure which deducts off the total claim or zero where there are no private miles. An employee has asked if they can make a claim where the journey starts from work to the location, even if they did not come into work. For example, home to location is fifty miles, home to work is ten miles, so the business mileage to claim would be forty miles. Can this be paid without there being an income tax and class 1 NICs liability? A: It is up to employers to decide what to pay an employee for business travel, but they would need to know what could be paid tax- and NICs-free. Many employers would only allow a payment for the extra miles travelled to be paid, which in this case would be forty miles. The rationale for deducting the home-to-office miles is that there would be no ambiguity regarding normal commuting which would be subject to PAYE income tax and NICs. It is possible that the employee could
claim tax relief if HMRC accepts that the business journey starts from their home to the temporary workplace. For this purpose, they would use a P87 form (https://bit. ly/2DgXUqT) to make a claim. Q: I am due to make to an ex- employee who left the company five years ago a payment applicable to their previous employment. How should I process this? A: This is a standard payment after form P45 has been issued, with regulation 37 of The Income Tax (Pay As You Earn) Regulations 2003 covering the situation. The employer must apply tax code 0T on a non-cumulative basis to the payment for PAYE purposes, and must decide if the payment was irregular or regular for the class 1 NICs calculation. For example, if the payment was for a bonus then this would be classed as an irregular payment and the NICs would need to be calculated on a weekly pay frequency even if the normal pay frequency was monthly. A regular payment would be calculated on the usual pay frequency. The figures would need to be reported in the FPS at the point the payment is made. Q: My client had to make a supplementary pay run in December 2017 after the usual pay day to correct an error. The usual pay day was 21 December 2017, and the date of the supplementary payment was 7 January 2018. When the client sent the FPS for the supplementary payment the pay day was entered as 21 December 2017. The client has received a penalty notice for the FPS which indicates it is due to having the wrong payment date. Is this correct? A: As the extra payment was made on 7 January 2018 it is in a different tax month to the original payment, so a different pay day is required. As the payment is to correct an error you would need to ensure that you have put a late-reporting reason in the FPS for this extra pay run. When an employer does not indicate a late reporting reason, it becomes liable to penalties. n
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| Professional in Payroll, Pensions and Reward |
Issue 47 | February 2019
*correct at time of publication
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