MEMBERSHIP INSIGHT
in advance is that tax allowances for the holiday weeks are applied separately. For example, holiday pay paid in week 29 will have tax allowances for weeks 30 and 31 applied. However, as it is week 52 this is not possible. An employee can only receive personal tax allowances for the tax year to a maximum of 52 weeks. The employer cannot apply tax allowances from a future tax year to a prior one; therefore, an employee being advanced holiday pay in week 52 could be pushed into a higher tax bracket. It may not be in the best interest of the employee to do this. If employees are really determined to take advance holiday pay at year end, and the employer is willing to do this, the payroll department cannot override the tax deducted. Your software will correctly apply one pay period’s allowance for the whole payment, instead of applying three weeks’ allowances. Q: We are currently changing our payroll software and propose to change the pay frequency from four-weekly to monthly. The final four-weekly pay day is 7 March (tax week 48) and the monthly payroll will be paid on 31 March (month 12). Both payments are in the same tax month (6 March to 5 April). Can you please explain how the PAYE and class 1 NICs should be calculated for this situation? A: As the company plans to calculate a weekly payment in March and is then going to calculate a monthly payment at the end of March you would have to aggregate the earnings for both periods to work out the NICs due for the monthly pay period. To calculate the amount of NICs which should be deducted from the employee’s monthly salary, subtract the amount they paid in week 48 from the aggregated calculation and the residue is deducted from the month 12 payment. As you are only changing the pay frequency you would use the current tax code, the taxable pay to date, and tax paid from the four-weekly payroll. You then calculate the tax due for month 12. As they have already had their tax allowances on the four-weekly payroll, they may pay more tax than normal (depending on which tax bracket they fall into). HMRC provide guidance on the changes to pay frequencies within the CWG2 guidance – Employer Further Guide to PAYE
Advisory Service is available 9a.m. to 5p.m. Mondays to Thursdays, and 9a.m.
to 4.30p.m. on Fridays. It is free to all CIPP members * , students and attendees of approved CIPP courses and conferences in the last six months. Call 0121 712 1099 , email advisory.service@cipp.org.uk or visit cipp.org.uk for frequently asked questions.
Advisory
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Q: I work for a payroll bureau and some of our clients are directors of small businesses and are always paid the maximum weekly or monthly pay that they can receive before their salary would be subject to pay as you earn (PAYE) or class 1 National Insurance contributions (NICs). Can you please advise me on the thresholds for the new tax year? A: The thresholds for the tax year 2018–19 can be found on the GOV.UK website at https://goo.gl/AJBsga and the amount an employee can earn before paying tax at the basic rate is £228.00 per week and £988.00 per month, based on £11,850.00 tax free pay per year. The NICs thresholds are as follows: lower earnings level is £116.00 per week, £503.00 per month and £6,032.00 per annum. Q: My question is regarding the General Data Protection Regulation (GDPR) that comes into effect on 25 May 2018. We email PDF payslips to employees and if any employee requests a duplicate we currently charge a small admin fee. Once GDPR comes into force can we still charge this admin fee? A: The Information Commissioner’s Office (ICO) states (see https://goo.gl/ rPY7Fy): “You must provide a copy of the information free of charge, however, you can charge a ‘reasonable fee’ when a request is manifestly unfounded or excessive, particularly if it is repetitive. You may also charge a reasonable fee to comply with requests for further copies of the same information. This does not mean
that you can charge for all subsequent access requests. The fee must be based on the administrative cost of providing the information.” Q: One of our employees was on holiday outside the UK when they became sick. I would like to enquire if they will still be entitled to statutory sick pay (SSP) for this absence? A : I can confirm that if an employee becomes sick whilst on holiday or leaves the UK while they are off work sick (for example, to go on holiday or visit relatives living abroad), you are still liable to pay SSP during their absence providing you consider their incapacity is genuine, that they meet the earnings test and they have been sick for four consecutive days or more. HM Revenue & Customs’ (HMRC’s) Statutory Payments Manual provides guidance and can be accessed at the following link https://goo.gl/sXUYHW. Q: I have had a request from one of our clients asking if we can make an advance of pay for one of their employees in week 52 for payday 31 March 2018. This is likely to result in the employee being deducted four times the normal amount of tax. I would like to know if our software will apply week 53 for this employee? A: In these circumstances the software won’t apply week 53, as the employee has been paid before 5 April. Anything paid in week 52 will only have one week’s allowance applied. The normal procedure for two weeks’ holiday paid
| Professional in Payroll, Pensions and Reward | April 2018 | Issue 39 8
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