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
www.cipp.org.uk for frequently asked questions.
Q: My client, a school, employs senior house-parents who work various shifts and in addition sleep-ins: 10.00pm–7.00am four days a week. Overall this results in a total of 50
hours 30 minutes worked. Their contracts also state that they are paid for sixteen weeks’ holiday (when the school is closed for holidays.) The client pays these employees the following annual salaries £20,000.00, £20,260.80, £21,363.60, £23,360.52 and £25,713.96 gross. If we divide these salaries by 52 weeks and then 50 hours 30 minutes, is the client paying their employees above the national minimum wage (NMW)? A: Your client’s employees are classed as salaried hours workers – paid under contract for either a set amount of hours per year, or paid an annual salary in equal weekly/monthly amounts. To work out whether the NMW is being paid, calculate how many hours the employee would be expected to work in the year, divide this by the number of pay periods (in this case twelve), and then divide the salary paid in that month by those hours. You must also ascertain whether the employees concerned are covering one or four sleep-ins per week, because if they work more than one sleep-in it appears that based on the information provided, your client may not be paying NMW. Should you need to make backdated calculations archive data on NMW rates
10 PayrollProfessional
can be found at
www.gov.uk/national- minimum-wage-rates.
Q: We have an employee commencing employment with our client effective from 1 January 2014, which will have withholding restricted to 85% of earnings. Our client has already submitted a ‘S690’ application to HMRC and is now looking at what needs to be prepared from a payroll perspective i.e. calculation of net pay and real time information (RTI) reporting. A: As part of the employee’s earnings will not be subject to UK taxation our advice on this matter is that the employer must report only the taxable portion of pay under RTI, in the Taxable Pay to Date and Taxable Pay in this Period fields in the full payment submission (FPS). The full earnings on which NICs are calculated should be entered in the Pay Subject to NICs in this Period field of the FPS. If any portion of pay is paid through Bacs then the net pay delivered must be balanced to that shown in the FPS by including any pay delivered outside Bacs in the Deductions from Net Pay field. You will need to check with your software developer as to how this should be accomplished using your software.
At year-end the employer must complete the P60 End of Year Certificate or FPS, to show only the pay on which the employer has operated PAYE – this will include the amount representing the UK duties agreed by HMRC under Section
690 of the Income Tax (Earnings and Pensions) Act 2003 and any other taxable pay – and the tax deducted from that pay. The employee should, when completing their self-assessment return also enter: l the earnings from their P60 / P45 in box 1 on the Employment page including any cash earnings from that employment that have not been included on the P60 / P45 l the tax deducted from their P60 / P45 in box 2 on the Employment page l the remainder of their earnings in box 3 on the Employment page including paid earnings overseas from an earlier year which were not liable to UK income tax unless they were remitted to the UK during the tax return year l the amount of their total earnings which relates to work done abroad in box 12 under the section ‘Share Scheme and Employment Lump Sum, Compensation and Deduction’ on the Additional Information Page (SA101)
Q: My enquiry is that after the tax year-end (e.g. 10 April) we usually receive information about payments which relate to stock options or restricted stock units exercised in previous tax year which need to be included in the closed tax year. There was no problem before RTI, but what is the process we should use now? A: We assume that the payments are usually made to the employees outside of the payroll and have been paid to the employees by no later than 5 April? If so, you will need to update the year to date figures via the FPS and you will need to speak to your software provider to establish how this can be achieved. HMRC guidance, however, makes clear that if you have the information before the 19 April you would update the year to date figures by utilising the FPS but if not then you would update the year to date figures via the earlier year update (EYU). For example, correcting an error in the current tax year, where the incorrect national insurance (NI) table letter has been applied. What you would do is utilise the FPS, and enter zeros under the incorrect table letter, and enter under the correct NI table letter the corrected year to date NI figures. If the correction is in regard to a previous tax year, and the correction was being done after 19 April, you would
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