tax and NICs risks
extremely expensive. l Action – It is important to take professional advice when considering making termination payments. There should be adequate procedures and checks in place to review each payment to ensure that the correct tax and NICs are accounted for.
Salary overpayments risk rating medium
Because it can take time for payroll to be advised that an employee has left, salary can often be paid for a period after the leaving date. Although the employer may recover the overpaid salary, recovery of the overpaid tax and NICs is often overlooked. l Risk – The employer will pay tax and NICs that are not due. l Action – When recovering overpaid salaries from employees who have left,
procedures should be in place to recover the tax and NICs overpaid.
Expenses dispensation risk rating medium
An expenses dispensation granted by HMRC removes the obligation from the employer of reporting on form P11D expense payments made to employees, where there is no tax liability. Such expenses can include rail and taxi fares, hotel costs, subsistence, etc. This saves administrative time and cost for the employer, as well as the costs of any potential NICs. l Risk – Unless the terms of the dispensation are regularly reviewed, there is a risk that its terms could be breached by the employer inadvertently paying expenses outside the dispensation parameters. This can result in a penalty for
...THIS YEAR OF TRANSITION HAS TAUGHT US, IS THE IMPORTANCE OF GOOD COMMUNICATIONS
incorrect P11D returns. l Action – If you have an expenses dispensation that is over three years’ old it should be reviewed and updated.
Payroll risk rating medium
These days payrolls are invariably computerised. We have been asked on a number of occasions to review the operation of payroll to ensure that the correct amounts of tax, NICs and pension contributions are being deducted. This is a manual review which checks the amounts deducted by the payroll programme using tax and NICs tables. l Risk – If there are discrepancies, they can affect a substantial number of employees, thus leading to incorrect payments of tax and NICs. For example, we have discovered discrepancies where wrong NICs rates and letters have been used or tax exempt amounts of mileage allowances have been taxed. l Action – Have a manual review carried out by an experienced payroll person unconnected with your payroll team or provider.
PP
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