Employer Further Guide to PAYE and NICs - CWG2 (2015)

 
CWG2 (2015) �

Employer Further Guide to PAYE
and NICs

Use from 6 April 2015
Help and guidance                                                  Employer helpbooks and forms
You can get help and guidance from the following sources.          Helpbooks and forms are available to download. Go to
                                                                   www.hmrc.gov.uk/payerti/forms-updates/
                                                                   forms-publications.htm
The internet
                                                                   Exceptionally, if you don’t have access to the internet, some
For help with your payroll go to,
                                                                   of our helpbooks and forms are available from the Employer
www.hmrc.gov.uk/payerti/index.htm
                                                                   Orderline on 0300 123 1074.
For wider interactive business help, go to
www.gov.uk/starting-up-a-business                                  Yr laith Gymraeg
Webinars are a new way of learning about your payroll.             I lawrlwytho ffurflenni a llyfrynnau cymorth Cymraeg, ewch i
                                                                   www.hmrc.gov.uk/cymraeg/ffurflenniathaflenni_defnyddiol.
Our presentations cover a wide range of topics. For more
                                                                   htm a dilyn y cysylltiad i Becyn y Cyflogwr. Os, yn eithriadol, nad
information, go to www.hmrc.gov.uk/webinars
                                                                   oes gennych gysylltiad i’r rhyngrwyd, cysylltwch â’r Ganolfan
Any page printed from the online version of this helpbook is       Gyswllt Cymraeg ar 0300 200 1900.
uncontrolled and may not be the latest version. We recommend
that you always check you are referring to the latest online       Forms and guidance in Braille, large
version.                                                           print and audio
Online services                                                    For details of employer forms and
For information and help using our Online Services,                guidance in Braille, large print or audio,
go to www.hmrc.gov.uk/online �                                     phone the Employer Orderline on
For more help, contact the Online Services Helpdesk by: �          0300 123 1074 and ask to speak to the
• phone on 0300 200 3600
• textphone on 0300 200 3603
                                                                   Customer Service Team.
                                                                   Education services from the Digital Delivery Team
Basic PAYE Tools                                                   Find out more about our live and recorded webinars,
The Basic PAYE Tools is software that you download onto your       go to www.hmrc.gov.uk/webinars
computer. It will help you run your payroll throughout the year.   To view our video clips, go to www.youtube.com/hmrcgovuk
It is designed for employers who have 9 or fewer employees,
and you can use it to calculate payroll deductions and then        Employer Bulletin online
report payroll information online in real time.                    Employer Bulletins contain information and news for employers.
                                                                   We publish these 6 times a year. Go to www.hmrc.gov.uk/
Basic PAYE Tools will:
                                                                   payerti/forms-updates/employer-bulletin/index.htm
• record your employees’ details
• work out and record your employees’ pay, tax,                    Employer email alerts
  National Insurance contributions (NICs) and any
                                                                   We strongly recommend that you register to receive employer
  Student Loan deductions every payday
                                                                   emails to prompt and direct you to:
• allow you to correct an employee payment made earlier in
                                                                   • each new edition or news about the Basic PAYE Tools
  the tax year
                                                                   • the Employer Bulletin
• allow you to make a mistimed payment (that is a payment
                                                                   • important new information
  that an employee was entitled to receive earlier or later than
                                                                   To register, go to www.hmrc.gov.uk/payerti/forms-updates/
  the date on which it will be paid)
                                                                   forms-publications/register.htm
• allow you to claim your NICs Employment Allowance
• generate the payroll data that you need to send to               HM Revenue & Customs
  HM Revenue & Customs (HMRC) in real time, including starter
                                                                   If you have a query about your PAYE scheme:
  and leaver information
                                                                   • phone the Employer Helpline on 0300 200 3200
• produce an Employer Payment Record that works out how
                                                                   • write to
  much you need to pay HMRC
                                                                     HM Revenue & Customs
• contain calculators to help you to work out statutory
                                                                     National Insurance Contributions & Employer Office
  payments such as Statutory Sick Pay and Statutory
                                                                     BP4102
  Maternity Pay
                                                                     Chillingham House
To find out more information about the Basic PAYE Tools, go to       Benton Park View
www.hmrc.gov.uk/payerti/getting-started/                             NEWCASTLE UPON TYNE
payroll-system.htm                                                   NE98 1ZZ
                                                                   Please tell us your employer PAYE and Accounts Office
Employer helplines
                                                                   references when you contact us. You will find them on
• Employer for less than 3 years, phone 0300 200 3211
                                                                   correspondence HMRC have sent to you.
• Employer for 3 years or more, phone 0300 200 3200
• If you have a hearing or speech impairment and use a             Your rights and obligations
  textphone, phone 0300 200 3212                                   ‘Your Charter’ explains what you can expect from us and what
Please tell us your employer PAYE and Accounts Office              we expect from you. For more information, go to
references when you contact us. You will find them on              www.gov.uk/government/publications/your-charter
correspondence HMRC have sent to you.
Contents
Numbers to the left of topics refer to paragraphs in the relevant chapters.
                                                         Page                                                               Page
About this guide                                           1        End of Year Final Submission                             17
Terms used in this guide                                   1        13 No payments in final pay period                       17
Online filing                                              2        14 Correcting a previous year’s payroll                  17
Commercially available or privately produced payrolls      3
                                                                    15 Making amendments for years prior to RTI              17
Chapter 1 – General procedures                                      16 Sending amendments for years prior to RTI             18
                                                                    17 to 19 not used – reserved for future use              18
Who is an ‘employee’ for the purposes of
PAYE and Class 1 NICs?                                     4        Chapter 2 – Special procedures
National Insurance numbers                                 4        Pension contributions                                    18
1 What is a National Insurance number?                     4        Pension payments                                         18
2 When the National Insurance number used by
                                                                    20 Lump sum payments from pension schemes                19
  HMRC differs from the one you already hold               4
                                                                    21 Procedures for employer of either an employee
3 National Insurance number and identity                   5
                                                                       retiring or a deceased employee whose dependant
4 How to get an employee’s National                                    is entitled to a pension                              19
  Insurance number                                         5        21a If an employee dies                                  19
                                                                    22 Procedures for employer of an employee starting
When to work out NICs and PAYE                             5
                                                                       to receive a pension whilst continuing to work for
National Insurance contributions (NICs) Employment                     the same employer                                     19
Allowance                                                  6
                                                                    23 Procedures for other pension and annuity payers       20
Abolition of Secondary NICs for those employees                     24 Trivial commutation payments relating to
under the age of 21                                        6           registered pension schemes                            20
Class 1A NICs on taxable benefits                          6        24a Payments relating to registered pension schemes
                                                                        where a person has flexibly-accessed their funds     21
How to work out NICs and PAYE for various
pay intervals                                              7        Statutory Sickness, Maternity, Paternity,
                                                                    Additional Paternity, Statutory Shared Parental and
Operation of PAYE and Class 1 NICs when the
                                                                    Adoption Pay                                             21
regular date for payment is a non-banking day              9
                                                                    25 Payments of SSP, SMP, SAP, SPP, ShPP and ASPP         22
Change of pay interval to a shorter interval               9        26 Payments of SMP, SAP, SPP, ShPP or ASPP to an
Change of pay interval to a longer interval                10           employee after their contract of service
                                                                        has ended                                            22
Employees’ payday changed but same pay
interval kept                                              10       Payments paid ‘free of tax or NICs’                      22
Extra payments made on a separate payday from                       27 All of an employee’s earnings paid ‘free of tax’      22
normal pay                                                 10       28 All of an employee’s earnings paid ‘free of tax
                                                                       and NICs’                                             22
Payments made in Week 53                                   11
                                                                    29 Part of an employee’s earnings paid ‘free of tax’     22
5 Week 53 and suffix codes                                 11
                                                                    30 Part of an employee’s earnings paid ‘free of tax
6 Week 53 and K codes                                      11
                                                                       and NICs’                                             23
Standard payments made when, or after, an                           31 Agreement to pay an employee’s share of NICs          23
employee leaves                                            11
                                                                    Payroll Giving – An easy way to give                     23
Payments made when an employee has died                    14
7 Death of employee or of a pension recipient              14       Incentive Awards                                         23
8 Death of pension recipient                               14       32 Cash awards and awards made by voucher
                                                                        which can be exchanged for cash                      23
Joint wages to spouses and civil partners                  14
                                                                    33 Non-cash awards and vouchers which cannot be
Change of gender                                           14           exchanged for cash                                   23
Mistake in the amount of NICs or PAYE deducted             15       34 Valuing cash vouchers for NICs purposes               24
9 Mistake in the amount of NICs or PAYE deducted                    35 Valuing non-cash vouchers for NICs purposes           24
   during the tax year                                     15       36 Apportioning the value of vouchers between
10 Mistake discovered after the end of the tax year        15           employees for NICs purposes                          25
                                                                    37 Non-cash vouchers exempt from NICs                    25
Unintentional overpayment of salary/pension                16       38 Taxed Award Schemes                                   26
11 Deliberate under deductions of NICs and PAYE            16
                                                                    Holiday pay                                              26
12 Arrears of pay for closed years                         16
                                                                    39 Holiday pay in the construction industry
Paying a refund of tax when no payments are due                        and similar schemes                                   26
to your employee                                           17
                                                                    40 Holiday pay from money set aside during the year      27
Different employer PAYE references for separate                     41 Holiday pay from a holiday credit scheme              27
groups of your employees                                   17       42 Working out PAYE on holiday pay                       27
                                                                    43 Working out NICs on holiday pay                       27
Page                                                             Page
44 NICs on payments due to be paid during a                      contributions in the tax year prior to receipt of form
   holiday period                                         28 �   CA2700                                                      45 �
45 Youth Contract and Work Choice wage incentives         29 �   73 Employers with occupational pension schemes -
46 to 47 not used – reserved for future use               29 �       contracted-out rate NICs                                45 �
Tips, gratuities, service charges and troncs              29 �   Working out NICs payable at the contracted-out rate         46 �
48 Tips/gratuities/voluntary service charges flowchart    30 �   Employer’s NICs rebate for those employees under            46 �
                                                                 the age of 21                                               46 �
Employees involved in a trade dispute or lock-out         30 �
                                                                 74 Contracted-out status starts whilst in employment        46 �
49 When the special procedures apply and what
                                                                 75 Contracted-out status stops but �
   they entail                                            30 �
                                                                     employment continues                                    46 �
50 How to decide if any employee is involved in a �
                                                                 76 Retrospective membership of an occupational �
   trade dispute or lock-out                              30 �
                                                                     pension scheme                                          46 �
51 Working out PAYE during the trade dispute              30 �
                                                                 77 not used – reserved for future use                       47 �
52 Payments to the accounts office during the �
                                                                 78 More information                                         47 �
   trade dispute                                          31 �
53 Trade dispute ends in the same tax year as �                  Special rules for some married women and widows             47 �
   it began                                               31 �   79 Certificates of election                                 47 �
54 Procedure at the end of the tax year if the �                 80 Giving up the right to pay reduced rate NICs             47 �
   trade dispute has not ended                            31 �   81 Losing the right to pay reduced rate NICs                47 �
55 Procedure for employees whose withheld refunds �              82 When to return a certificate of election                 48 �
   you cannot pay at the end of the trade dispute         31 �   83 Adjusting NICs                                           48 �
56 to 59 not used – reserved for future use               31 �   84 More information                                         48
                                                                 Payment of NICs for employees over �
Chapter 3 – National Insurance only procedures �                 State Pension age                                           49 �
Earnings periods for NICs purposes                        32 �   85 Certificates of age exception                            49 �
60 Employees paid at regular intervals                    32 �   86 not used – reserved for future use                       49 �
61 Employees not paid at regular intervals but who �             87 When to return a certificate of age exception            49 �
   can be treated as paid at regular intervals            32 �   88 Adjusting NICs                                           49 �
62 Employees paid at irregular intervals                  32 �   89 National Insurance contributions (NICs)
63 More than one set of regular payments                  32 �       Employment Allowance                                    50 �
64 Working out NICs when you first pay an employee        32 �   90 National Insurance contributions (NICs) Abolition
                                                                     of secondary rate of contributions for those under 21
Working out NICs for employees not paid on their �
usual payday                                              33 �       years of age (U21)                                      51 �
                                                                 91 to 109 not used – reserved for future use                51 �
Changing the method of working out NICs                   33 �
Employees with more than one job                          33 �   Chapter 4 – Special types of employee
65 An employee has two or more jobs with different               Part-time or casual employees                               52 �
   employers and each one pays the employee               33 �   Workers supplied by agencies                                52 �
66 An employee receives one payment of earnings for              Student employees                                           52 �
   separate jobs with different employers                 34 �   110 to 111 not used – reserved for future use               52
67 An employee has two or more jobs with the �                   Information for farmers                                     52 �
   same employer                                          34 �   112 Harvest casuals                                         52 �
                                                                 113 Labour Providers or contractors engaged to carry �
Working out and recording NICs when earnings from                     out specific jobs                                      53 �
separate jobs are added together                         34 �
                                                                 Employees coming to or leaving the UK – treatment �
68 NICs are due at the not contracted-out rate in
                                                                 for NICs purposes                                           54 �
   all jobs                                              34 �
                                                                 114 Employees coming from within the European
69 NICs are due at the contracted-out rate in all jobs �
                                                                      Economic Area (EEA) and countries with which the
   and are covered by the same occupational
                                                                      UK has a Reciprocal Agreement (RA) covering NICs
   pension scheme                                        34 �
                                                                      or a Double Contributions Convention (DCC)             54 �
70 NICs are due at the contracted-out rate in all jobs �
                                                                 115 Employees coming from countries outside the �
   and are covered by different occupational
                                                                      European Economic Area (EEA) with which the UK
   pension schemes                                       34 �
                                                                      does not have a Reciprocal Agreement (RA)
71 NICs are due at the contracted-out rate in one job �
                                                                      covering NICs or a Double Contributions
   and the not contracted-out rate in another            35 �
                                                                      Convention (DCC)                                       55 �
72 Deferment of the payment of employee’s contributions
                                                                 116 Liability to pay NICs for employees going abroad        55 �
   for employees with more than one job                  45 �
                                                                 117 Modified NICs Schemes – Applying for simplified
What to do if you have already deducted employee’s
Page                                                          Page
    reporting for employees coming to or leaving               150 Lump sum payments on retirement or
    the UK                                              55         death which are not from registered schemes        78
                                                               151 Foreign service                                    78
Employees coming to or leaving the UK – treatment
for PAYE purposes                                       56     Employment Tribunal Awards                             78
118 Employees coming from abroad                        56     152 Reinstatement order or re-engagement order         78
119 Employees going abroad                              56     153 Order for the continuation of employment           78
120 Employees working in offshore areas                 57     154 Pay due under a protective award                   79
121 Coding for payroll purposes for non-resident
                                                               Providing an employee with a non-cash payment          79
     employees who have never been resident in the UK   57
                                                               155 ‘Readily Convertible Asset’ (RCA)                  79
Workers providing their services through                       156 Valuation of assets                                80
intermediaries                                          57
                                                               Shares and other securities                            80
122 Workers paid by intermediaries which do not                157 Securities options                                 80
    meet the definition of Managed Service                     158 Restricted shares (conditional shares
    Companies (IR35 rules)                              57         pre-16 April 2003)                                 81
123 Workers paid by Managed Service Companies           58     159 Special charges on employment-related securities   81
124 IR35 - At the end of the tax year                   59
                                                               Practical considerations on non-cash payments          81
125 Agencies and employment intermediaries              60
                                                               160 PAYE and NICs on RCAs                              81
126 to 129 not used – reserved for future use           60
                                                               161 Deducting PAYE from non-cash payments              82
Chapter 5 – Pay, expenses and benefits                         162 Deducting NICs from certain non-cash payments      82
                                                               163 Paying PAYE and NICs to HMRC on
What to include as gross pay on your employee’s                     non-cash payments                                 82
payroll record                                          61
                                                               164 Recording a non-cash payment                       82
Giving us details of your employees’ benefits                  165 P9D/P11D                                           82
and expenses                                            66     166 Employment income provided through third
130 Form P46(Car)                                       66          parties ('Disguised Remuneration’ rules)          82
131 Form P11D                                           66     167 Employment income provided through third
132 Form P11D(b)                                        67          parties ('Disguised Remuneration’ rules) for
133 Form P9D                                            67          NICs purposes                                     84
134 What to enter on form P9D or P11D                   67
135 Reporting termination packages where amounts               168 onwards not used – reserved for future use         84
     over £30,000 are taxable                           67
                                                               Appendix – other useful forms and
136 P9D/P11D Chart                                      68
                                                               guidance issued by HMRC                                85
Dispensations                                           71
137 What is a dispensation?                             71     Index                                                  87
138 How to apply for a dispensation                     71
139 Using a dispensation for NICs purposes              71
140 Information and guidance for holders of
     a dispensation                                     71
PAYE Settlement Agreements                              71
141 NICs on motoring expenses payments                  72
142 Taxation of mileage expenses payments               72
Treatment of expenses payments for NICs purposes        72
143 Payments towards additional household costs
     incurred by employees who work from home           73
144 to 147 not used – reserved for future use           73
Round sum allowances                                    74
Travel and subsistence payments                         74
Relocation allowances or expenses                       74
Allowances or expenses to employees
relocating abroad                                       75
Allowances or expenses to employees
working abroad                                          75
Payments you make when an employee
stops working for you                                   75
148 Type of payment                                     75
149 Action to take when you make such payments          75
Introduction
Real Time Information (RTI)                                 The operation of PAYE is based on the Income Tax
The following guidance applies to all employers. Guidance   (Pay As You Earn) Regulations 2003 and the payment
for reporting PAYE in real time is also available at        of NICs is based on the:
www.hmrc.gov.uk/payerti/index.htm                           • Social Security Contributions and Benefits (Northern
                                                              Ireland) Act 1992
About this guide �
                                                            • Social Security Administration (Northern Ireland) Act 1992
Welcome to the Employer Further Guide to PAYE and NICs      • Social Security (Categorisation of Earners) Regulations
for the tax year 2015 to 2016. This edition replaces the      (Northern Ireland) 1978, as amended
CWG2(2014). �
                                                            If you are unhappy with our service
Throughout this guide PAYE means Pay As You Earn and        If you are unhappy with our service, usually a phone call to
NICs stands for National Insurance contributions. �         the person or office you have been dealing with will allow
For information about the day-to-day tasks in �             us to put things right quickly. Their number will be on any
operating PAYE and paying NICs please go to �               papers they have sent.
www.hmrc.gov.uk/payerti/index.htm or refer to the �         However, if you are still unhappy, or you would like to deal
Employer Helpbooks. �                                       with someone else, then you may want to complain. Please
This guide gives more detailed information and covers       see our factsheet ‘Complaints and putting things right’
some less common situations. New or amended material is     which is available. Go to www.hmrc.gov.uk/complaints-
sidelined in black. �                                       appeals/how-to-complain/index.htm or contact the
Please remember that you may be asked to produce            Complaints Manager at the office you have been
evidence of how you have worked out PAYE and NICs. It is    dealing with.
important that you keep records either in paper form or     Terms used in this guide
on a computer. In either case, these records must be made
                                                            Gross pay
available to HM Revenue & Customs (HMRC) on request. �
                                                            The amount the employee is due to receive before any
There are legal requirements that mean employers must       deductions are made. What counts as gross pay for PAYE
comply with their obligations. At the time of writing,      and NICs purposes is defined in more detail in Chapter 5.
this guide sets out HMRC’s view on how these legal
                                                            Income Tax year (tax year)
requirements can be met. �
                                                            A tax year is a period starting on 6 April in one year and
It will be updated annually and was last updated �          ending on 5 April in the following year. For example, the
December 2014. �                                            2015 to 2016 tax year starts on 6 April 2015 and ends on
The operation of PAYE is based on the Income Tax (Pay As    5 April 2016.
You Earn) Regulations 2003 and the payment of National      Income Tax weeks (tax weeks)
Insurance contributions is based on the: �                  Tax weeks are periods of seven days which follow on from
• Social Security Contributions and Benefits Act 1992       each other starting on 6 April each year. The first tax week
• Social Security Administration Act 1992                   is 6 to 12 April inclusive, the second tax week is 13 to
• Social Security (Contributions) Regulations 2001,         19 April inclusive, and so on.
  as amended
                                                            The odd day or days at the end of the last complete tax
• Social Security (Categorisation of Earners) Regulations
                                                            week in the year, (5 April or in leap years, 4 and 5 April) are
  1978, as amended
                                                            treated as a whole tax week, that is tax week 53.
For more information, go to:
                                                            Income Tax months (tax months)
• www.hmrc.gov.uk/payerti/index.htm
                                                            Income Tax months are periods following on from each
• the Employer Helpline
                                                            other in an Income Tax year. They start on the 6th of one
Employers in Northern Ireland                               month and finish on the 5th of the following month. The
When reading this guide please note that references to      first Income Tax month is 6 April to 5 May inclusive, the
Department for Work and Pensions should be read as          second Income Tax month is 6 May to 5 June inclusive,
Department for Social Development.                          and so on.
If you cannot find the information you need in this guide   For details of relevant dates within a tax year
more help is available from:                                go to www.hmrc.gov.uk/payerti/paying/deadline.htm
• www.hmrc.gov.uk/payerti/index.htm
• the Employer Helpline

1                                                                                                             CWG2 (2015)
Pay interval                                                    There are very few exceptions. For more information
The period of time between one payment and the next.            about the exceptions go to
Pay intervals can be:                                           www.hmrc.gov.uk/payerti/reporting/paper-filing.htm#1
• ‘regular’, that is every week, month and so on                For more information about online filing, go to
• ‘irregular’, that is with no fixed period of time between -   www.hmrc.gov.uk/payerti/getting-started/using-paye-
  for example, an employee is paid after working for            online.htm
  10 days, then again after a further 25 days and again         For more information about sending starter and
  after a further 40 days                                       leaver information online, go to www.hmrc.gov.uk/
Payroll record                                                  payerti/getting-started/using-paye-online.htm
A payroll record shows PAYE and NIC deductions for each         PAYE Online – your filing options
of your employees. It is important that you keep payroll        You report your payroll information by submitting
records, either in paper form or on a computer.                 Full Payment Submissions (FPS) and Employer Payment
Recorded gender                                                 Summaries (EPS). You also use an EPS to tell HMRC if you
This refers to the gender which a transsexual person was        haven’t paid any employees in a pay period and have no
registered with at birth.                                       return to make. These submissions and other returns and
                                                                reports are sent electronically by your payroll system
Acquired gender
                                                                to HMRC.
This refers to the gender which a transsexual person
presents to the world, it is not the gender that they were      You can send forms and returns online using:
registered with at birth.                                       • our PAYE Online for employers – Internet service,
                                                                  choosing either
Full Gender Recognition Certificate
                                                                   — our free ‘Online Return and Forms - PAYE’ product
A certificate issued by the Gender Recognition Panel
                                                                     (this is designed for small employers who have up to
that shows a person has satisfied the criteria for legal
                                                                     and including 49 employees and do not send large
recognition in their acquired gender. From the date of
                                                                     numbers of forms to us)
issue the person is recognised in their acquired gender
                                                                   — third party (commercial) payroll software
and will benefit from any rights and responsibilities that
                                                                • Electronic Data Interchange (EDI) – more suitable for
are associated with that acquired gender.
                                                                  large employers who typically have employee numbers
Interim Gender Recognition Certificate                            in the thousands and/or a very high staff turnover
A certificate issued by the Gender Recognition Panel that       • an agent or payroll bureau who can file online on your
shows a person has met the criteria to be recognised in           behalf, using our PAYE Online for Agents service. For
their acquired gender subject to them annulling their             more information go to www.hmrc.gov.uk/payerti/
marriage. A full Gender Recognition Certificate will be           reporting/how-to-report.htm
issued following the annulment of the marriage.
                                                                PAYE Online – Expenses and Benefits
Transsexual female                                              In addition to the above filing options, we provide a
A person who at birth was recorded as male but chooses          service that allows you to send your expenses and benefits
to live as a female, should be referred to in female terms      information electronically, if your software doesn’t do
(‘she’, ‘her’, ‘Ms’).                                           this automatically.
Transsexual male                                                For more information on completing your expenses and
A person who at birth was recorded as female but chooses        benefits forms go to www.hmrc.gov.uk/payerti/exb/
to live as a male, should be referred to in male terms (‘he’,   forms.htm
‘him’, ‘Mr’).
                                                                PAYE Online – Direct Debit payment
Online filing                                                   When you enrol for the PAYE Online for Employers service,
There are a wide range of PAYE (Pay As You Earn) notices,       you are given instant access to the Direct Debit Online
forms and returns that can be sent and received online.         service. This allows you to set up a Direct Debit Instruction
                                                                which you can use to pay your monthly or quarterly PAYE
Online filing is a fast, convenient and secure way of
                                                                and NICs payments. For more information on how to pay
exchanging information with HMRC. It cuts down on time,
                                                                PAYE/Class 1 National Insurance contributions/CIS, go to
administration and errors, and it means that you’ll get up      www.gov.uk/pay-paye-tax
to date PAYE information, such as updated employee tax
                                                                Internet
codes much faster.
                                                                Forms and returns that can be sent over the Internet are:
As part of operating PAYE, almost all employers must
                                                                • Employer Alignment Submission (EAS)
report their payroll information online using a
                                                                • Full Payment Submission (FPS)
Full Payment Submission (FPS) for each pay period.
                                                                • Employer Payment Submission (EPS)
There are, however, a small number of employers who             • Earlier Year Update (EYU)
may be:                                                         • NI number Verification Request (NVRREQ)
• exempt from submitting this information online                • P35, P38A - Employer Annual Return/supplementary
• unable due to exceptional circumstances to submit               statement, used for a tax year during which you did not
  information online                                              operate PAYE in real time
                                                                • P14 - End of Year Summary, used for a tax year during
                                                                  which you did not operate PAYE in real time
CWG2 (2015)                                                                                                                 2
• P11D – Return of expenses and benefits                       More information is available at
• CIS300 – (Contractors Monthly Return)                        www.hmrc.gov.uk/softwaredevelopers/rti/edi-rti.htm
• P11D(b) – Return of Class 1A National Insurance              Privately produced programs
  contributions, Return of expenses and benefits:              If you design and operate your own computer program we
  Employer declaration                                         provide regularly updated information to help you keep
• P9D – Expenses and benefits form                             computerised payroll systems up to date with changing
• P46(Car) – Notification of car made available for            legislation. These updates are available on our website at
  private use                                                  www.hmrc.gov.uk/softwaredevelopers/rti/ �
Forms and notices you can receive over the Internet are:       internet-rti.htm �
• P6 – Employer coding notification                            Substitute forms P60, ‘End of Year Certificate’ �
• P6(B) – Employer coding notification (budget)                All substitute forms P60, ‘End of Year Certificate’, paper or
• P9 – Annual coding notification                              electronic, must be submitted annually for
• SL1 – Student Loan Start Notice                              HMRC approval.
• SL2 – Student Loan Stop Notice                               Our booklet RD1 ‘Specification for employer substitute
• P11D(b) notification                                         forms P60’, gives guidelines to anyone producing a new
• Incentive Letter notification                                substitute P60 design or amending an existing design. We
The following forms and returns can be exchanged online,       revise the booklet annually to publish any changes for
using EDI.                                                     the current tax year. To view the specification download
• P11Ds – Return of Expenses and Benefit                       the booklet using the link ‘Download Specification for
• P11D(b) – Return of Class 1A National Insurance              employer substitute forms P60’ at
  contributions, Return of expenses and benefits:              www.hmrc.gov.uk/payerti/end-of-year/tasks.htm
  Employer declaration                                         Substitute forms P60 provided by a supplier of business
• P14 – End of Year Summary (up to 2012–13)                    stationery or by a computer bureau will normally have
• P35/P38A – Employer Annual Return and                        been approved by HMRC for general use and bear a
  supplementary statement (up to 2012–13)                      unique imprint agreed between HMRC and the supplier
• P46(Car) – Notification of car made available for            or manufacturer.
  private use
                                                               To apply for HMRC approval, send a draft of the proposed
• P6, P6B, P9 – Coding notifications
                                                               form to us either by email or as a paper copy. Please email
• SL1/SL2 – Collection of Student Loans – start/stop notices
                                                               your draft (for example, PDF) to
• NVREP – National Insurance number verification replies
                                                               hmrc.substituteformsapproval@hmrc.gsi.gov.uk
  and RTI National Insurance number notices
                                                               or alternatively post a paper draft to:
• Employer Alignment Submission (EAS)
                                                               HM Revenue & Customs Digital Services
• Full Payment Submission (FPS)
                                                               6th Floor
• Employer Payment Submission (EPS)
                                                               Dorset House
• Earlier Year Update (EYU)
                                                               27-45 Stamford Street
• NI Number Verification Request (NVRREQ)
                                                               LONDON
Businesses involved in the Construction Industry               SE1 9PY
Scheme can file monthly returns (CIS300) and carry out
                                                               Form P45 for use on computer printers
verifications of subcontractors over the internet or using
                                                               We supply four versions of the P45 for computer use:
EDI. For more information, go to
www.hmrc.gov.uk/cis/returns/cis-online.htm                     • form P45 (Manual) – for manual completion
                                                               • form P45 (Continuous) – suitable for completion by
For Online End of Year Expenses and Benefits Forms, go to
                                                                 impact printer
www.hmrc.gov.uk/payerti/exb/forms.htm
                                                               • form P45 (Continuous)(E) – suitable for completion by
Commercially available or privately                              impact printer
produced payrolls                                              • form P45 (Laser-Continuous) – suitable for completion
                                                                 by high-speed laser printers
The notes below tell you how to get information to enable
                                                               • form P45 (Laser-Sheet) – suitable for completion by
you to use and run a computerised payroll.
                                                                 cut-sheet laser printers
Commercially produced programs                                 The forms can be obtained from the Employer Orderline.
We work closely with commercial software developers
and provide free technical specifications to help them
create products and services suitable for use with HMRC
Online Services.
HMRC will accept forms and returns sent using any of the
commercial software products listed on our website.
For more information go to www.hmrc.gov.uk/
softwaredevelopers/paye/rti-software-forms.htm
A list of EDI enabled software products can also be viewed.
Go to www.hmrc.gov.uk/ebu/edi/edi-software.htm

3                                                                                                                CWG2 (2015)
Chapter 1 – General procedures
The following guidance applies to all employers. Guidance        National Insurance numbers
for reporting PAYE in real time is also available at
www.hmrc.gov.uk/payerti/index.htm                                  1    What is a National Insurance number?
                                                                 A National Insurance number is the unique reference
Who is an ‘employee’ for the purposes of                         number used by HMRC and the Department for Work and
PAYE and Class 1 NICs?                                           Pensions to identify an individual’s NICs record. It ensures
In this guide, ‘employee’ means anyone who is gainfully          that contributions paid by, and credited to, an individual are
employed in the UK and is:                                       put on the right record so that whenever a claim to benefit
• engaged under a ‘contract of service’ - where you             is made, the correct amount can be paid.
   pay somebody to work for you, that arrangement                You are required to record an employee’s National Insurance
   will normally amount to either a contract of service          number on payroll records. It is important, therefore, that
   (employment) or a contract for services (self-                you ask employees for their National Insurance number as
   employment) - almost everyone who works for an                soon as possible after they start working for you.
   employer will be employed under a contract of service,
                                                                 Your employees are required by law to give their National
   including full-time, part-time, casual or temporary
                                                                 Insurance number to you, although they can start work
   employment - a contract need not be written, but can be
                                                                 before providing the number.
   a verbal or implied working agreement
• an office holder with earnings chargeable to tax - an         For each employee, you must:
  office holder is someone appointed to hold a titled office     • record their date of birth, gender and address including
  (including an elective office), for example, a                   postcode
  company director                                               • arrange for them to let you know of any change of name,
• engaged through an agency or some other third party -           gender and/or address
   for more information, see ‘Workers supplied by agencies’      Currently you are required to send HMRC a new employee’s
   on page 52                                                    address within your RTI Full Payment Submissions (FPS), or
For PAYE purposes                                                later FPS if their National Insurance number is unknown.
In addition, ‘employee’ includes, for most PAYE purposes,        From April 2015 you can submit details of an employee’s
pension recipients and others who get PAYE income (for           change of address on an FPS and HMRC will validate
example, ex-employees).                                          the information provided and when appropriate use the
                                                                 information to update its systems.
Similarly ‘employer’ includes, for most PAYE purposes,
agencies, pension-payers and others who make payments            Your employee remains accountable for their own records
of PAYE income.                                                  but receiving this information from you will help HMRC keep
                                                                 records up to date.
For NICs purposes
In addition to the above, if certain conditions are met,         Temporary National Insurance numbers
a person in any of the following occupations is treated          We no longer accept temporary National Insurance numbers
as being an employee. The conditions are set out in the          on Employer Annual Returns (for example, any National
Social Security (Categorisation of Earners) Regulations          Insurance number beginning with ‘TN’). This applies no
1978, as amended. The occupations are:                           matter which method you use to submit your returns. In all
• office cleaners                                                cases you should try to get the National Insurance number
• ministers of religion                                          (see paragraph 4) and enter it on your payroll record.
• people employed by their husband or wife or civil             If you are unable to get the National Insurance number
   partner for the purpose of his or her employment              you must:
If you are not sure if someone is an ‘employee’ or if you        • leave the National Insurance number field blank, and
are an ‘employer’ for PAYE or NICs purposes you can:             • enter the date of birth and gender
• go to www.gov.uk/employment-status-indicator                    2 	When the National Insurance number used by
• go to HMRC’s interactive employment status tool at                   HMRC differs from the one you already hold
   www.hmrc.gov.uk/calcs/esi.htm
• phone the Employer Helpline                                    If the National Insurance number used by HMRC for an
                                                                 employee differs from the one you already hold, use the
                                                                 National Insurance number given to you by HMRC. If your
                                                                 employee disputes this is the correct National Insurance
                                                                 number advise them to contact HMRC.

CWG2 (2015)                                                 Chapter 1                                                          4
3   National Insurance number and identity                 • when the remuneration is fixed or determined
                                                                 — if the amount for a particular accounting period is
The National Insurance number card should not be
                                                                   determined before the end of that period, take the
accepted by anyone as proof of identity. HMRC no longer
                                                                   date as being when the period ends
issue plastic National Insurance number cards but they
                                                                 — if the amount is determined after the period ends,
can issue written confirmation to a person who requests a
                                                                   take the date as being when the amount is determined
reminder of their National Insurance number. If your new
employee doesn’t know their National Insurance number          For NICs purposes
and you haven’t yet included them on an FPS, you should        The point of payment is that at which the earnings are
ask them if they have an old payslip or form P60 – you will    placed unreservedly at the disposal of the employee.
usually be able to find it there.                              If the employee is a director, go to
                                                               www.hmrc.gov.uk/nitables/ca44.pdf
If you can’t get a National Insurance number from a new
                                                               You can seek advice on what to do for PAYE and NICs
employee, you must still send their details on the first FPS
                                                               purposes by phoning the Employer Helpline.
that includes a payment to them – but you must leave the
National Insurance number field blank for that employee.       Late notification of marginal items of pay
You must not use an incorrect or ‘dummy’ National              Occasionally, payroll sections do not get to know about
Insurance number.                                              certain marginal items of pay, for example expenses, until
                                                               some time after they have been paid or treated as paid.
When you submit the FPS, HMRC will try to match the
                                                               So they include the item in a later earnings period because
employee’s details to their National Insurance number, and
                                                               it is time-consuming to have to revisit the correct earnings
where HMRC are able to match the employee’s National
                                                               period and recalculate the NICs due. HMRC will allow you
Insurance number with the details you provided, you will
                                                               to use a later earnings period when calculating the NICs
get a message through the FPS submission route telling
                                                               due, even on the rare occasions when such payments are
you the correct National Insurance number.
                                                               notified late and the most convenient earnings period
If you do not receive a message from HMRC telling you the      falls within the next tax year. But the marginal item of
correct National Insurance number, continue to leave the       pay must be included in the gross pay for the purposes of
National Insurance number field blank for that employee        calculating NICs without any undue delay.
until notified.
                                                               Marginal items of pay included in a later earnings period
The fact that a person has a National Insurance number         do not have to be reported to HMRC when paid. They
does not mean that the person has the right to work or         should be reported when they are included in the later
live in the UK. It is not a passport to employment. For more   earnings period at the time that the earnings paid in that
information on a person’s right to work in the UK go to        later period are paid.
www.gov.uk/employers-checks-job-applicants
                                                               You must allocate marginal items of pay to the correct
or phone the Home Office on 0300 123 4699.
                                                               earnings period and recalculate the NICs where the
    4   How to get an employee’s National                      deferred calculation may have a material effect on an
        Insurance number                                       individual’s benefit entitlement. For example, where an
To find out how to get an employee’s National                  employee earns around the Lower Earnings Limit.
Insurance number, or if you want to check an employee’s        HMRC will also ask you to include the marginal item of pay
National Insurance number before including it on the           in the correct earnings period and recalculate the NICs due
employee’s payroll record go to www.gov.uk/business-           where it appears that you are deferring the calculation to
tax/paye                                                       avoid or reduce NICs.

When to work out NICs and PAYE                                 If you must allocate the marginal item of pay to the
                                                               correct earnings period and recalculate the NICs, you will
As a general rule both NICs and PAYE are operated when a
                                                               need to ensure that the year to date National Insurance
payment of earnings is made to an employee.
                                                               information submitted on a Full Payment Submission
For PAYE purposes                                              reflects the correct values.
If the employee is not a director, operate PAYE on the
                                                               ‘Marginal items of pay’ do not include amounts paid, or
earlier of:
                                                               treated as paid, by way of securities, for example shares,
• when you actually make the payment
                                                               share options.
• when the employee is entitled to be paid, even if the pay
  is not drawn until later                                     If an item of pay is not marginal and your payroll section
                                                               does not find out about the item in time to include it in the
If the employee is a director, operate PAYE on the
                                                               correct earnings period, the pay records must be adjusted
earlier of:
                                                               to allocate the item to the correct earnings period.
• when you actually make the payment
• when the director becomes entitled to be paid
• when the payment is credited in the company accounts
  or records, even if
   — the director cannot draw the money straightaway
     because there is a block on the right to payment �
   — the credit is not specifically in an account in the
     director’s name �
5                                                          Chapter 1                                               CWG2 (2015)
National Insurance contributions (NICs)
Abolition of Secondary NICs for those
employees under the age of 21
• From April 2015 the rate of employer Class 1 secondary
  contributions will be 0% for employees under the age of
  21 up to a new ‘Upper Secondary Threshold’ (UST)
• Class 1 secondary contributions will continue to be
  payable on all earnings above this threshold
• The current way in which NICs is assessed remains
  unchanged
• Employers should ensure that they hold the employee’s
  correct date of birth
• For more information please see CWG2, Chapter 3,
  paragraph 90

Employment Allowance
This annual £2,000 Employment Allowance became
available from 6 April 2014 for businesses, charities and
Community Amateur Sports Clubs to be offset against their
employer Class 1 secondary NICs. Businesses, charities
and Community Amateur Sports Clubs may claim the
Employment Allowance if the earnings they pay give rise
to a secondary Class 1 NICs liability. Service companies
have limited eligibility for Employment Allowance (they
are not able to claim in respect of deemed payments of
employment income).
From April 2015 the Employment Allowance will be
extended to certain individuals employing carers. This
extension is subject to Parliamentary approval.
You will need to determine your eligibility. For more
information, details of eligibility and how to claim the
Employment Allowance see CWG2, Chapter 3,
paragraph 89 and go to
www.hmrc.gov.uk/nicsemploymentallowance

Class 1A NICs on taxable benefits
Class 1A NICs are due on most taxable benefits in kind.
Details of when liability for Class 1A NICs arises and how
they are calculated, reported and paid are included in
CWG5(2015), ‘Class 1A National Insurance contributions on
benefits in kind’.
For more help and advice go to
www.hmrc.gov.uk/guidance/cwg5.pdf
You should also read CA33, ‘Class 1A National Insurance
contributions on Car and Fuel Benefits’ if you provide car
and fuel benefits in addition to other benefits.
Go to www.hmrc.gov.uk/guidance/ca33.pdf

CWG2 (2015)                                                  Chapter 1   6
How to work out NICs and PAYE for various pay intervals
The following charts will help you work out NICs and PAYE for most pay intervals. The calculators on our
website at www.hmrc.gov.uk/calcs-tools/index.shtml can be used for those pay intervals marked * below. If you use
the Basic PAYE Tools to calculate all payroll deductions and carry out real-time reporting, it will handle the pay intervals
marked ^ below. You can find out more about the Basic PAYE Tools at www.hmrc.gov.uk/payerti/getting-started/
payroll-system.htm For examples of how to calculate NICs using the exact percentage method
go to www.hmrc.gov.uk/calcs/nice.htm

        Pay                   To work out NICs                           Working out PAYE using Tax Tables A - The Pay
     intervals                                                                        Adjustment Tables
                                                                Using a code on a cumulative basis       Using a code on a week 1/
                                                                                                         month 1 basis
 Weekly* ^       Earnings period is weekly                      Use the table for the tax week           Use the table for week 1
                 Use either the appropriate weekly table or     that includes the date of payment.       on each payday.
                 the exact percentage method to calculate       If a payday is in week 53, use the
                 NICs.                                          table for week 1 again on a
                                                                non-cumulative basis.
 Fortnightly*    Earnings period is two-weekly                  Use the table for week 2 for the first Use the table for week 2
 ^               Use either the appropriate weekly table or     payment after 5 April, even if the     on each payday.
                 the exact percentage method to calculate       payment is made in the first week of
                 NICs. If you use the tables:                   the tax year. Use the table for week 4
                 • divide the earnings on which NICs are        for the second payment and so on up
                   payable by 2                                 to week 52. If there is a 27th payday
                 • look up this figure in the appropriate       in the tax year use the table for week
                   weekly table                                 2 again on a non-cumulative basis.
                 • multiply the NICs shown in the table by 2
                 This is the amount of NICs due.
 Four-           Earnings period is four-weekly                 Use the table for week 4 for the first   Use the table for week 4
 weekly* ^       Use either the appropriate weekly table or     payment after 5 April, even if the       on each payday.
                 the exact percentage method to calculate       payment is made in the first, second
                 NICs. If you use the tables:                   or third week of the tax year. Use
                 • divide the earnings on which NICs are        the table for week 8 for the second
                   payable by 4                                 payment and so on up to week 52.
                 • look up this figure in the appropriate       If there is a 14th payday in the tax
                   weekly table                                 year use the table for week 4 again
                 • multiply the NICs shown in the table by 4    on a non-cumulative basis.
                 This is the amount of NICs due.
 Monthly* ^      Earnings period is monthly                     Use the table for the month that         Use the table for month 1
                 Use either the appropriate monthly table       includes the date of payment.            on each payday.
                 or the exact percentage method to
                 calculate NICs.
 Quarterly ^     Earnings period is quarterly                   Use the table for month 3 for the        Use the table for month 3
                 Use either the appropriate monthly table or    first payment after 5 April, even if     on each payday.
                 the exact percentage method to calculate       the payment is made in an earlier
                 NICs. If you use the tables:                   month. Use the table for month 6 for
                 • divide the earnings on which NICs are        the second payment and so on.
                   payable by 3
                 • look up this figure in the appropriate
                   monthly table
                 • multiply the NICs shown in the table by 3
                 This is the amount of NICs due.
 Half-yearly     Earnings period is half-yearly                 Use the table for month 6 for the        Use the table for month 6
 ^               Use either the appropriate monthly table or    first payment in the tax year, and the   on each payday.
                 the exact percentage method to calculate       table for month 12 for the second
                 NICs. If you use the tables:                   payment.
                 • divide the earnings on which NICs are
                   payable by 6
                 • look up this figure in the appropriate
                   monthly table
                 • multiply the NICs shown in the table by 6
                 This is the amount of NICs due.

7                                                              Chapter 1                                                  CWG2 (2015)
Pay                    To work out NICs                             Working out PAYE using Tax Tables A - The Pay
  intervals                                                                           Adjustment Tables
                                                               Using a code on a cumulative basis       Using a code on a week 1/
                                                                                                        month 1 basis
Annually ^     Earnings period is annually                     Use the table for month 12.              Use the table for month 12.
               Use either the appropriate monthly table or
               the exact percentage method to calculate
               NICs. If you use the tables:
               • divide the earnings on which NICs are
                 payable by 12
               • look up this figure in the appropriate
                 monthly table
               • multiply the NICs shown in the table
                 by 12
               This is the amount of NICs due.
Intervals of   Earnings period is one week                     Use the table for the tax week that      Use the table for week 1 for
less than      Add together all the payments made in an        includes the date of payment. If a       each payment.
a week ^       Income Tax week and if the total goes over      payment is in week 53, use the table     Add to each payment any
               the weekly lower earnings limit and the         for week 52 again.                       payments made earlier in
               Primary and Secondary Thresholds, NICs                                                   the same Income Tax week
               are due.                                                                                 when working out the tax to
               Use either the appropriate weekly table or                                               be deducted.
               the exact percentage method to calculate
               NICs from the employer and
               employee respectively.
Irregular      Earnings period is the interval the             Use the table for the week that          Use the table for the
pay            payment covers                                  includes the date of the payment. If     week that includes the
intervals of   You must use the exact percentage method        a payment is made in week 53, use        date of payment. (Where
more than      to work out the NICs due. To do this:           the table for week 52, unless you are    employment started after
a week         • work out the daily lower earnings limits      given written instructions by us.        5 April, deduct from that
but not          and upper accrual point by dividing the                                                the number at the date of
multiples        weekly limits by 7                                                                     commencement.) After that,
of weeks or    • multiply the answers by the number of                                                  take into account the time
months           calendar days in the period which the                                                  elapsed between payments
                 payment covers                                                                         to the employee to work
               • work out the daily Primary Threshold,                                                  out the correct basis to use.
                 Secondary Threshold and Upper Earnings
                                                                                                        For example, if the first
                 Limit/Upper Secondary Threshold by
                                                                                                        payment is in week 4, use
                 dividing the annual figures by 365
                                                                                                        the table for week 4. If the
               • multiply the answers for the Primary
                                                                                                        next payment is made in
                 Threshold, Secondary Threshold and
                                                                                                        week 10, use the table for
                 Upper Earnings Limit/Upper Secondary
                                                                                                        week 6 (10 minus 4), or if
                 Threshold by the number of calendar days
                                                                                                        the next payment is in week
                 in the period which the payment covers
                                                                                                        10 but the employment
               In all cases the resulting figures should be                                             started in week 6, use the
               calculated to the nearest penny. Amounts                                                 table for week 4 (10 minus
               of £0.005p or less should be disregarded.                                                6). If the next payment is
               NICs are due on earnings in each interval if                                             made in week 16, use the
               the earnings exceed the Primary Threshold                                                table for week 6
               and Secondary Threshold for employees                                                    (16 minus 10).
               and employers.
Employees      Earnings period is the length of time you       If you employ them for less than a       Use the table for the week
paid once      employ them or one week whichever is            week, follow the rule in the first row   the employment ends if the
               longer
only, or                                                       above for intervals of less than a       employment started before
               Follow whichever rule above applies.
employees                                                      week. If you employ them for more        the start of the tax year.
paid once                                                      than a week, use the table for the       If the employment started
only where                                                     week the employment ends.                after the end of the tax year
the earnings                                                                                            use the table for the length
period is                                                                                               of the employment. For
one of those                                                                                            example, if the employment
marked *^                                                                                               starts in week 5 and ends
(see page 7)                                                                                            in week 9 use the table for
                                                                                                        week 4 (9 minus 5).
CWG2 (2015)                                                   Chapter 1                                                                 8
Operation of PAYE and Class 1 NICs when                                 Example - regular payday and actual payday cross
the regular date for payment is a                                       a tax year
non-banking day                                                         Regular payday on Monday 6 April 2015, (tax year 2015
When a regular payday falls on a non-banking day                        to 2016) but paid on Thursday 2nd April (tax year 2014
(Saturday, Sunday or bank holiday) and because of this                  to 2015) may be treated for PAYE/NICs purposes as
payment is made on the:                                                 being paid on 6 April. Payments should be reported on
• last working day before the regular payday                            the FPS on or before 6 April 2015 with a “payment date”
• the next working day after the regular payday                         on the FPS showing 6 April 2015.
For PAYE purposes the payment may be treated as having                  Regular payday on Friday 3rd April 2015 (tax year
been made on the regular payday. This is also the date                  2014/15) and payment made on first day after the
that should be reported on the Full Payment Submission                  non-banking days (Tuesday 7th April). Payments may be
as the ‘payment date’ even if the actual payment is made                treated for PAYE/NICs purposes as being paid on Friday
slightly earlier or later. There is a weekly/monthly chart at           3rd April and the payment date of the FPS would be the
paragraph 6.                                                            3rd April. In this case employers should either
For NICs purposes the payment must be treated as if it had              - report the payment on an FPS sent in advance of the
been made at its regular time, if the actual and regular                  actual payment date (on or before the 3rd April); or �
payment days are in the same tax year. The payment may                  - send the FPS on the actual payment date (7th April)
also be treated as having been made at its regular time                   and complete the ‘late reporting reason code’ G on
when the payment dates cross a tax year.                                  the FPS. This is because if the FPS is sent on the 7th,
                                                                          showing a payment date of the 3rd it will appear to be
    Example – regular payday falls on a non-banking day                   late and a penalty may be charged.
    Payment made on the last working day before the
    regular payday.                                                    All other payments you make on regular paydays that fall
                                                                       on banking days and the deductions due must be reported
    Pay due on Sunday 6th December 2015 (tax month
                                                                       on or before the date of payment unless an exception
    9) but paid on Friday 4th December (tax month 8)
                                                                       applies - see www.gov.uk/running-payroll/fps-after-
    may be treated for PAYE purposes as being paid on
                                                                       payday
    6th December 2015. For NICs purposes the payment
    must be treated as having been paid on 6th December                (See pages 32 and 33 for more NICs information
    2015. The ‘payment date’ on the FPS should be the 6th              and examples.)
    of December and payments should be reported on or                  Change of pay interval to a shorter interval
    before Sunday 6th December.                                        If the interval between the payment of an employee’s
    Payment made on the first working day after the                    earnings changes to a shorter interval, for example,
    regular payday.                                                    monthly paid to weekly paid, take the following action.
    Pay due on Saturday 5th December 2015 (tax month 8)                For NICs purposes
    but paid on Monday 7th December (tax month 9) may                  Work out NICs from the first payment after the change
    be treated for PAYE purposes as being paid on                      based on the new earnings period. Do this even if the first
    5th December 2015. For NICs purposes the payment                   weekly payday falls within the same tax month as the
    must be treated as having been paid on 5th December                previous monthly payday. To use the NICs calculator on
    2015. The ‘payment date’ on the FPS should be the                  our website go to www.hmrc.gov.uk/calcs/nice.htm
    5th of December and in these cases you should either
                                                                        Example
    - report the payment on the FPS sent in advance of the
                                                                        A monthly paid employee changes to being weekly
      actual payment date (on or before the 5th); or
                                                                        paid on the first day of the month, after receiving a
    - send the FPS on the actual payment date (7th) and
                                                                        monthly salary the day before. The first weekly payday
      complete the ‘late reporting reason code’ G on the FPS.
                                                                        is the 5th. Although this payment is in the same tax
      This is because if the FPS is sent on the 7th, showing a
                                                                        month as the monthly salary, treat it completely
      payment date of the 5th, it will appear to be late and a
                                                                        separately and work out NICs on the payment using a
      penalty may be charged.
                                                                        weekly earnings period.

                                                                       For PAYE purposes
                                                                       Work out PAYE using the weekly table on the first
                                                                       payment after the change if you have not already paid
                                                                       the employee in the month.
                                                                       If you have already paid the employee in the month of
                                                                       change, use the same monthly table for the rest of that
                                                                       month and then use the weekly table from the beginning
                                                                       of the next tax month.
                                                                       For both PAYE and NICs purposes use the same payroll
                                                                       record as before.

9                                                                Chapter 1                                              CWG2 (2015)
Change of pay interval to a longer interval                      For PAYE purposes
If the interval between the payment of an employee’s             Work out PAYE using the appropriate monthly table on the
earnings changes to a longer interval, for example, weekly       first payment after the change. �
paid to monthly paid, take the following action.                 For both PAYE and NICs purposes use the same payroll
For NICs purposes                                                record as before. �
Work out NICs from the first payment after the change
                                                                 Employees’ payday changed but same pay
based on the new earnings period. �
                                                                 interval kept
If you have already made a payment using the old shorter
                                                                 Take the following action if you change your employees’
earnings period in the first of the new longer periods,
                                                                 payday but keep the same pay interval. For example, you
the payment you have made, and NICs worked out on it,
                                                                 change from making monthly salary payments on the
should be taken into account when working out NICs for
                                                                 15th of the month to the 1st of the month.
the new period as a whole. �
                                                                 For PAYE purposes
 Example 1                                                       To find out the correct tax week/month look up the �
 A weekly paid employee changes to being monthly                 table on page 13. �
 paid on 9 July 2015 and receives their last two-weekly
                                                                 If the month or week number in which you are making
 payments on 29 June and 6 July.
                                                                 the payment: �
 The new earnings period is a month and will coincide            • follows on from the tax month or week of the previous
 with the tax month which always starts on the sixth of            payment, complete your payroll record and operate PAYE
 every month. The first monthly payday is 31 July.                 in the normal way - your next FPS should reflect the
 Work out NICs due on the first monthly pay taking                 payment and tax month
 into account the earnings and NICs worked out on the            • is the same as the tax month or week of the
 payment made on 6 July.                                           previous payment
 The total NICs payable must not exceed that which                  — treat the first ‘new date’ payment as an extra payment
 would have been payable had the two payments been                     for the month or week
 added together and monthly NICs worked out on                      — as only one amount of free pay can be given in a pay
 the total.                                                            period the free pay due is the figure used when the
                                                                       previous payment was made - for paydays after the
 Amend the payroll record.
                                                                       first ‘new date’ payment, complete your payroll record
 The weekly payment made on 29 June is not in the new                  and operate PAYE in the normal way, send a further
 earnings period and is not included in the calculation.               FPS to report the revised data
                                                                 For NICs purposes
For more information, go to
                                                                 Work out NICs using the normal earnings period on each
www.gov.uk/running-payroll/changing-paydays
                                                                 of the paydays.
However, where, at the time of the change of pay interval,
the employee also joins your contracted-out occupational         Extra payments made on a separate payday
pension scheme and is covered by your contracting-out            from normal pay
certificate, NICs are payable at the new appropriate             Where you make extra payments (such as overtime,
contracted-out rate(s) and limits on the total payments          commission, bonuses and so on) on a separate payday
made in the new earnings period.                                 from other pay, take the following action.
 Example 2                                                       For NICs purposes
 Using the same dates as in Example 1, add the weekly            Treat extra payments as part of the total pay at the time
 earnings paid on 6 July to the monthly earnings paid            they are paid, no matter when they were earned.
 31 July and work out NICs on the total at the                   If you have paid an employee and then make another
 appropriate contracted-out rate(s), using the new               payment to them in the same earnings period, NICs have
 monthly NICs thresholds.                                        to be worked out again on the total payment.
 Deduct the NICs previously paid on the 6th to determine
                                                                  Example
 the amount of NICs now due on the 31st. Amend
                                                                  An employee who is normally paid on a Friday receives
 the payroll record to reflect the changes to the NICs
                                                                  a payment of £200 on Tuesday 3 November 2015 and
 category letter and NICs thresholds.
                                                                  NICs have been worked out on that sum.
In both examples, where, exceptionally, it is not practicable     On Friday 6 November 2015 the employee is paid a
for you to aggregate the earnings in the first new earnings       normal weekly wage of £300 making a total of £500
period, calculate the NICs due on payments made before            paid in that week.
and after the change separately, in the normal way. This          NICs must be recalculated based on £500.
means that, where the date of change coincides with the
date on which your employee joins the company pension            If the FPS has already been sent send a further FPS to
scheme, you should leave the weekly not contracted-out           report the revised data.
NICs unchanged and work out NICs at the contracted-out
rate, using the new monthly thresholds, only on those
payments made after the date of change.
CWG2 (2015)                                                 Chapter 1                                                        10
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