Off-payroll working and statutory payments
07 April 2021
If a worker receives some earnings that have been subject to deductions under the off-payroll working rules, and some that have not, for the purposes of establishing entitlement to statutory payments, all earnings must be considered.
A worker’s earnings period for the purposes of statutory payments is based on when their intermediary makes payments of earnings to them, not when the deemed employer makes payment to the worker’s intermediary or when that intermediary receives that payment.
To avoid double taxation, payments from the intermediary already subject to tax and NICs by the deemed employer are reported in data item 58A on the Full Payment Submission (FPS) submitted by the intermediary. The payments from the deemed employer will have been made to the intermediary net of Income Tax and National Insurance Contributions (NICs), so the worker needs to locate a payslip, remittance notice or other payment document received to gather information relating to the original gross pay. If the worker does not have access to this, they should request it from the deemed employer.
Where a worker’s intermediary receives figures relating to off-payroll working engagements, and only a portion* of that is paid as a net amount to the worker, then a ‘just and reasonable apportionment’ must be made for the attribution of tax and NICs on that net amount.”
Smiths Ltd. receives £1,000 in relation to an off-payroll working engagement. Smiths Ltd. then pays Mr. Smith 60% (£600) of the amount received and keeps the remaining 40% (£400). **
The £1,000 was already subject to tax deductions of £200 and NICs of £120.
A reasonable apportionment could be to apportion £120 to tax (60% of £200 tax) and £72 to NICs (60% of £120 NICs).
Therefore, the gross amount for use in statutory payment calculations would be the £600 received + £120 tax + £72 NICs = £792
The worker’s intermediary should ensure that an FPS is submitted normally, on or before payday.
The FPS will advise HMRC that the gross statutory payments have been made. Even though the figures received by the worker will have been net amounts, this will provide HMRC with the data it requires to apply the usual checks to any statutory payments made.
In line with standard process, an Employer Payment Summary (EPS) also needs to be sent to advise HMRC of the amounts of statutory payments that the worker’s intermediary will reclaim.
*Please note that if a worker pays themselves by dividends only, then no entitlement to statutory payments arises.
** Please note that if a worker received net amounts from their intermediary that were not subject to Class 1 NICs when paid by the deemed employer, then these amounts would need to be discarded
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