Termination awards and sporting testimonials –real-time Class 1A NICs guidance – clarification

01 October 2019

In a previous news article published on 25 September 2019, a statement from HMRC was included that requires further clarification.

 

HMRC advised within guidance for software developers that ‘, if an individual receives a Termination Award of £39,000, the employer would pay income tax on £9,000 as this is the amount above the threshold’.

 

The above statement implies that the liability for tax on termination payments exceeding £30,000 is taken directly from the employer, and that they foot the bill. It is, in fact, the employee who pays the income tax on the £9,000 exceeding the tax-free termination payment threshold. It is at this point that the employer pays the tax amount across on behalf of the employee when they submit their liability payments for the month to HMRC. Whilst the employer is responsible for submitting the figures to, and paying the liabilities across to HMRC, the tax liability figure essentially gets deducted from the employee in the first instance.

 

The Policy team has notified the relevant HMRC department so that the relevant amendments can be made to avoid any confusion and remove any ambiguity.

 

 

 


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