Claim Back Wages from the Taxman
Newsletter issue - April 08.
When your employees become parents they may take some maternity, paternity or adoption leave. If they earn more than the NI threshold (£87 per week for 2007/08) and have worked for you for at least 6 months, you will also be required to pay them at the statutory rate during most of that leave period. These statutory wages (SMP, SPP or SAP) must be paid at a flat weekly rate of £112.75 for 2007/08, although SMP is paid at 90% of a woman's average wage for the first six weeks of the leave period.
All this statutory pay for absent employees can leave you out of pocket, so the good news is you can claim it back from the Taxman. First you need to check whether the Taxman classes you as a 'small' employer or not. Small employers get 100% of the statutory (baby-related) pay back, plus a 4.5% bonus, other employees can only claim back 92% of the statutory pay.
The test of being 'small' depends on how much NIC you were due to pay for the previous tax year. If this was £45,000 or less you qualify as a 'small' employer. Dig out a copy of the form P35 you submitted last year for 2006/07 and check the figures of NI reported on that form, to see if you are under or over the £45,000 threshold. Look at the total NI collected before deducting any amounts used to fund any statutory payments.
You should technically reclaim the statutory pay as you pay it out each month during the tax year. The Taxman wants you to hold back the statutory pay plus the 4.5% compensation, from the other payroll deductions you make each pay period. If you forgot to do that, all is not lost as you can complete a form SP32 to reclaim all the statutory pay paid out over the last few tax years. We can help you with that.