As the income tax and national insurance contributions may not be practically recoverable from the employee and the calculation would be applied retrospectively to previous years employment the cost to an employer can be considerable.

When should national insurance deductions be made from an employee?

National insurance must be deducted from all employees who are over the age of 16 and under the state retirement pension age of 60 for a woman and 65 for a man. Equality of employment does not apply to government legislation on equality of employment between men and women where national insurance contributions and pension payments are concerned.

In addition national insurance should only be deducted from an employee wage or salary if that income is at or above the national insurance earnings threshold. The earning threshold usually changes each year and should be checked in case of doubt with the current tax thresholds applicable.

What is the procedure when a new employee does not have a P45?

If the new employee either does not possess or has lost the P45 from a previous employee then the employer operating the PAYE scheme must still deduct tax and national insurance from any wages payments made to that employee and also advice the Inland Revenue to establish the tax status of the employee. If the employee does not have a P45 the employer must complete a P46 and send the P46 to the Inland Revenue without delay. Following receipt of the P46 the Inland Revenue will notify the employer of the income tax deductions to be made.

In the period from when the employee commences employment and notification of the employee tax status is received the employer should adopt a week 1 or month 1 status for that employee and also use an emergency tax code. The emergency tax code would be the standard personal allowance for that tax year.

Is a medical certificate required before statutory sick pay payments are made?

It is advisable for an employer to obtain from an employee written documentation of sickness. This documentation can be in the form of self certification which should be filed as part of the PAYE administration. If an employee satisfies all the conditions to receive statutory sick pay and there is no reason for the employer to doubt the claim then strictly speaking statutory sick pay can be paid without medical evidence.

How as an employer do I fund working tax credits?

Working tax credits an employer may pay to an employee is deducted from the PAYE and other deductions that employer has made and is payable to the Inland Revenue. Eligible deductions include deductions from employees in respect of income tax, national insurance, student loans and CIS deductions and employer national insurance contributions. If the deductions are insufficient to cover the tot6al working tax credit to be paid to an employee the employer can apply to the Inland Revenue who will fund the shortfall.

Why the employer is charged penalty fines when the accountant submits the tax returns?

Penalty fines are chargeable to the employer responsible for submission of the annual PAYE tax returns. If an accountant, bookkeeper or payroll bureau has been appointed they are permitted to submit tax returns with the permission of the employer. Arrangements between an accountant or bookeeper to submit tax returns online does not remove the employers responsibility who would be liable to a penalty fine by the tax authority if the submission was late.

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