Week 53 Query

steve-worley

Hi All, just wondering if anyone has had a run on HMRC letters regarding an underpayment on Weekly payroll's, we have had a few people ask the same question which after a conversation with HMRC has been pointing at week 53 calculation giving a Tax Free allowance instead of the normal W1/M1 routine which obviously doesn't give any allowance at all, we've not seen this before so wondering if Pegasus have actually changed anything during one of the updates  

0712131256598360.doc

tcyprys

Yep, it was the first time I cam across it but this is the answer - it stems from HMRC wanting to do it one way and software wanting to do it another - other Payroll software has the same issue:

"Pegasus have investigated this and have advised the reason for the underpayment of tax can be due to the additional week 53 that applied to weekly payroll last financial year.

Employers that pay their employees weekly, fortnightly or four-weekly, instead of monthly, may end up making an extra payment to their employees at the end of the tax year, which ends on the 5 April. These extra payments are called 'week 53' payments.

When you process week 53, the week 1 month 1 calculation means they've received 53 weeks of tax allowance. HMRC then recalculate 53 weeks of earnings against 52 weeks of annual allowance. These payments may result in an underpayment of tax for employees due to the extra Personal Allowance (tax free pay) provided to protect the level of take home pay they receive in that pay period,

HMRC normally claims this back through a tax code adjustment in the new tax year, notified on form P800. So, in effect the tax has been split over the 53 weeks as opposed to the allowance of 52."

0911060553270289.pdf