Unique week 53 processing for 2006/07 and 2007/08 tax years


Attention employers with Thursday, Friday and Saturday paydays!

In last week's newsletter item under this heading we described the various Week 53 situations that will arise at the end of the current tax year and the 2007/08 tax year. These include a new Week 53 situation that arises if employers with Friday paydays bring forward the payment due on Friday, 6 April 2006 because that day is a bank holiday.

We have now taken the view that HMRC's insistence that this unusual situation be handled strictly in accord with PAYE regulations is not reasonable and have written to HMRC asking for their guidance to be reconsidered. We have made the following enquiry:

"[The newsletter article] takes a broader view of the week 53 issues than the one referred to in your recent guidance. Even without this issue, there are already Week 53 situations arising at the end of the 2006/07 and 2007/08 tax years - including another week 53 situation at the end of 2007/08 for employers with Friday paydays. The majority of employers paying weekly and fortnightly, and some paying four-weekly, will be affected in one or both of these tax years. In my experience, many employers fail to recognise a week 53, 54 or 56 when it occurs as it is an infrequent PAYE procedure. Many payroll systems recognise and apply Week 53 automatically when it occurs but are unlikely to recognise situations arising when a payday is brought forward by a day.

Your guidance on how to handle payments that are due on 6 April 2007 but that are brought forward because that day is a bank holiday may be correct in law but I have no doubt that many employers will miss the Week 53 situation altogether and those that do recognise it will have further problems in identifying the following week's payment as a Week 2 payment.

So, what harm would there be if you were to withdraw your guidance and, exceptionally, allow a payment of wages that is normally due on 6 April 2007 but that is paid on 5 April 2007 to be treated as being paid in 2007/08? It would avoid the considerable confusion and the many mistakes that your guidance is going to cause and will allow employers to follow their normal procedures and enable computer systems to operate without any changes.

I ought also to point out that a cynical view of HMRC's insistence on the strict application of PAYE rules in this situation would be that all of the tax and NICs due on those payments will be paid to the Accounts Offices by 19/22 April instead of 19/22 May, a month earlier than would otherwise be the case. It would be interesting to know just how much money the Government would receive a month earlier due to insisting on the strict application of PAYE regulations.

I presume that the only way that HMRC could formalise this exceptional breach of PAYE rules would be by means of an extra-statutory concession. Once in place, it could also apply to the identical situation that will occur on 6 April 2012 (but not again after that until 2091). The concession could be worded so that it applies only to this special situation, where the first day of a tax year is also a bank holiday and the payment is brought forward by one day only.

If HMRC's decision is to leave the guidance as it is and insist on the strict application of PAYE rules, it is essential that you also make it clear what position you will take towards non-compliance. If a compliance audit reveals that tax and NICs due on a payment that was made on 5 April 2007 was not paid over until 19/22 May 2007, what action would be taken against the employer?"

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