PayPerShop Forum

HI - this is my first post and look forward to a reply.

Couple of questions..

1)Should employees over retirement age and continuing to pay pension contributions have an ECON number? The employee has an NI Category of C so I would say not but just wanted other payroll opinions...

2) Employees due a bonus in week 53 are complaining they are paying too much tax (as obviously they have no more free pay left). Is there any way around this or for them to reclaim the the tax? Again, I would say - other than not to pay the bonus in week 53 but again looking for the correct answer.

Thanks in advance.

Derek

Derek, welcome to the PayPerShop forum and thank you for your questions.

First, I'm not sure what you mean by an employee having an ECON. An employer has an "employer's Contracted-out number" when it obtains approval for employees in one or more occupational pension schemes to be contracted-out of the state second pension scheme. It isn't the employee who has the ECON, it is the employer. The contracting-out certificate does not apply to your employee who is over retirement age, so that person is no longer contracted-out and is therefore on table letter C.

Taking your second question, in week 53 employees are taxed as if it were week 1 of the tax year and, as a result, have an additional one week of free pay. In the 2007/08 tax year they will have received a full year's free pay, as indicated by their tax code, plus an additional 1/52nd of the annual free pay. So, maybe they misunderstand the situation - but they are not disadvantaged.

Incidentally, did you realise that employees, who are paid four-weekly and who have a week 56 every 22 or 23 years, have an extra four weeks free pay when that happens? On their 14th payday in the tax year, they are taxed as if it were week 4.

Just a point about the week 53/56 situation. I am not 100% sure this still applies but if HMRC re-assess your tax paid in a particular tax year the extra allowance given for week 53/56 is taken away. This happened to me a couple of years ago when I sold some shares and my tax liability was recalculated without the extra allowance. Despite my protests about how unfair this was it fell on deaf ears at HMRC, so I ended up paying tax on a salary that had previously been given a tax allowance through PAYE.

HMRC reasoning was that they could not give more than the standard personal allowance when tax liability is calculated this way.

Employee will not lose more tax on their bonuses in week 53 than they would have done in week 50, 51, 52 etc.

Week 53 simply operates on a week 1 / month 1 non cumulative basis.

They could pay more tax on wk 53 than wk 52, 51 etc if their bonuses were quite high and it took them into the 40% band. This is quite possible when they are taxed on a week 1 basis. I would think it advisable not to pay bonuses in wk 53 if at all possible. They could also lose out if a similar situation applied as I explained previously.