Understanding Statutory Tax and National Insurance
This topic discusses:
Tax and National Insurance.
P46 (Expat) starter notification.
Delivered tax and national insurance deductions.
Viewing delivered elements.
All employees who are over the age of 16 but below state retirement age, and whose income is above the Lower Earnings Limit (LEL), are required by law to pay National Insurance contributions (NICs). All employees pay Pay As You Earn (PAYE) income tax. HM Revenue and Customs (HMRC) provides detailed information about the regulations for NICs and PAYE tax.
After hiring an employee in PeopleSoft HR, you must enter the employee's statutory details using pages in Global Payroll for the UK. If you run payroll without setting up tax and NI details for a payee, the payroll calculation uses these default tax and NI values and it generates payee messages for the payee:
Tax Code: BR
NI category: A
If you want to apply different default values, change the value of these variables:
TAX VR CD ALPHA
TAX VR TXBASIS
GBR VR TAXCODE
NI VR CATEGORY
See (Classic) Adding a Person.
Managing Starters from an NI Perspective
Global Payroll for the UK automatically calculates National Insurance for new employees who are paid later than the period in which they begin working—for example, an employee starts on May 25 but is not paid all he or she is due until the June payroll. In a situation like this, Global Payroll for the UK calculates the National Insurance contribution for May and June separately and posts the results in the correct period. To activate this feature, the automatic retro feature for National Insurance calculations should be activated at implementation.
Managing Leavers from an NI Perspective
When payments are made to employees after the pay period in which termination occurs, there are specific statutory requirements in the UK for establishing the basis on which National Insurance should be calculated. For regular payments, the normal NI basis is used. If the payment is irregular, a weekly basis should be used. HMRC defines regular and irregular payments.
When a payment is made to an employee after the termination has been processed, the system uses the value of the accumulator GBR AC IRREG SEG to determine whether the payment is irregular. This accumulator tracks all earning elements that constitute irregular payments.
If the value of GBR AC IRREG SEG is equal to the value of the accumulator GBR AC NIBL SEG the weekly NI basis is automatically applied for NI calculation purposes. If GBR AC IRREG SEG and GBR AC NIBL SEG are not the same, then the payment comprises regular payments only, or a combination of regular and irregular payments. In this case, the system calculates NI using the employees' pay frequency basis.
Alternatively, you can also override the NI frequency on the Maintain NI Data GBR page to force a change of the NI basis.
Note: When you define earning elements for irregular payments, make the earnings members of the accumulator GBR AC IRREG SEG.
The P46 (Expat) Starter Notification is a new form. It is one of a number of In Year Movement messages sent from your payroll system to HMRC. It is used to send starter notification to HMRC of employees who are transferred to work in the UK.
The employees who fall under this category include:
Individuals working wholly or partly in the UK for a UK resident employer on assignment whilst remaining employed by an overseas employer.
Individuals assigned to work wholly or partly in the UK at a recognized branch of their overseas employer's business.
All individuals included by an employer within a dedicated expatriate scheme.
All individuals included by an employer within an expatriate modified PAYE scheme (the employer would typically be a multinational company).
Starting on April 6, 2009, it is mandatory for employers with 50 or more employees to send information to HMRC online on employees starting their employment who have been transferred to work in the United Kingdom. To help you meet this requirement, PeopleSoft Global Payroll for the United Kingdom has delivered an EDI message type, P46 (EXPAT).
The P46 EXP EDI message is generated for an employee seconded to work in the UK only. According to the specifications, when a person is seconded to work in the UK, they must be provided a P46 (Expats) form, which is used to capture relevant employee details.
Once the employee fills in the details, the employer section of this form has to be filled in and the form or EDI details must be sent to HMRC. The section completed by the employee determines the applicable tax code.
The standard P46 form only relies on statements A, B or C to determine the tax code. The new P46 (Expat) form also relies on an optional entry in the European Economic Area (EEA)/Commonwealth Citizen check box to determine the tax code.
If an employee enters X in the EEA/Commonwealth citizen box, employers must use the emergency tax code on a cumulative basis (which applies to Statement A) even if the employee has completed Statements B or C. PeopleSoft Global Payroll for the United Kingdom provides a page within the application to enroll an expatriate in the system and then generate the EDI message thereafter.
This message is also a part of In-year movements which have to be filed electronically starting April 6, 2009. The EDI message type complies with the new legislation.
Note: We are delivering only the EDI format, not the P46 (Expat) form.
You should follow the general process used for existing In-year returns. Although it's a new form, it has been given version number 6.0 to be consistent with other In-year movements messages, which were activated in April 2009.
These deductions are delivered for statutory tax and National Insurance deductions:
TAX DD PAYE (employee's PAYE tax deduction).
NI DD EES (National Insurance employee deduction).
NI DD ERS (National Insurance employer deduction).
NI DD EESRBT (National Insurance employee rebate).
NI DD ERSRBT (National Insurance employer rebate).
These deductions are delivered for processing NI overrides:
NIO DD EES (employee NI override).
NIO DD ERS (employer NI override).
NIO DD EESRB (employee NI rebate override).
NIO DD ERSRB (employer NI rebate override).
The PeopleSoft system delivers a query that you can run to view the names of all delivered elements designed for the United Kingdom. Instructions for running the query are provided in the PeopleSoft Global Payroll product documentation.