A director has returned from maternity leave. SMP was paid via the payroll together with some additional salary. Accounts show directors remuneration - salary plus SMP and CT allowance is claimed.
However, we need to provide for SMP re-payment from HMRC.
I am not sure what the credit entry would be - ie debit HMRC as debtor - credit what?
and is the credit taxable ( on the basis that the payment included in remuneration is allowable for CT).
Or am I missing a point?
Replies (2)
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Quite possibly
"SMP was paid via the payroll together with some additional salary"
I do hope that the director was not working during her maternity leave, apart from the 10 KIT days, to earn her additional salary because that would have ended her entitlement to SMP.
"However, we need to provide for SMP re-payment from HMRC."
Only if it was not posted as part of the payroll at the time and only if it was not set off against any PAYE due for other employees.
If the director was the only employee, the SMP recovery is 103% of the SMP paid. I agree with John - you post the credit to whatever account you debited the payment of the SMP and the debit to PAYE Recoverable in the balance sheet. As such the 103% recovery will reduce the amount of director's remuneration and increase the taxable profits - it is not so much that the recovery is taxable, but that the deductible business expense is reduced.