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Net Salary agreement

Does net salary agreement goes beyond employment income?

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Hi,

If an employer entered into a net salary agreement with an employee, does employer's tax liability goes beyond the employment income of the particular employee?

For an example, if the said employee has a rent income, but hasn't paid the tax on that, is the employer liable for the unpaid tax on rent as well?

Thanks in advance! 

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17th Dec 2018 18:11

Only an utter fool would enter into a net salary arrangement.

Either party could lose out on the tax. If the employee has a tax debt or, as you suggest, other income, the employer has to pay his tax. If, on the other hand, the employee is due a tax refund, the employer gets it.

There are also possible unexpected Minimum Wage issues. If an employee is paid £500 net and £400 of that is a tax rebate, the minimum wage is probably not met in that week.

Still, if that's what the parties want, they must accept the consequences of their stupidity.

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to lionofludesch
17th Dec 2018 18:14

Sounds crazy.

Who the hell put that into law as a good idea?

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to atleastisoundknowledgable...
17th Dec 2018 18:22

It's not a law as such.

It's a consequence of doing something arseaboutface because the employer's too lazy to calculate the tax, NI and pensions properly and just wants to stuff a wedge into his employee's hand every Friday.

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By tom123
to lionofludesch
18th Dec 2018 07:45

Sounds like the employer deserves what they get then!

Mind you, aren't such agreements fairly common with nannies etc - if I recall, the adverts seem to quote a 'net' pay rather than gross.

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By PBH64
to tom123
18th Dec 2018 08:22

It's a risk the employer and employee takes. If the employee gets anything that restricts his code the employer pays; anything that increases the code benefits the employer.

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to tom123
18th Dec 2018 09:49

tom123 wrote:

Mind you, aren't such agreements fairly common with nannies etc ...

Dunno, Tom. We don't have a nanny. We've a couple of cats but they just sleep all day - they don't need a lot of looking after.

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to lionofludesch
18th Dec 2018 22:01

Thanks Lion!! This answers my question.

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18th Dec 2018 08:54

IANAL but... at a guess the outcome of any individual agreement follows from - or is at least influenced by - what that individual agreement says.

Lion's answer for an "a net salary agreement", as you mentioned, is doubtless correct. Whether it's correct for another "a net salary agreement" - in particular the one you have in front of you - is hard to know.

But, as PBH64 says, if that other tax liability is reflected in the tax code (these things can be arranged), it's hard to see what the employer could do about it.

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18th Dec 2018 09:35

Let's put it this way. If I were an employee on a net pay agreement, I'd be trying to reduce my code as much as possible.

Then maybe I could claim a repayment after the year end and have it paid to me. It's called "playing the system".

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