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Now forgive the ignorance please.  Despite being qualified and having a 22 year accountancy career, I've never had to deal with payroll, SMP, SSP and things like that.  Until now.  And I know very little about it, so I would appreciate your help on the following 2 matters.

1. One of my clients is a limited company, husband and wife team, each receiving a salary of only £6468 gross per annum (£539 per month) from which only a minor amount of NI is deducted.  The wife took some time off work after having a baby, taking the maximum time off work as is covered by SMP.  Her company continued paying her the monthly £539 less the NI deduction.  SMP was then recovered by the company.  For the purposes of the accounts (Financial Statements), am I right in assuming that this income should be treated as 'other' within the P&L, before being added back in the CT Computation?

2. Another client ran a limited company and, for many years, paid himself up to the NI threshold (£5715 in recent years), as was reflected in his company's P35 and his own P60.  He then fell ill for several months, during which he claimed SSP.  The SSP ended in December 2009, after having claimed it for the maximum period.  On completing the P35 and P60 for the year ended 5 April 2010, his only entry was his salary for £5715.  Now, in February 2011, his company has received a PAYE tax demand to repay all of the SSP.  He thought that he qualified for SSP (irrespective of the company actually paying any NI), so does not understand why his company's now being asked to repay it.  Is the demand payable, or did he make a mistake on the P35/P14 (missing out any reference to SSP) which could now be corrected?

Any comments would be much appreciated. 


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By geoffmw
14th Feb 2011 19:34

easy answers

 1. The SSP is a recovery of Salary and is CT taxable income in the company.

the company recovered SSP because the NI liability was a very low proportion of total salaries. If you lok up the HMRC website you will find a formula for recovery of SSP by small employers.


2. Your question is unclear. Were ther other employees?

On the face of it the SSP element may not have been shown on the P14's.

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15th Feb 2011 10:40

More answers

I don't really understand the previous answers.  My take is:

The question is about SMP, not SSP.  What the company has done (without perhaps realising it) is to pay the wife SMP (presumably at the rate of £111.95 a week, which is 90% of her average earnings, for 26 weeks, being less than the standard rate of £124.88 in 2010/11 or £123.06 in 2009/10) and then top up her earnings to £124.38 a week.  The SMP element is wiped out by the 100% recovery, leaving only the £12.43 a week as the wife's salary in the accounts.  The additional 4.5% recovery is intended to compensate for the cost of the employer's NI contribution and so, should be credited against that in the accounts.SSP is recoverable only to the extent that it exceeds 13% of the total NIC (ee's and er's combined) payable by the company for the month.  If the client was his company's only employee, he would be entitled to recover all his SSP as 13% of nil is nil, but if there are other employees paying NI contributions, the recovery would be less or even, nothing.  It appears that he may have deducted the full amount of his SSP from any PAYE payments made and/or failed to disclose the SSP recovery to which the company was entitled on its P35; the Revenue are demanding the underpayment of PAYE, rather than repayment of the SSP.

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