I have a client (Ltd co contractor) who decided to close her company prior to going on maternity leave. Employment was terminated, PAYE scheme closed, VAT deregistered, HMRC informed of cessation of trading, and liquidation planned but not yet started. Client then applied for maternity allowance. HMRC sent a long rambling questionnaire to complete to both employee and company, and despite both clearly stating that the employee had voluntarily left employment prior to maternity leave, HMRC insist that the company is still liable to pay SMP as it is not yet insolvent. It seems a bit pointless for HMRC to argue this, given the company would reclaim the SMP anyway, it's surely just going to mean a huge delay and a whole load of admin since the PAYE scheme has closed? Have I missed something here?
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Yes its correct
if the client has ceased employment by way of redundancy, then its the company's role to pay her SMP
as you say the company will be able to claim advanced funding for the SMP and it wont actually cost them anything
the company could payout the entire SMP in one payslip and reduce admin that way, but it would put the employee at a disadvantage from an NI perspective
EIM 76360 states that "An employer is still required to pay SMP even if the employment ceases." It doesn't mention anything about reasons for the employment ceasing.
Not sure when exactly the SMP liability crystallises but since the amount is based on the average earnings in the 8 weeks to that date, it's plausible.
You may need to get PAYE scheme unceased and possibly even rehire yourself. I've no experience on HMRC attitude to this.