SMP vs Maternity allowance

SMP vs Maternity allowance

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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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By Crouchy
03rd Jun 2019 11:16

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

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Replying to Crouchy:
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By whatdoyoumeanwashe
03rd Jun 2019 11:29

Thanks, but they haven't been made redundant - they've resigned. I appreciate being a one-woman band it's hard to say whether it was the employer or the employee's decision to end the employment, being the same person, but does it have to be considered redundancy?

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By paul.benny
03rd Jun 2019 12:06

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.

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Replying to paul.benny:
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By whatdoyoumeanwashe
03rd Jun 2019 13:25

Thanks Paul. Sounds like I may have messed this up. But... It doesn't mention when the employment ceases. In this case it ceased before maternity leave started. Are we to assume that the liability crystallises on the employer in the 15th week before the due date? So any cessation of employment after that still creates the SMP liability for the employer?

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Replying to whatdoyoumeanwashe:
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By paul.benny
03rd Jun 2019 14:43

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.

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