Recovering Statutory Payments from HMRC

Recovering Statutory Payments from HMRC

When you pay statutory amounts to employees — such as maternity, paternity or adoption pay — you can reclaim most or all of this money from HMRC. The amount you recover depends on the size of your business, and you normally claim back these payments through your regular payroll reporting.

What you can reclaim

As an employer, you can usually reclaim 92% of the following statutory payments made to employees:

• Statutory Maternity Pay (SMP)
• Statutory Paternity Pay (SPP)
• Statutory Adoption Pay (SAP)
• Statutory Parental Bereavement Pay
• Statutory Neonatal Care Pay
• Statutory Shared Parental Pay

The remaining 8% is your contribution as the employer.

Small Employers' Relief

If your business qualifies for Small Employers' Relief, you can reclaim 109% of statutory payments. This means HMRC reimburses you for the full amount paid to employees, plus an additional 9% to help cover the National Insurance contributions you pay on those statutory payments.

You qualify for Small Employers' Relief if you paid £45,000 or less in Class 1 National Insurance in the last complete tax year before the relevant qualifying week. When calculating this figure, ignore any reductions you received from Employment Allowance.

The "qualifying week" or "relevant week" varies depending on the type of statutory payment:

• For maternity pay: the 15th week before the week of the baby's due date
• For adoption pay (UK): the week your employee was matched with a child by the adoption agency
• For adoption pay (overseas): the date on the official notification
• For parental bereavement pay: the week before the death of the child or stillbirth (or the week before miscarriage if the employee is in Northern Ireland)
• For neonatal care pay: the week before the child started receiving neonatal care (unless your employee is entitled to SMP, SPP or SAP, in which case use the qualifying week for that payment instead)

How to reclaim statutory payments

You reclaim statutory payments through your regular payroll reporting to HMRC:

1. Use your payroll software to calculate how much you're entitled to reclaim

2. Include the amount in your Employer Payment Summary (EPS) to HMRC

3. HMRC will offset what you've claimed against what you owe in PAYE and National Insurance for that pay period

If the amount you're reclaiming is more than your current PAYE liabilities, you can write to the PAYE Employer Office to request a repayment. However, you cannot do this until the start of the next tax year.

Write to:

National Insurance Contributions and Employers Office

HM Revenue and Customs

BX9 1BX

Applying for advance payment

If you cannot afford to make statutory payments to employees upfront, you can apply for HMRC to pay you in advance.

You can apply online for advance payment of Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, and Statutory Shared Parental Pay. Apply up to 4 weeks before you need the first payment — HMRC may return your application if you apply earlier.

For Statutory Parental Bereavement Pay or Statutory Neonatal Care Pay, there's a different application process.

Be aware that you can be charged a penalty of up to £3,000 per employee for each tax year if you include incorrect information in your application.

Paying back advance payments

Even if you've received an advance payment from HMRC, you must still send an Employer Payment Summary (EPS) for each pay period when you reclaim statutory payments.

HMRC will automatically reduce what you owe on your advance payment when your statutory payment reclaims exceed your PAYE deductions for that month.

Example: If you have £2,500 in PAYE deductions to pay (shown on your Full Payment Submission) and you reclaim £3,000 in statutory payments (shown on your EPS), your advance payment will be reduced by £500 (the £3,000 reclaim minus the £2,500 PAYE deductions).

If you still owe HMRC anything at the end of the period the advance covers, pay them by that month's normal payment date.

Advance funding for previous tax years

If you need advance funding for a statutory payment relating to a previous tax year that you haven't yet paid, you must write to HMRC at:

HM Revenue and Customs

Corporate Treasury

BX9 1BG

Your letter must include your HMRC account information (Accounts Office reference and PAYE reference), employee details (name, National Insurance number, employment start date), claim dates, the total you're entitled to reclaim, the amount you need in advance, and your bank account details for payment.

If your business becomes insolvent

If your business becomes insolvent while employees are receiving statutory payments, HMRC will take over paying Statutory Maternity, Paternity, Adoption or Parental Bereavement Pay directly to employees.

HMRC will also pay maternity pay to pregnant employees who have passed the qualifying week but haven't yet started receiving SMP.

You (or the administrator or liquidator) must contact the National Insolvency Unit Helpline on 0300 0540 808 (Monday to Thursday, 8:30am to 5pm; Friday, 8:30am to 4pm) to inform them of the insolvency. Your employee must also contact the Statutory Payment Dispute Team.

Sources

• Get financial help with statutory pay
• Report PAYE information (Employer Payment Summary)
• Statutory pay: apply for advance payment
• Statutory Parental Bereavement Pay: get help with statutory pay
• Statutory Neonatal Care Pay: help with statutory pay

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.