Avoiding Christmas payroll issues

Avoiding Christmas payroll issues is key to enjoying a relaxed, restorative festive break.

You and your employees have worked hard all year. Now, it’s time to sit back and enjoy the fruits of your labour.

But, before you set that ‘out of office’ notification, make sure you’ve thought about the payroll-related points listed in this article. Let’s take a closer look.

Key things to consider for avoiding Christmas payroll issues

These are the most important points your business should consider for avoiding Christmas payroll issues:

1) FPS and EPS

Accurately logging Full Payment Submission (FPS) and Employer Payroll Summary (EPS) over the Christmas period can be a real headache.

Your FPS pay date should still appear as per contracted terms – even if you’ve changed your payment date for December. This is the same date as you use for the remainder of the year.

Similarly, you should stick to your usual timetable when it comes to submitting your EPS. The tax month officially commences on the sixth of each month. By the 19th of the following tax month, you should have submitted your EPS in order to log any deductions with HMRC.

These are both important considerations. If HMRC spots a late or inaccurate return submission, you’ll be subject to hefty penalties. These can also accrue additional interest over time, if left unpaid.

2) Bonuses and gifts

Before you decide on Christmas bonuses or gifts for staff, think carefully about the potential tax implications.

Bonuses:

Regardless of when you issue a cash bonus, you should count this as an ‘earning’ in exactly the same way as an employee’s regular pay.

As such, you’ll be required to administer the bonus through your payroll system as with any other staff payment. This involves applying Class 1 NI deductions and PAYE tax as applicable.

Gifts:

Reporting Christmas-related staff gifts – goods and other non-cash related perks – works a little differently.

Providing the gift meets the relevant criteria to be considered ‘trivial’, you don’t need to inform HMRC or pay tax on this benefit.

If it doesn’t meet these criteria (for example, if it cost you more than £50), you’ll need to report whether the gift could be sold on in return for cash. You’ll also need to state whether it’s being given to employees earning over the £8,500 annual threshold.

Goods given to employees paid less than £8,500 pa that can’t be exchanged for cash don’t need to be reported to the taxman.

3) Staff communication

Lastly, however you decide to administer your Christmas payroll, make sure you take a proactive and transparent approach to keeping staff in the loop.

Avoiding Christmas payroll issues means you can rest easy this festive season. Use these handy tips and your small business should be covered.

Get the financial expertise your business needs to safely navigate the Christmas break by calling on the friendly 3 Wise Bears team.