Marginal items of pay – late notification
Marginal items of pay are those expenses that payroll operators only find out about after the payroll run. Sometimes the information was available earlier but the required tax and NIC treatment was unclear. Most commonly this happens in connection with certain non-cash bonuses and the reimbursement of unusual expenses to employees and directors.
HMRC have published new guidance on their website explaining when a marginal item of pay can be included in an earnings period later than the one in which it was paid or treated as paid. In such cases the marginal item of pay must be included in gross pay for the purposes of calculating NICs without any undue delay.
HMRC also confirm that payments of earnings by way of securities, for example, shares and share options, are not marginal items of pay. The guidance also addresses the question of late payment penalties.
This guidance replaces that in paragraph 4 of Chapter 1 of the CWG2 about late notification of marginal items of pay. HMRC have confirmed that the CWG2 will be amended in time for the issue of the Employer’s Pack in or around February 2011.