53 or 54 week pay periods in a year - PAYE position

[SlimeyGoose]

I got a balancing statement back from the revenue re year to Dec 04 showing an underpaynent of tax.

Payroll is run every 2 weeks and there were 27 payments (54 weeks) in 2004.

The underpayment re tax seems to arise due to the company payroll dept. taking the annual tax credit and dividing by 26 and allowing 27/36ths of this. They have done the same for the tax bands so that rather than have 28,000 at 20% the figure is 29,400.

Has anyone else had this problem? I have seen one post re someone on a 53 week year getting extra credits, but details are a bit unclear.

I haven't rung the revenue yet in case it is a mistake on the company's part and it gets more people into trouble!

Any advice would be appreciated.

 

[jcollins]

I got a balancing statement back from the revenue re year to Dec 04 showing an underpaynent of tax.

Payroll is run every 2 weeks and there were 27 payments (54 weeks) in 2004.

The underpayment re tax seems to arise due to the company payroll dept. taking the annual tax credit and dividing by 26 and allowing 27/36ths of this. They have done the same for the tax bands so that rather than have 28,000 at 20% the figure is 29,400.

Has anyone else had this problem? I have seen one post re someone on a 53 week year getting extra credits, but details are a bit unclear.

I haven't rung the revenue yet in case it is a mistake on the company's part and it gets more people into trouble!

Any advice would be appreciated.

This sounds to me to be the same thing as a "Week 53" for an employee who is paid on a weekly basis.

An employee who get's paid in week 53 is allowed one week's extra tax credit and cut off, and the tax is calculated on what is called a "Week 1 Basis" - but essentially the employee gets the benefit of an extra weeks' credits.

What Revenue usually do in this case is reduce their tax credits in the following tax year to claw back the extra credits gained in the week 53.

I would suggest you contact Revenue and ask if you could reduce your 2006 credits by the amount of tax that you owe - that way you will spread the cost through the rest of 2006.

A week 53 (or Period 27) is a normal enough sort of thing, it just depends on the number of pay days that happen to fall in that tax year.

One other small interesting fact, ROS P35 files accept up to 56 insurable weeks per employee - though I am not sure how you could end up with 56!

 

[SlimeyGoose]

This sounds to me to be the same thing as a "Week 53" for an employee who is paid on a weekly basis.

What Revenue usually do in this case is reduce their tax credits in the following tax year to claw back the extra credits gained in the week 53.

Thanks for the reply.

Not sure about the claw back though. If someone starts with 2 weeks to go in year 1, gets paid the first day of year 2 followed by 26 more payments etc then they really worked 2 wks year 1 and 52 weeks year 2. Presumably employee should get credit for working the extra weeks from a PRSI / stamps point of view? The P60 only shows 52 weeks.

The credits should not be a problem but grossing up the annual allowance for an additional 2 weeks by the company looks highly suspect.

Will try the revenue and see what they say. I suspect there will be a number of people affected by week 53 in 2004 , but unless they are filing returns it is unlikely to get picked up.

 

[z107]

Not sure about the claw back though. If someone starts with 2 weeks to go in year 1, gets paid the first day of year 2 followed by 26 more payments etc then they really worked 2 wks year 1 and 52 weeks year 2. Presumably employee should get credit for working the extra weeks from a PRSI / stamps point of view? The P60 only shows 52 weeks.

Week 53 scenarios happen every seven years for weekly paid employees, if they are always paid on the same day - Friday for example. This is because there are 365 days in a year (366 every leap year). 52*7 = 364, one day 'missing'. An extra week is added on every seven years to make up for this shortfall. A similar situation happens for fortnightly paid employees.

As regards the insurable weeks, I would have thought the P60 should show 53. This is after all how many weeks are worked. Over seven years, 365 weeks are worked.


www.payback.ie

 

[asdfg]

An extra week is added on every seven years to make up for this shortfall.

I think it can happen even sooner. In your example there could be one or two leap years so the 53 weeks rule would happen every five or six years depending on the number of leap years.