If you have a client that reclaims either SMP or SSP where do you post it to?
The reclaim is deducted from the payment made to HMRC therefore when you post the PAYE/NIC eventually to wages the wages in the accounts will be less that the payroll year to date total by the SMP or SSP reclaimed.
Do you gross up for the SMP or SSP eg
Dr Wages Cr Sundry Income
Or do you just accept that the wages in the account will be less that the payroll by the SMP or SSP amount?
I have a client that has been reclaiming SMP as a deduction from their NIC monthly payment but each month I have been grossing up the wages in the accounts by the deduction so the wages in the accounts equals the payroll. Have posted the other side to miscellaneous income. Not sure if this is correct or not.
But what i am asking is say your payroll for month is
Gross wage is £1000 ER NIC £100
PAYE £200
EE NIC £200
Net Wage £600
SMP claimed £100
Then your payroll report will show £1100 being total ie gross pay + ER NIC
But when you post your payments to your accounts you will only post £1000 ie net pay £600 + £400 PAYE/NIC (£100 ER NIC + £200 PAYE + £200 EE NIC - £100 SMP claimed)
So how do you record the £100 SMP claimed?
Do you gross up your wages in the account
Dr Wages £100 Cr ????? £100
Or do you just leave your accounts at £1000 although your payroll total is £1100 in the knowledge that the £100 difference is due to SMP reclaimed.
Can you not just post your NI ERs as zero? (£100 NI ERs less £100 SMP reclaimed)
OR
DR Gross Wages (Sage Nominal 7000) 1000.00 DR ERs NI (Sage nominal 7006) 100.00 CR ERs NI (Sage nominal 7006) 100.00 (SMP reclaimed) CR Net Wages (Sage nominal 2220) 600.00 CR PAYE tax (Sage nominal 2210) 200.00 CR EEs NI (Sage nominal 2211) 200.00 CR ERs NI (Sage nominal 2211) 100.00 DR ERs NI (Sage nominal 2211) 100.00 (SMP reclaimed)
Had a coupla glasses of vino now so see what you think!!
Ok - so the gross wages from the payroll total includes the SMP paid - I have always posted SMP payments to a seperate nominal account from gross wages and therefore the reclaim would go to the same place effectively netting off the payment so only the net cost is in the P&L.
But if you are including the payment of SMP as though it were a wage (or salary) and recording it as gross wages then you would have to post the refund to that also. Or you could have an nominal account just for the reclaims I suppose. I think its best to keep seperate nominal accounts so you can keep track of it, after all in my opinion it is an overhead in it's own right just like SSP.
In short in need to go in the P & L so as to reduce the amount paid in wages.
Hopefully. I've got the point now, Hope this helps
-- Edited by annepebo on Sunday 27th of February 2011 04:22:38 PM
The P&L needs to show the actual cost of wages to the business in the P&L. If reclaiming SMP or SSP this is a contra to the Gross Wages (reimburses the business for paying it in the first place)
Gross Pay (including SMP) is £1000 plus ER's NI £100 less SMP refund £100 So Gross Pay in the accounts would be £1000
I don't use Sage, so I don't use all the separate accounts but this is how I would record the wages.
Dr Net Wages - £600 Cr Bank or Cash - £600 Dr PAYE - £400 (I am assuming that PAYE is tax only £200, plus ER £100, plus EE £200 less Compensation (SSP or SMP) £100) Cr Bank - £400
When you run your payroll reports, the total of Net Pay + PAYE (£1000) should then agree with your accounts figure.
If you just show the £1100 in the accounts you will be overstating the cost of wages to the business.
