PAYE20060 - employer records: set up employer record: profit related pay

Profit Related Pay (PRP) is that part of pay which varies in line with the movement in profits of a business, or part of a business, in which the employee works.

Registration

Employers who wish to have a PRP scheme registered must apply, before the scheme starts, to the Profit Related Pay Unit (PRPU).

Profit Related Pay Unit (PRPU)

The Profit Related Pay Unit administers all PRP schemes, and will notify you when a scheme has been registered or when it has ceased. You should refer any enquiries or requests for information about PRP to them at

Profit Related Pay Unit
HMRC
St Mungo’s Road
Cumbernauld
Glasgow G67 1YZ

Telephone 01236 736121

Eligibility

Most employers are eligible to set up a PRP scheme providing they operate a PAYE scheme. The main exceptions to this are employers in or under the control of Central or Local Government. An employer can have a scheme registered for all or part of their business, for example, Production Plant or Paint Shop.

Duration

The employer can decide (subject to registration)

• When a scheme starts
• How long it will last

The minimum period for a PRP scheme is one year. A scheme can last for several years or indefinitely.

Tax Relief

Tax relief for employees who receive PRP was introduced in the 1987 Finance Act. To qualify for tax relief, payments of PRP must be made under a PRP scheme which complies with legislation, and which has been registered by HMRC.

The employer deals with PRP payments as a normal part of PAYE operation. They will give tax relief under a net pay arrangement similar to that used for giving tax relief for superannuation contributions or payroll giving donations for charities.

The relief given is being phased out, and for profit periods that begin on or after 1 January 2000 no tax relief will be available.

Notification

PRPU will notify you when a PRP scheme has been registered.

Where the scheme covers more than one PAYE employer belonging to the same group, the parent company of that group is the scheme employer for PRP purposes.

Notification is sent to the parent company’s PAYE office showing the name and employer reference of each company covered by the PRP scheme.

A separate notification is sent to the PAYE office for each subsidiary company in the scheme.

Use Function EMPLOYER NOTES to record receipt of the notification or cancellation and place a copy in the employer record pad.