PAYE74011 - PAYE operation: lump sum termination payments: giving relief before termination payment made (Action Guide)
Where you have been able to calculate the provisional relief before the lump sum termination payment is to be made, follow steps 1 - 5 below.
- Allow, as a reduced PAYE deduction, the amount of provisional relief you would repay
- Send the employee a copy of the computation of provisional relief. Advise him or her that the employer will allow the relief against the tax due on the termination payment
- Tell the employer in writing
- The amount of provisional relief in terms of tax
- To reduce the tax due on the termination payment (as shown by the Tax Tables) by the amount of provisional relief
- To make the following entries on the Deductions Working Sheet
- In column 6, ‘PR’ followed by the amount of provisional relief and, below this, the total tax due to date less the provisional relief
- In column 7, the net tax deducted from the final payment
- To enter in ‘X’ in the Week 1 / Month 1 box on form P45 issued to the employee. (This is because the pay and tax figures will not be in accordance with the Tax Tables). Any new employer will need to operate PAYE on the Week 1 / Month 1 basis
- Use PAYE Service, coding details to put the tax code on a Week 1 / Month 1 basis
- Use PAYE Service Contact History to note ‘TERMINAL PAYT’
