SE42420 - Emoluments from offices and employments: basis of assessment - more than usual number of pay days in the year

Where employees are paid weekly, fortnightly or four weekly there will be some tax years when there are 53 weekly pay days, 27 fortnightly pay days or 14 four weekly pay days. Because certainty of take home pay is so important to taxpayers with regard to personal financial planning the PAYE system allows extra personal allowances on the additional pay day. This has the effect of ensuring consistency of take home pay. Extra personal allowances are also given in other cases where the number of pay days exceeds the norm.

The extra allowances given under PAYE do not apply for assessment purposes. Assessments must only be made on a statutory basis. An assessment therefore claws back the extra allowances and creates an underpayment of tax.

Where a taxpayer

• requests an assessment for 1995/96 or earlier

or

• requests an SA return for 1996/97 or later where the taxpayer is not normally within SA

and there will be an underpayment caused solely by the operation of week 53 PAYE procedures, send a letter to the taxpayer along the following lines, adjusted accordingly for fortnightly or four weekly paid taxpayers.

“In connection with of your claim for an allowance in respect of …………. I have to point out that PAYE codings and tax tables round figures in taxpayers’ favour and this can create a small underpayment at the year end.
I also need to point out that during the tax year .../… you had 53 pay days (as opposed to 52 pay days in most tax years). This is quite normal and happens from time to time depending on how an employer’s pay arrangements fit in to the yearly tax cycle. The PAYE tax tables allow an employee 1/52 of the year’s tax allowances each week. Where there are 53 pay days an extra 1/52 is allowed to ensure consistency of take home pay.
Where an assessment/self assessment is made for a year in which there were 53 pay days the total income for the year has to be included but only the statutory allowances can be given (in PAYE terms 52 weeks allowances and not 53 weeks allowances). If I make an assessment/you complete a self assessment return you will only be entitled to the statutory allowances as opposed to the extra 1/52 of the allowance that the PAYE system gave you. This would result in a tax underpayment.
In the circumstances I do not propose to make the assessment/issue the return unless you contact me further, and the tax underpayment will not be pursued. If an assessment is made then the tax underpaid would have to be collected.”

Refer any difficulties with the operation of week 53 procedures or objections from taxpayers who have self assessed and lost the extra allowances to

Business Services
Employer Unit (TAG C6740/1)
Crown House
Shipley.