Payroll - Termination or Sporting Testimonial Payments
Termination payments are received in connection with the termination of a person's employment. Income tax and Class 1A NIC is due on amounts over a threshold (as at April 2021 £30,000). The Class 1A NIC is payable by the employer.
Sporting Testimonials are used to describe no-customary and non-contractual sporting testimonials. If an individual is contractually entitled to a sporting testimonial this would b3 treated as regular income and reported and taxed as such. Income tax and Class 1A NIC is due on amounts over a threshold (as at April 2021 £100,000). The Class 1A NIC is payable by the employer.
Dealing with either type of payment in the payroll
Unlike Class 1A NIC's reported and collected on expenses and benefits as part of the annual P11D(b) process. The Class 1A NIC's on termination and testimonials are calculated, reported and paid as part of the existing PAYE cycle along with any income tax due.
- Set up appropriate payroll elements
If the payment exceeds the threshold two elements will be necessary, one for the non taxed element, one for the taxed/Class 1A NIC element. The taxed element will be for those amounts over and above the tax free threshold. Navigate to
PAYROLL - CONFIGURE PAYROLL - PAYROLL ELEMENTS - ADD ITEM
ADD NEW Pay Element Field Non Taxed Element Taxed Element Type Pay Pay Payment Pattern Ad Hoc Amount Ad Hoc Amount In PAYE Gross - tick In NIC Gross - - In Pension Gross confirm with advisor confirm with advisor In NIC 1A Gross - tick Account Select as appropriate Select as appropriate
Click SAVE ITEM and when ready SUBMIT to store the element
Run the payroll
Enter Pay amounts as usual on the Employee Record and run and complete the payroll as normal.