Supporting Guidance: employer compliance: guidance by subject: free of tax payments: FOT payments - action to take where part of pay is 'gross' and part is 'net'
Where payments to employees consist of part ‘gross’ pay and part ‘net’ (free of tax) pay
- form P11(FOT) cannot be used.
The employer should calculate the tax and NIC in accordance with the example listed in Chapter 2 of the CWG2 (Employers Further Guide to PAYE and NIC).
Where irregularity is discovered in such cases, the caseworker should
- explain to the employer how to make any necessary open year adjustments, and
- seek recovery for closed years, if appropriate
Note: Calculation of tax and NIC will depend on whether it was originally agreed by the employer to calculate “Free of tax” or not.