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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Social security benefits: statutory adoption pay: summary

Part 10 Chapter 3 ITEPA 2003

Statutory adoption pay (SAP) is intended to help employees take time off work to be with their new family by providing a measure of earnings replacement. The first employees to qualify will be those where the child is placed with the adopter on or after 6 April 2003. Employers are responsible for administering the scheme and paying their employees the amounts to which they are entitled. HMRC is responsible for ensuring that employers correctly administer the scheme and for providing employers with the funding to which they are entitled.

The definition of an employee for SAP is exactly the same as the definition for SMP. To qualify for SAP an employee must:

  • be a person with whom a child is, or is expected to be, placed for adoption under UK law
  • stop working for, or take leave from, the employer
  • have been continuously employed for at least 26 weeks continuing into the week in which they are told by the adoption agency that they have been matched with a child, the “matching week”,
  • have average weekly earnings of not less than the lower earnings limit for National Insurance purposes that applies at the end of the matching week
  • give the employer notice of the date from which they expect the liability to pay them SAP is expected to begin at least 28 days beforehand or as soon as is reasonably practical.

Employees can choose when they want to start being paid SAP within certain limits. If the employee is also entitled to adoption leave the two periods are aligned.

An employee is only entitled to one lot of SAP and adoption leave even if more than one child is placed as part of the same arrangement.

Any enquiries about entitlement to SAP should be dealt with initially at the local HMRC office or by the Employers’ Helpline. If an employee is disputing his or her employer’s decision about entitlement to SAP or the amount being paid, he or she should be referred to the Statutory Payments Dispute Team in Nottingham.

SAP is taxable

SAP is not a social security benefit but replacement earnings, chargeable to tax as employment income. An employer is still required to pay SAP even if the employment ceases. In exceptional circumstances, HMRC pays SAP direct to the claimant, but without operating PAYE (EP1015 tells you how to deal with these cases).

National Insurance contributions are payable on SAP.

How employers recover the cost of SAP

The SAP legislation allows the employer to recover the cost of paying SAP by deducting 90% of the amount from the National Insurance contributions and income tax payments due under the PAYE system. Small employers may deduct 100% of the SMP paid plus a set percentage as compensation (Small Employers Relief). If necessary they can also apply for advance funding.

Use of the abbreviation SAP

The abbreviation SAP is used in DTI literature and certain HMRC guides and forms. You can use this abbreviation when dealing with employers, collectors and other tax offices.