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HMRC internal manual

Statutory Payments Manual

From
HM Revenue & Customs
Updated
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Penalties - employer fraudulently or negligently obtains incorrect statutory payment funding

SMP and SSP

Where an employer fraudulently or negligently receives an incorrect payment in pursuance of regulations under Section 167 of the Social Security Contributions and Benefits Act 1992 or under Section 163 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992 they are liable to a penalty.

The legislation that allows HMRC to penalise an employer who fraudulently or negligently obtains incorrect SMP funding is:

  • Section 9 of the National Insurance and Statutory Payments Act 2004 (NICs & SPA 2004)
  • Section 10 of the National Insurance and Statutory Payments Act 2004 (NICs & SPA 2004)

ASPP, SPP, SAP and ShPP

Where an employer fraudulently or negligently receives an incorrect payment in pursuance of regulations under Section 7 of EA2002 or Article 8 of E(NI)O2002 they are liable to a penalty.

The legislation that allows HMRC to penalise an employer who fraudulently or negligently obtains incorrect ASPP, SPP, SAP or ShPP funding is:

  • Section 12(5)(b) of the Employment Act 2002(EA2002) 
  • Articles 13(5)(b) of the Employment (Northern Ireland) Order 2002 (E(NI)O2002).

The offence is committed when the incorrect payment is received.

SPM180800 explains the procedures an employer has to follow where they want to receive a payment in advance of paying the SMP, ASPP, SPP, SAP or ShPP. Employers are not entitled to receive advance funding for SSP.

If during the course of their investigation the Statutory Payments Disputes (SPD) Team identify incorrect payments of advance funding where an employer has asked for more money than they need, they should ask the employer why they have received incorrect payments of funding and remember a penalty can only apply where at least neglect has been established.

If they are unable to complete their investigations they must refer the case to the Employer Compliance Team which covers the employer’s business address.

Although the SPD Teams will deal with this type of case it is more likely the Employer Compliance Caseworker will identify these types of cases and the action taken by Employer Compliance (EC) staff should follow the same procedures as above.

Note, there may be instances where an employer has correctly claimed funding but did not use all the funding received.

Examples:

  • The employer claims funding expecting that the employee’s entitlement will continue throughout the whole of SAP pay period but the employee returns to work before their SAP entitlement ends, therefore entitlement to SAP ceases.
  • The employer claims funding and at the time only had two employees but then took on more staff, which increased the pool of tax and NICs remittances available. 

If EC staff are unable to negotiate a Class 6 settlement for the recovery of the excess funding and any penalty, then they will need to make a formal decision of the amount of excess funding, as well as a formal determination of the penalty. Formal decisions about the amount of excess funding are made under:

  • Section 8(1)(ga) of the Social Security Contributions (Transfer of Functions, Etc.) Act 1999, inserted by Section 9(2)(c) of EA 2002
  • Article 7(1)(ga) of the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671), inserted by Article 10(2)(c) of E(NI)O2002.

The procedures are exactly the same as for other Section 8 and Article 7 decisions. See Decisions and appeals for National Insurance Contributions and Statutory Payments (DANSP). 

The penalty for receiving an incorrect payment of:

  • SMP, ASPP, SAP or ShPP is a sum not exceeding £3000.
  • SPP is a sum not exceeding £300.

The penalty is based on the total amount of incorrect funding received and how often the offence has been committed.

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If an employer fraudulently or negligently obtains incorrect statutory payment funding, a Penalty Warning Letter should be issued before issuing a Penalty Determination.