Repaying back a bonus

Blackwood861

I need some assistance if anyone can help...

In December my company paid me a 5k retention bonus, repayable if I leave within a year. Subsequently I am now leaving and they wish for me to repay the gross value whereas I think, as it is within the same tax year, I can repay the net. The contract states only the full amount, not gross or net.

I have had conflicting advice. A member of the board of directors at the CIPP thinks I should be able to repay the net amount whereas HMRC think I should repay the gross. My main concern with this is that if I repay the gross amount, I would want this reduction reflected in my P60 so that the HMRC can issue a quick rebate (in accordance to what the lady told me) whereas my company want to issue me a letter for me the claim to tax back via self-assessment, which will take forever.

Any advice/guidance will be gratefully received.

TELLIT01

In theory the advice from HMRC should be the definitive answer. I do say 'in theory'.

I assume repaying the gross is because tax and NI contributions will be recalculated at the end of the tax year and any over payment returned.

Blackwood861

Repaying the net (and having previous payslips recalculated) would result in the correct tax and ni from my side and the company would itself pay a reduced amount in my next pay. I don't mind repaying the gross amount if my gross pay on my P60 will be reduced by the same value and then HMRC can issue a refund directly without the need for self-assessment

maisie_cat

The gross amount will be deducted from you last pay, and the resulting taxable pay will result in a tax charge or repayment depending on where the pay falls. If the resulting net pay is negative, that is the amount you will pay which is the equivalent of the net amount of the months pay less the net amount of the bonus. I suspect that HMRC and your payroll department are talking at cross purposes as you are paying back the gross amount but it will cost you the net amount in cash

TadleyBaggie

Strange that the bonus was paid up front, when I got one it was paid at the end of the retention period.

However there was still a !!!!-up, the bonus should have been $20K but the company paid me £20K. I had pay back the difference and this was taken from the gross salary so that the final tax paid was correct.

Blackwood861

I have spoken again to our finance department about paying the gross amount back in cash and having this reflected in the payroll. Their response was " We cannot process the gross repayment through payroll as that would automatically trigger an Tax and an NIC refund which would not be appropriate as this is not an error. Therefore a repayment of a gross amount would not be reflected on the P60 or P45 as we would not process it via payroll.

Once repaid, we will provide you with a supporting letter to evidence the gross repayment so you will be able to make the self-assessment application without too much effort.
"

gettingtheresometime

Blackwood861 wrote: »

I have spoken again to our finance department about paying the gross amount back in cash and having this reflected in the payroll. Their response was " We cannot process the gross repayment through payroll as that would automatically trigger an Tax and an NIC refund which would not be appropriate as this is not an error. Therefore a repayment of a gross amount would not be reflected on the P60 or P45 as we would not process it via payroll.

Once repaid, we will provide you with a supporting letter to evidence the gross repayment so you will be able to make the self-assessment application without too much effort.
"

That sounds like finance speak we can't be asked to do it because it would mean extra work for us.


If they are saying you are entitled to a refund of tax (I don't think NI can be reclaimed) but you can do it via self assessment then I don't see why the tax refund can't be processed via paye

Blackwood861

Yeah I don't particularly want to repay the gross amount and have my P60 showing that I was paid the money when I have paid it back. I don't think that is best practice