Repayment of employers overpayments via wages: HMRC reported gross salary, NI and tax

Samrazakir

For the current year, how does gross salary together with NI and tax is reported to HMRC when part of salary is used for repayment of salary overpayments by employer earlier.
For a gross salary of X, employee pays Y tax and Z NI, so with W being the repayment amount per month, employee will receive:
X-Y-Z-W
But what figure will be reported to HMRC in terms of gross, NI and tax? as now employee is getting W amount less?

sourcrates

Moved to more appropriate forum.

chrisbur

Strictly speaking this is the wrong way to do this but provided the amount is not very large and does not affect anything else it can be a simple way to correct things.  Was the over-payment in your gross pay for example you were paid one week £293 and should have been £239 or was the gross correct and some error resulted in the wrong net pay.  How is the over-payment being collected from your gross pay or from your net pay?

EDIT   Looking at previous posts this does not look like a case for a simple quick fix your employer needs to follow the correct procedures, details here....
https://www.gov.uk/payroll-errors/correcting-pay-or-deductions
Any problems and they should contact HMRC for assistance.

Once all the adjustment have been made there will be a net pay difference that you will owe your employer.  This will be the difference between what you received and what you should have received.

Samrazakir

The overpayment recovery amount is large (£1500) and it is based on net overpayment figure (what I was paid - what i should have been paid). The gross had been incorrect due to receiving full time salary though it should have been part time. I just asked the employer to collect it from my pay in this month salary. I am not sure hoe they will do it, deduct from gross or net? and how they will report it to HMRC, 1) report gross and normal NI and tax on HMRC and deduct overpayment amount from my salary internally without showing it up on HMRC (X-Y-Z), this means I will lose money, 2) decrease gross amount so that my net salary becomes actual salary - overpayment figure (X-Y-Z-W), which one of the two options is correct or other correct ways? and what should I ask the employer about it?

chrisbur

The correct way is as described in the link I gave.  This will give you a net figure to repay, your gross tax and NI will all be as they would be had this never happened.  

Samrazakir

Thanks Chrisbur, so can't it be done through payroll, meaning they just cut my salary by the same amount, rather than giving full salary and asking the net figure to repay. 

chrisbur

Samrazakir said:

Thanks Chrisbur, so can't it be done through payroll, meaning they just cut my salary by the same amount, rather than giving full salary and asking the net figure to repay. 

The only way to do this would be to take the gross over-payment and deduct this from the gross they are going to pay.  This may not even be possible as you may not have enough gross pay left to you.  It would also result in earnings showing in the wrong tax years and may result in the wrong tax and NI figures being deducted.  I would only suggest this for a small correction as a quick and easy cheat.  For the amount you are talking about the correct method should be used.  That does not mean "giving full salary and asking the net figure to repay." it means recalculating the wrong payments, advising these details to HMRC so that your recorded with them is now correct and comparing net pay that has been made with net pay that should have been made to get a net pay difference that you owe.  This net could then be deducted from future net pay you are to receive but would there be enough as you are shortly leaving.

Manxman_in_exile

Of course it can (and should) be corrected through payroll.  I'm not sure why you think it can't - unless I've missed something in your explanation?

So long as your employer knows what they are doing and they use a half-decent payroll system, you shouldn't have anything to worry about*.  In simple terms they simply reverse whatever the earlier error was and the payroll automatically makes correcting adjustments to your net pay, NI and tax.  You should end up no better or worse off and all you should notice is a reduction in net pay - because you only received a net overpayment from your employer, you only make a net repayment to them.  The only possible complication is if the overpayment and repayment are in different tax years and different tax rates apply.

You can always ask them for a breakdown of the overpayment and how they've recovered it so you can check it yourself.  As I say, you should neither gain nor lose.

*I worked in a NHS trust and scores if not hundreds of people were overpaid each year.  Recovering an overpayment via payroll is simplicity itself - assuming your employer has a proper payroll system.

EDIT:  Does your employer have a proper payroll?  Are you paid cash in an envelope, or by cheque, or by bank transfer, or some other method?  Do you receive a proper computer generated payslip?

Samrazakir

Thank you, the reason that I was thinking it might not be corrected through payroll was that I already paid part of net payment back separately (not through wages) and I will be paying the rest through deduction in the wages. 

chrisbur

Samrazakir said:

Thank you, the reason that I was thinking it might not be corrected through payroll was that I already paid part of net payment back separately (not through wages) and I will be paying the rest through deduction in the wages. 

No problem there.   The correction will be a net figure, you have paid part back so the rest can be deducted from your net wages.  End result your wages tax and NI are all recorded correctly and in the correct tax years and you pay back the net pay you should not have received.
Subject of course to your payroll dept. doing it correctly.  If you want that checking you will have to give full details.

Samrazakir

Thank you again, my employer is making adjustment to deduct the amount from my salary but said it will take long time to update it on HMRC, mentioned something 'supplemental payroll in background' needs to be manually run, not sure what it means