Great Britain Payroll Tax calculation and period parameters

[Former Member]

Hello experts,

I need valuable support from all,

I am initiating implemantation of SAP HR  with payroll for Great britain.

I also did all the related Configuarations related to Payroll and simulate it, its processed successfully,

I have 2 doubts described below:

1 ) Now i am Confused about the Taxation part, because it calculate the tax but didnt know how the system derives it.

when i debug the tax function, it goes to the standred formulas proessing and its too long to understand in debug that how it calculate the tax.

2) One more thing is the the question about the period paramters.

I had configured the weekly period parameters with the payroll area, but am in confustion what is the standred procedure, wether i should configure it as weekly or monthly?

please help..

Thanks in advance

Jagdish

[sikindar_a · Accepted solution]

Check Period Parameter time Units in T549R and T549P you will get an idea.

[Former Member · Accepted solution]

Yea,

Hi sikindar, we met after long time.. thanks

actually i had already configured Period parameters weekly, but is it correct as weekly or i need to change it as monthly?

because tax calucation formulae of GB is based on pertiod parameters invervations..

thanks

[harishtk1 · Accepted solution]

Jagdish,

You must be aware that Period parameters will be weekly or monthly depending on the requirements of your own organisation i.e how often payroll is run there. It surely will not depend on how tax is calculated or vice versa.

If your employees are weekly paid, then you need to configure period parameters for weekly payroll, and if your employees are paid once a month, then you have to do monthly period parameters.

For help in understanding how tax is calculated, you might visit the relevant pages in hmrc.gov.uk - the self assessment pages might give information on how tax is calculated. The standard function modules will calculate in the same way, it is a bit tedious to go through the entire function by debugging - all you need to know is how hmrc wants it calculated.

Hope this helps.

[jayantvenkata]

Hello Jagdish    

Please refer to the wiki page  for the tax calcuation logic http://wiki.sdn.sap.com/wiki/display/ERPHCM/Tax+Calculation+for+UK+Payroll

Thanks and Kind Regards

Ramana

[former_member219272]

Hi Harish & Ramana,

can you please help me with my query in the below link

Hi Ramana,

the link which you have given below gives me some idea but i have a question in it

Tax Calculation for UK Payroll - ERP Human Capital Management - SCN Wiki

Salary of the employee 3000 GBP
Fetching Tax Step Value:
From T511k table, the tax step value is fetched which is 500 GBP

Get tax Code Number:
Example: 100 is tax code number for Tax code 100L
Calculating Tax Free Pay:
Tax free pay = (tax code number)/12
= 83.33 ( i am not able to get this 83.33, 100/12 = 8.33 not 83.33)
Actual Taxable pay
= 3000 – 84.09 ( where did you get this 84.09 is it a typo? should it be 83.33?) if it is 84.09 then how did we get that amount?

= 2916.67 (if we take 84.09 then we will get 2916.67 insted we will get 2915.91)

(3000- 83.33 = 2916.97)

Fetching tax bands:
from table T5G01, tax rate fetched based on paydate, in our example,

Tax calculated
= Actual Taxable Pay * percentage threshold
= 2915 * 20% (i am not sure where did we get the 2915 is it a typo again, if feel it is 2916.97)
= 583 (is it 583.334)

Regards

Rahul

[jayantvenkata]

Hi Rahul

The tax free pay will be 1000/12, i.e. 83.33.

Here we deduct this amount for the salary paid to get the taxable pay.

3000-83.33 = 2916.77

Therefore applying the tax percentage on the above taxable pay , the tax paid value should be 583.34.

the wiki document was more illustrative of how the calculation should happen.

hope this helps.

Thanks and Kind Regards

Ramana

[former_member219272]

Hi Ramana,

Thanks for the info,

i have a query in GB tax calculation

EE was has been hired after the last month payroll run (e.g feb 10) & he has been processed for march payroll run.

so he will be getting march salary & april salary

the NI calculation is fine

but this tax has got deducted more not sure whether it is calculating 40% on it or not he has not produced his P45 yet, his tax code is 1000L m1 - which i am not able to understand what has happened

the above calculation is nto working as expected

please check my post

Regards

Rahul

[jayantvenkata]

Hello

Check what is his taxable pay /121 that is getting formed in GTAX function, and the tax code /basis as maintained for this employee.

is the scenario that of a late starter? and if yes , is it across tax year?

can you explain the scenario in a bit detail

Thanks and Kind Regards

Ramana

[former_member219272]

Hi Ramana,

we completed the last month payroll on 10th itself, the EE was hired on the 12th with the starting date as 09 feb.

he did not get paid anything for feb because he was not in the payroll run at all

now this month we ran payroll for him & the tax for him seems to be more

he is a late starter, but we did not ran him in GRET, we ran him in normal schema

Regards

Rahul

[jayantvenkata]

Hello Rahul

Can you send me the screenshots of GTAX (complete as in Input ,processing and Output) as found in the payroll log of the employee along with the infotype 0065 screenshot , for the period where the tax calculations are being checked.

Also do send me the RT which contains /121 as well as /501 , calculated for the employee.

Finally is the calculations done for single employee or ME contract ?

Thanks and Kind Regards

Ramana

[former_member219272]

Hi Ramana,

we do not have ME,

please find the information below

IT0065

retro Gtax

current GTAX

RT Table

please let me know if you have any questions

Regards

Rahul

[former_member219272]

Hi Ramana,

Any luck?

Regards

Rahul

[former_member219272]

Hi Ramana,

i have found the solution

there is no issues at all, the system is calculating the tax correctly, i have verified it with HMRC tax calculator

http://payecalculator.hmrc.gov.uk/PAYE0.aspx

please check my post i will update there

Thanks for your support

Regards

Rahul

[Former Member]

any input please?