It’s common for small businesses to have to make payments to cover statutory maternity and statutory paternity pay. This can put a strain on your cash flow and if you are struggling to make the payments you can request an advanced payment from HMRC. The advance payment can cover up to 103% of your employees statutory pay for maternity, paternity, adoption and shared parental payments.
In 2020 if your employee was entitled to 39 weeks at the SMP rate of £151.20 the advanced payment could be up to £6,074.
Businesses usually offset statutory payments against their PAYE liabilities, this excludes SSP (Statutory Sick Pay). You can apply for the advanced funding if the total of your PAYE deductions is less than the cost of the statutory payments.
How do I apply for an advance payment?
If you are eligible you can apply online by logging in to your government gateway account
Make sure that the details you enter on your application are correct because if they are inaccurate you can be fined up to £3,000 per employee for each tax year.
Paying back your advance payment
You must send an Employer Payment Summary (EPS) for each period which you reclaim statutory payments for, even if you are in receipt of the advance payment from HMRC.
If the payments you reclaim are more than your PAYE deductions for that month HMRC will automatically reduce the amount outstanding.
For example if you receive an advance payment of £3,000 and have £2,500 in PAYE deductions to pay after submitting your FPS (Full Payment Submission) your advance payment will be reduced by £500. If you still owe anything to HMRC at the end of the advance payment period you will need to pay the outstanding amount by that month’s usual pay date.