First, navigate to the ‘Banking’ tab at the top of the screen and select ‘Bank Accounts’ from the drop-down menu.
Choose the relevant bank account from the list.
Select the transaction that relates to the statutory payment.
2. Choose ‘Refund’ as the transaction ‘Type’
Select ‘Refund’ from the ‘Type’ drop-down menu.
3. Choose ‘PAYE/NI’ as the transaction ‘Category’
Scroll down and select ‘PAYE/NI’ from the bottom of the ‘Category’ drop-down menu.
4. Explain the transaction
Select ‘Explain Transaction’ to complete the process.
This will post the funds to your Balance Sheet where it will show as a liability as there is no justification yet in your accounts for the payment. This liability will reduce each month when you run payroll as the advance payment is used up against the relevant statutory reclaim each month.
FreeAgent will automatically reclaim the statutory pay at 103%, and file both a Full Payment Submission (FPS) and Employer Payment Summary (EPS) to HMRC for you. You’ll see confirmation of this in the ‘Payroll Summary’ panel in FreeAgent. For more information on how FreeAgent handles statutory payments, please see this article.
The amount of statutory pay that you are reclaiming each month needs to be reported to HMRC so that they have a record and can see how you're using up the amount they've paid you in advance.
As you have already received the statutory payment from HMRC you would ignore this deduction when you come to pay HMRC, in order to ensure the correct amount of tax and National Insurance is paid. If you’re unsure of how much to pay each month, you can check this by logging into your HMRC business tax account or by contacting HMRC directly.
If you or your accountant posted journal entries when you received the statutory payment from HMRC to remove the balance from your PAYE/NI account, you'll need to post further journals to re-introduce the relevant statutory reclaim amount each month back into your PAYE/NI account. Please speak to your accountant if you’re unsure which journals to post.
FreeAgent is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 (register no. 799763) for the provision of account information services.
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