I am looking to record the payroll via a journal entry but cannot see an account in the chart of accounts for SMP compensation. If I were to set up a new account what type of account would it be?
For SMP that’s being reclaimed from HMRC, you can use
7011 SMP Reclaimed .
Hope this helps.
I do understand how this could work for the money that has been paid under the SMP but in the instance of compensation this is money that is not being re claimed but given and could be considered as a source of income, or am I looking too deeply?
It may be best to run this passed your accountant just to be sure it’s recorded correctly.
But if you are able to give a few more details (e.g. what’s the situation - why is it being given rather than re-claimed), someone else on these forums, who is an accountant, may be able to advise further.
I think you’re over complicating things.
SMP compensation for NIC as far as I know, stays on account with HMRC until you use it to offset NIC payments during the payroll.
If you use it to reduce the NIC paid to HMRC, then the journal entry for payroll, plus the actual payment to staff and HMRC will match, theres no need to record the SMP compensation separately in quickfile.
The SMP compensation is being given or credited by HMRC because of the amount of SMP that I am paying to the employee. The amount that I receive in compensation has not been paid out to an employee. I believe this amount is paid to the employer to cover administration costs of running the SMP.
The actual SMP paid to the employee is reclaimed.
Every month I pay out more in SMP than is collected in Tax & NIC so I am continually running and building up credits with the HMRC account and have not made a physical payment to the HMRC for over two years.
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