Q. All my employees are entitled to a bonus for exceeding performance targets in 2013, including those who left before the end of the year. How should I report the bonus due to the former employees to HMRC, and do I have to deduct tax?

A. Under RTI you need to set the 'payment after leaving' indicator on the full payment submission (FPS) that includes the bonus payment to your former employee. Also on that FPS use the same payroll ID for that person as applied while they were an employee, and show the date the employee actually left. The year to date figures on the FPS should include the bonus payment as well as the previous pay and deductions for the former employee. When paying the bonus to a former employee you need to use the PAYE code 'OT' on a month 1 basis to deduct tax and NICs.