All Posts By

Bob L

Coronavirus March 2020

Coronvirus (CoViD-19) Statement

Payroll Options has a coronavirus policy in the workplace focused on hygiene and disease prevention.  In the event of forced isolation of staff and only a limited workforce available then work could continue from a single office.  Communications would be sent to clients depending on how severe the staff shortage.

Payroll Options will follow guidance from the NHS and PHE as it becomes available and applicable, and we have not assessed the nature of our work, or location of our offices, to currently be at high risk.

The most likely scenario for us in this outbreak would be an increase in processing time, but still operating from two offices.  It is possible we will ask for less information; could the payroll be processed with salaries only and no amendments for instance?  We would have less capacity to deal with late payroll submissions, so if a payroll request was sent to us late it is likely it would also be returned late.

Payroll Options has multiple back-ups and disaster recovery procedures in place to ensure BACS payments can go through on time.  These payments do rely on a payroll to be processed however, so if a payroll were processed late the BACS payments would also be late.  In the event of BACS failure it is likely no payment transfers would be available, so clients own banks would also effectively cease to function as well.  If Payroll Options had an issue with BACS affected clients would be notified.

It is possible for you to pay your staff an estimated amount, then we could report it at a later date.  It is likely HMRC will be understanding where there are genuine reasons for a late submission, and this is already built into RTI.  We will offer guidance on what information is required on a case by case basis.

We have asked clients to also have plans in place in the event their own staff, responsible for payroll information, are not available.  We need to have authorisation in advance if a different member of the team may be sending instruction or receiving reports.

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

5.3.2020

Employment Allowance April 2020

Employment Allowance April 2020

The Employment Allowance is £3000 that can be offset against an employer’s NICs (National Insurance Contributions).  There are changes arriving this April and there are a few more details now available.

Eligibility for Employment Allowance

Eligibility is now a little more involved to determine; there is a company size threshold then other questions that need to be answered each tax year.

  1. Some exclusions remain the same, such as single director companies and public bodies.
  2. The employer’s (secondary) Class 1 NICS liability in the previous tax year must be less than £100 000. If greater the employment allowance cannot be claimed.  This £100 000 threshold is also applied to groups and connected PAYE schemes, so the combined total needs to be measured.
  3. If you have workers within IR35 you cannot offset their NI liability against Employment Allowance, but equally you do not need to count their NI towards the £100 000 threshold.
  4. If there are connected PAYE schemes, but the combined total is less than £100 000, then the Employment Allowance can still only be used against a single PAYE reference. It is up to the connected PAYEs to nominate the particular scheme.
  5. De minimis State aid rules: these rules will apply if the organisation is engaged in economic activity, so providing goods or services to the market, and most companies will fall into this bracket. You cannot claim Employment Allowance if this would mean exceeding the De minimis State aid thresholds for a particular business sector.

Claim the Employment Allowance each Tax Year

The majority of small business should be able to continue to claim the allowance, but there is now more work to do at the beginning of the new tax year.

At the start of the tax year, as well as determining eligibility, if the business is claiming the employment allowance you will need to declare the business sector, choosing from one of the following options

  1. State Aid Rules do not apply
  2. Primary Production of Agriculture Products
  3. Fisheries and Aquaculture Sector
  4. Road Freight Transport Sector
  5. Other, Industrial

For further guidance see here

Within IR35 Contractors April 2020

What is ‘Within IR35 Contractors’ and the changes in April 2020?

The IR35 legislation is aimed at ensuring contractors pay the same tax and National Insurance as an employee in an equivalent position.  New rules come in from April 2020 that will affect private companies classed as medium sized or larger.  The new rules will not be applied retrospectively.

The IR35 legislation places responsibility on the employer, not the contractor, for the reporting, collection and payment of tax and National Insurance.  The employer is also responsible for determining if the contractor falls within the IR35 rules.

Who does it apply to?

Small employers are exempt.  Small employers should meet two of the following conditions:

  • Have less than 50 employees
  • A turnover of less than £10.2million
  • A balance sheet total of less than £5.1million

There are additional rules where companies fall under the group rules, and simplified rules for certain other companies with a turnover of greater than £10.2million.

For medium and large enterprises the new rules will be applied.  The employer not the contractor decides if the work falls within IR35 rules, and is then responsible for reporting and paying the tax and National Insurance.

What contractors fall within IR35?

Employers must take reasonable care when determining the status of a worker, and there is a tool available from HMRC to assist with the test – CEST (Check Employment Status for Tax).  Employers should record the results of the CEST assessment as HMRC have said they will not hold records.

The CEST assessment is based upon a true agreement between parties, so if a contract or agreement is considered as contrived and not reflecting the true nature of work HMRC will disregard the CEST result.

Once a worker has been determined to be within IR35 they need to be reported via RTI.  This will mean through a payroll, but there is an important distinction between a PAYE employee and a contractor within IR35.

What do we need to do about contractors who fall within IR35?

How employers deal with IR35 will depend on individual circumstances.  For many a separate payroll with separate PAYE references will be simplest, but if there are only one or two temporary workers, including them within the normal payroll may be more straightforward.  Intermediary companies will also have to deal with IR35.

The RTI requirement is a reporting issue, as it is deemed employment that is reported and used for the tax and NI calculation.  This is unlikely to be the same as the invoiced amount from the contractor.  HMRC has guidance on how to calculate deemed earnings, but these are also changing in April.  Again it is important to understand the distinction between a contractor within IR35 and an employee, although both could potentially be reported through the same payroll.

There are some other differences between the contractor within IR35 and an employee on Pay as You Earn.  There are no student loan payments, holiday pay, statutory payments or auto-enrolment duties for instance.  Employment Allowance cannot be offset against NI from deemed employment, although Apprenticeship Levy is counted.  For these reasons a separate payroll to the PAYE payroll may be much easier to administer.

Further details will follow, but at the moment there is still a lot of uncertainty within companies of how exactly they will remain compliant with the new regulations.  There is further guidance available from here.

Second Site now Fully Operational

Business continuity is critical, never more so than in payroll

Disasters happen, and when they do they’re unplanned, unexpected and unpredictable.  For any size business it’s important to have a fail over process for all your business activities and none more important to your staff than making sure the payroll goes on time.

A fire, cyber attack or simply a downed internet connection at the wrong time could prove disastrous for any business so we’ve built in a second layer of disaster recovery establishing a second office at Kiln Farm, Milton Keynes.

This office offers full back-up and redundancy of service so a disaster at either site can be immediately mitigated and business can continue as usual.

There are few payroll providers that offer this level of service should the worst happen but our commitment to providing the highest levels of service dictated that we needed to invest.  We ran our first disaster recovery exercise in September when the entire team operated out of a single office, proving that providing our clients with a “business as usual service” in the event of a disaster was realistic and practical.

One thing you can help us with

While the test went extremely well and I’m sure none of you noticed we logged something you could help us with – eMail subjects lines.  We struggled to find some eMails as there was no payroll reference in the subject line.  Please can you all include your payroll reference into the subject line of your eMail and ideally your company name as well.  This will make sure that, in the event of a disaster, there are no barriers to Payroll Options delivering the service you expect.

Pension Data Exchange

Coming soon

We are currently conducting a live trial of our new pension company data exchange API. We’ve been working hard to ensure that this service will integrate with our existing systems and so provide a seamless transition for those clients wishing to join the scheme.  All tests have gone well and we’ve move to a live trial so, depending on what issues we find, we expect to be offering this service shortly.

With the API we will be able to transfer data to the pension provider, this will include new joiners and contribution details, and we will also be able to receive notices of employee opts outs back from the pension company.  There will be the opportunity for us to provide pension letters for distribution to the appropriate employees, but this will follow at a later date.

We will be supporting the following providers: NEST, Now, Peoples (B&CE), Smart & Aviva.

If you’d like to know more then please eMail your usual contact or Traci Glasgow.

 

Student Loan Notices

Student Loan Notices

HMRC has started issuing Generic Notification Service (GNS) messages when an employee still has student loan deductions taken despite a stop notice.  The GNS messages are a reminder to stop deductions for the next available pay day, and are available via online PAYE accounts.

There are eight possible GNS messages, although these can be considered as prompt 1 and prompt2, then student loan or post-graduate loan and borrower or non-borrower.  There is no practical difference with the messages, they all are a reminder to stop the appropriate loan deductions.

These GNS messages follow on from the earlier announcement by HMRC that they will be sharing information with the Student Loans Company (SLC) on a weekly basis.  This should mean a faster response once a student loan is paid off, or when an employee incorrectly completes a new starter form for instance.

However, these GNS messages are reminders so no action is required if the appropriate student loan has already been stopped.  So you should not need to contact HMRC if you have received the reminder despite stopping the loan deduction.

Student Loan thresholds

The thresholds are changing for student loans from April 2020:

Plan 1 £19 390  (currently £18935)
Plan 2 £26 575  (currently £25725)

The student loan deductions are at 9% above these thresholds.

The post-graduate loan threshold will remain the same from April at £21 000, with deductions at 6% above this.

Although there is a general election looming, we imagine the rates will go through as planned.  We will be monitoring announcements from HMRC as they come through however.

For more information about student loan deductions see here.

Employment Allowance Changes for April 2020

Employment Allowance Changes for April 2020

The Employment Allowance is changing again.  The allowance was introduced in 2014 and offers a reduction to employer’s class 1 secondary National Insurance contributions.  The allowance was initially £2000, but was then increased to £3000 in 2016.  The proposed Employment Allowance changes for April 2020 will potentially affect most business in the UK.

Employment Allowance Eligibility

Employment Allowance is generally not too complex and is fairly simple to administer, but there can be difficulty sometimes with determining eligibility.

At the moment there are guidelines in place to determine whether a company is eligible or not, and these include the following:

  1. A company which provides a function wholly or largely of a public nature will not be eligible. Examples include for the NHS such GP surgeries, or refuse collection for local government. A company could be eligible if they work partially in the public sector but this is less than 50% of their business.
  2. Public authorities such as parish councils are not eligible.
  3. Educational Institutions are only eligible if they are private companies or charities.
  4. Domestic staff payrolls will not be eligible for the employment allowance. Examples include employers of domestic gardeners, cleaners and nannies.
  5. A limited company where the only employee is a director will not be eligible.
  6. Connected businesses and Charities. Only one member within the group can claim the allowance, the rules that determine the connected status are complex and care is needed.

For further guidance on determining eligibility for employment allowance please see here.

Employment Allowance Changes from April 2020

There are two changes announced for April 2020:

  1. The employment allowance will need to be claimed each tax year, it will no longer automatically roll over if claimed the previous tax year
  2. Larger companies and groups will no longer be eligible.

The simplest change is that the allowance will need to be claimed each tax year.  This is likely to be an additional Employer Payment Summary (EPS) for companies in the April of each tax year.  This will be a declaration that the company is eligible, but the administration should be straightforward.

The more complex proposal is that companies with a secondary class I employer’s National Insurance liability of greater than £100 000 will no longer be eligible.  This also includes connected businesses, so if the combined liability is greater than £100 000 the group will no longer be eligible, even for the single nominated group member.

The £100 000 employers National Insurance is taken from the preceding tax year, so for a company to claim employment allowance in April 2020, their liability will need to be below £100 000 for the 19/20 tax year.

What is required?

We suspect the most issues will be with groups, and especially where they are around the £100 000 employer’s National Insurance total liability.  There is nothing new in this, but there will be the added complication of combining the employer’s National Insurance once the members of the group have been agreed upon.

Small companies that forget to claim annually could also face fines and interest payments if they reduce their payments to HMRC assuming they still qualify for the allowance.  Book-keepers and small business owners responsible for their own payroll will need to be aware of the changes and make sure they know the steps required in April.

Some preparation is required, but hopefully this will be fairly straightforward for most businesses.

Off Payroll Working

Off Payroll Working

As a payroll bureau we generally deal with conventional PAYE employees, however the rules are due to be changing for off payroll working in April 2020 and we thought we should highlight a few items here.  These are changes that affect companies employing contractors.

Who do the new rules apply to?

The new rules will apply to medium and large companies, with smaller companies excluded.

To qualify as a small company the proposal is that two of the following requirements must be met:

  1. Annual turnover Not more than £10.2 million
  2. Balance Sheet Total Not more than £5.1 million
  3. Number of Employees Not more than 50

(see consultation document)

What are the changes?

The change is that the business or agency becomes responsible for the contractor paying the correct amount of tax and National Insurance.  The government says they have brought these measures in to try and increase fairness in the tax system, so that individuals will pay roughly the same tax doing roughly the same job.

The governments CEST tool (Check Employment Status for Tax) is to be enhanced, and further guidance is also going to be made available.  Businesses will need to look at this before April, as it is not straightforward, and if changes are required they will require some preparation.

The first step is to consider whether the new rules apply from April, so is the business a small company or not, and then whether there are any workers who are not employees.  The business then needs to determine if these workers should have the off-payroll rules applied to their roles or not.

The proposed change to off payroll working was announced in the 2018 Budget, and those companies aware of IR35 should already be preparing.  At the moment the legislation is still being drafted, but we imagine it is very unlikely it won’t go through.

For further information on the off payroll working changes please see here.

Student Loans 2019

Student Loans 2019

Student loans seem to cause some confusion, and this is not really surprising.  There are two types loan from this tax year, Student Loans and Postgraduate Loans.  The Student Loan is then further divided to plan 1 or plan 2 depending on when the student started their course.

Student Loan Reporting

If an employee has a Student Loan but is not sure which plan it is then, then the default is plan 1.  The Student Loan details are reported in the Full Payment Submission (FPS), which is part of the Real Time Information (RTI) submitted to HMRC with the payroll.

If the loan or plan type is incorrect HMRC will issue a notice to change, start or stop the loan.  This can then be applied through the payroll.  In the past HMRC faced criticism for being slow to share information with the Student Loans Company (SLC), and vice versa, so deductions could be taken for far longer than they should be.  From April HMRC have been sharing information with SLC on a weekly basis.

The aim is for the employee and SLC to have increased and more timely visibility of all repayments made.  Although it is still early days for this process hopefully this will be of benefit to all parties.  It should be noted the increased onus on employers to ensure the correct information is supplied via the FPS.

The thresholds for the tax year starting April 2019 are:

Student Loans

Plan 1

£18 935 annually, or £1577.91 per month

Plan 2

£25 725 annually, or £2143.75 per month

Both plan types are calculated at 9% above these thresholds.

Post Graduate Loans

£21 000 annually, or £1750 per month

Repayments are calculated at 6% above this threshold

 

Further information on Student Loans including guidance is available here.

 

National Minimum Wage (NMW) Rates 2019

National Minimum Wage 2019

The National Minimum Wage (NMW) rates increase in April, and this year they are increasing by around 4% on average.

National Minimum Wage Rates 2019

Criteria

Rate

Aged 25 and Over (National Living Wage) £8.21
Aged 21 – 24 £7.70
Aged 18 – 20 £6.15
Under 18 £4.35
Apprentice Rate £3.90

 

These rates are proposed each year by the Low Pay Commission.  The government would then accept the proposals and add them to the budget for the next tax year, where HMRC then has the responsibility for enforcing the law.

There is also the voluntary organisation the Living Wage Foundation, who propose wage rates based upon the cost of living which are generally higher than the HMRC minimums.  The Living Wage Foundation also applies a weighting for living in London where costs are higher.

The minimum wage applies to workers in the UK, and takes into account the basic pay or salary as well as other payments or deductions.  Salaried staff are also considered for the minimum wage, it is not just hourly paid workers.

Examples for salaried staff

32 year old salaried worker, working 37 hours per week:  £1316.34 per month

37 x 52 = 1924 hours per year

Minimum salary would equal = 1924 x £8.21 = £15 796.04 pa

22 year old salaried worker, working 40 hours per week:  £1334.67 per month

40 x 52 = 2080 hours per year

Minimum salary would equal = 2080 x £7.70 = £16 016.00 pa

(These are minimums and care would still be need to make sure the NMW requirements were met in any 12 week period – see below)

National Minimum Wage Calculations

National minimum wage pay is not necessarily the same as gross pay, taxable pay or NICable pay however, and can get complicated where pay structures are not straightforward.

If workers receive bonuses or commissions then a 12 week average could be used to check the worker is receiving at least the correct hourly rate.  For this you would divide the total pay received by the total hours worked, which would then give an average hourly rate.

Care needs to be taken with salary sacrifice deductions, as these will reduce the pay for NMW calculations.  Common salary sacrifice arrangements include pensions, childcare vouchers and cycle to work schemes.  But there are other arrangements too.

Deductions for things like uniform can also be used to reduce the pay for NMW calculations, so employers do need to check they comply as the fines can be high if they fail in their obligations.  If a deduction can be shown to benefit the employer then it may well reduce the NMW, and advice should be taken.

If an employee feels they have been paid below the NMW their first course of action is to discuss this with their employer and see if they can find a solution.  ACAS offer an early conciliation service if a dispute between an employee and employer is not quickly resolved, and there is also the HMRC enforcement process.

Summary

In a simple pay structure it is very straightforward to check that the hourly rate is greater than the NMW rates, but where there may be deductions or variable hours it can get more complicated.  April is a good opportunity for employers to check the pay rates they have in place and adjust as needed.