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Bob L

Final Post for 2014

This is the final news posting for 2014 and we should probably be reflecting on the changes that have occurred this year. But I think there is plenty to look forward to next year. We have the NIC savings for under 21s, Shared Parental Leave, the £2000 employment allowance available for carers as well, and do we really need to mention auto-enrolment again? And the general election giving the opportunity for radical reform for the next Autumn statement.

 

So, Merry Christmas and best wishes for a healthy and happy New Year!

 

And did anybody else notice the article from HMRC regarding VAT on Snowballs?
Revenue and Customs Brief 36 (2014): VAT – liability of snowballs

End of the P11D

Although it seems very unlikely the P11D will be scrapped any time soon –

 

“From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kindand replace it with new exemptions for carers and for ministers of religion. It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling“
extract from the Tax simplification section of the Autumn Statement

 

This means that some benefits are likely to be able to be spread through the year via PAYE rather than reported on a P11D. The full details are not available yet, but this should be good news for employers.

 

The aim is to offer a reduction in administrative time to employers, and therefore a cost saving, whilst at the same time making it more straightforward and accurate for employees. Employees will be able to spread the correct amount of income tax on their benefits throughout the year.

 

There is a fair amount of discussion on the payroll forums but we do not have full details yet, and we are just waiting to see the complexity that will be passed across to payroll. There have already been questions raised regarding how class 1A and 1B NICs will be recorded. Watch this space!

The Autumn Statement

There were relatively few announcements that appear to directly relate to payroll, but I have highlighted a few below

 

• Scotland will gain powers to set thresholds and rates of income tax, so some of the below may not apply if you live in Scotland.
• The personal allowance is to rise to £10600
• The higher rate threshold will also be raised to £42385
• The basic, higher and additional rates of income tax will remain the same
• National Insurance upper earnings and profits limits will also change
• Employers of care and support workers will also be able to benefit from the £2000 employment allowance from April 2015
• No employers National Insurance Contributions up to the upper earnings limit for apprentices below the age of 25. (although this was announced this will come into effect from April 2016)
• An exemption for trivial benefits in kind below £50

 

I hope this will be helpful. You may also like to read the full statement that can be found here.

Living Wage

The living wage is not a statutory wage but recommended by the Living Wage Foundation. It is possible as an employer to get accreditation from the Living Wage Foundation and they list various benefits from doing so.

 

The current National Living Wage is £7.85 per hour, and for London it is £9.15 per hour. It is calculated by the Centre for Research in Social Policy at Loughborough University. The statutory minimum wage for an employee aged 21 or over is currently £6.50 per hour.

 

The latest rates were calculated on the 3rd November and on the 26th November there were 1036 Living Wage Employers listed.

 

And……..

 

Auto-Enrolment Reminder – If your company staged in July you should have submitted your declaration of compliance by the end of November.

Shared Parental Leave

This arrives in April 2015 and the intention is to enable families more choice with how they look after their children in the first year. The rules for maternity leave and pay, and ordinary paternity leave and pay, will remain the same. Additional paternity pay and leave will be abolished. The arrangement for recovery of statutory payments through HMRC will be the same as current arrangements.

 

The other change is to bring Adoption Leave into line with Maternity Leave. Statutory Adoption Pay is also being brought into line with Statutory Maternity Pay (SMP). Shared parental leave and pay will also be available to adopting parents.

 

• There will still be a ‘Continuity of Employment Test’ to apply for the mother to establish whether she is eligible for Shared Parental Leave (SPL), but if she qualifies for Statutory Maternity Leave it is likely she will be eligible. Equally the eligibility for shared parental pay is much the same as for SMP.
• For the partner there is an “employment and earnings test” to establish eligibility for SPL. Both partners must qualify for SPL to be taken, and there are various definitions for the ‘partner’.
• Maternity leave is ended to create SPL.
• Share parental pay can be taken based upon criteria similar to those for SMP, the employee receiving the pay must qualify.
• Employees must give at least eight week notice of their intent, and they are allowed to take the leave in three blocks, of a minimum of 1 week at a time.
• The Leave can be spread out in discontinuous portions and the amount of leave available is the balance remaining from 52 weeks, after the maternity/adoption leave taken has been accounted for.
• Employees and Employers can arrange more than three blocks if they wish but this is by mutual consent.
• ‘KIT’ days are available with Maternity Leave, there will be 20 ‘SPLIT’ days available for each partner with SPL. SPLIT is Share Parental Leave In Touch and these are days where an employee can return to work without affected their SPL eligibility.
• Shared parental pay is at 90% of employee’s earnings, or £138.18 per week, whichever is lower
• It is possible for parents to take SPL at the same time, so be off with child together, but Maternity Leave cannot be ended until 2 weeks after the child is born.

 

It is fair to say that the rules are fairly complex, and although we do not expect a huge take up, we expect employees will be dealt with on a case by case basis. More information can be found here, and ACAS has guidance on how employers should structure and conduct meetings

Xmas Period

We will be sending details regarding Christmas Payroll Dates with your payroll reports soon. If you can fill these in and return them that would be much appreciated; it is only a box to tick. We are asking you to confirm your company payday for December, and giving the dates for payroll data submission. Christmas is a busy period and the last thing we want is anybody not paid when they should be.

 

The recent headlines regarding the employment tribunal and holiday pay, taking into account regular overtime payments, have caused some concern. We suspect things are not as desperate as at first presented, and it is reassuring that back dated claims appear limited to three months. There may be an appeal, the UK Government could legislate, and so it could be several years before a final position is reached.

New Staff

Payroll Options continues to expand and welcomes two new members of staff to the team. Rochelle and Kate joined our main payroll team this month, so watch out for the new names on your payroll reports.

 

Our roll out of the online payslips continues to gather momentum and has been well received. We are amazed at how many employees really do not care about their payslips, it would be interesting to know how many paper payslips were actually read and filed. Most companies have well over 50% of employees accessing their payslips, but for some this has been considerably less.

 

The real power of the online scheme is the ability to view archived material, this will only be seen as the number of payslips published continues to grow. There is also the Android and iOS app available.

 

There was no plan to mention auto-enrolment this week, but the figures have been released regarding compliance for the period July-September, and there has been an increase in notices and fines issued. The Pensions Regulator has also realised there are only likely to be more issues as time goes by, as small and micro employers start to enrol. Watch out for the advertisements!

Auto-Enrolment – Again!

There is another large group of our clients that will be staging over the next few months and there is still some confusion over the ‘type’ of worker. There are three categories a worker can be put into, and then uncategorised for anybody that does not fall into these categories.

 

Eligible – This worker should be automatically enrolled. They will be working in the UK, aged 22 – State Pension Age (SPA) and earning over £10000

Non-Eligible – This worker has the right to opt in, but this is not automatic. They will be earning over £10000 but aged 16 – 21 or SPA – 74, or aged 16 – 74 and earning £5772 – £10000.

Entitled – The worker has a right to join a scheme. They work in the UK, are aged 16 – 74 and earn less that £5772.

(correct as of 22.10.14)

 

For non-eligible workers that want to join the scheme, it is useful to have the information at the same time as the payroll data is submitted. A worker cannot opt out until they have been enrolled.

 

The postponement system is not in place to delay the set-up of the scheme or the assessment. It is more in place to help with temporary or short term staff. Find out more about postponement here. This is an area where people seem to get themselves into trouble, so please make sure you fully understand what your advisor, and Pension Company, have told you.

 

We have new forms now for companies staging in the next few months. Unfortunately the form has become more complex as we really need to pin down exactly what is happening. Auto-Enrolment is not simple, companies will need professional advice and the payroll is just one part of that process.

What is a P800?

“If you’re due a tax refund or need to pay more tax, HM Revenue and Customs (HMRC) may send you a P800 tax calculation.” You can find more information here.

 

The P800 is in the news this week as apparently there have been a few issued in error following on from HMRC errors. These errors are related to income tax, and people are advised to contact HMRC if they receive a notice related to the 2013/14 tax year.

 

Only a small proportion of P800s are affected by the error, and HMRC are sorry for any worry or inconvenience caused. The interesting thing with this story is that really RTI is supposed to be just that, Real Time Information. So in the press there is considerable speculation as to just how efficient HMRC is at handling the RTI submissions.

 

So for most people the P800 is far too dull to be concerned with, but if you are one of the unfortunate people to be issued a demand in error, I am sure it will become of the utmost importance and interest.

Coding Notice to Recover Unpaid Tax

This is nothing new, but the current headlines are based around the maximum that can be recovered in this way. If HMRC decided you had an underpayment of income tax of less than £3000, they could change your tax code in order to recover this debt.  For high earners this is now £17000.

 

Tax codes are generally not complicated, the higher the code the more money that can be earned before tax is applied. The standard 1000L code gives £10000 before income tax is payable. There are a few things, such as K codes, that make things interesting and you can get more details here

 

Recovering an underpayment in this way is not as straightforward as it sounds, the debt can be recovered in one year or spread over three years. There is a wealth of guidelines to be applied and things like the 50% of salary maximum for K codes has to be considered. It is possible to claim to reduce the amount due to hardship for instance. You may wish to follow this link.

 

In essence I believe coding out underpayments is a good idea. Everybody should pay the tax they owe, and spreading the cost across the year is more humane than demanding a lump sum. The argument for the amount of tax we should pay can be made elsewhere.

 

There is always the possibility that HMRC will get things wrong. The big problem is that we receive a coding notice, apply this to a salary and instantly the employee receives less money and HMRC more. It is not always fast to get a coding notice put back to where it should be. There is some guidance as to what to do if you believe your tax code is wrong here.

 

The new legislation is giving HMRC powers to instantly start recovering larger debts. There is no need to go to court, it will be faster, cost the rest of the tax payers less money and is all good news. Mostly. The maximum amount that can be claimed in this way is graded from £3000 for those earning less than £30000pa to £17000 for those earning in excess of £90000pa.

 

Higher earners will see the biggest effect and in theory are most able to afford it. I imagine their rights will be the same as anyone else, and they can claim exceptional circumstances to reduce the amount payable in any one year. The issue is more that HMRC can decide there is an underpayment and apply a coding notice, and they do occasionally get things wrong.

 

So, if HMRC is correct then we can all be happy. Somebody has managed to underpay some tax, been caught out, and the money easily recovered through PAYE. There may be issues with drastically reduced income for some individuals, and the biggest issue will be if HMRC manages to make a mistake.

 

For those earning less than £30000pa there is no new issue, those earning more need to pay closer attention.

 

http://www.legislation.gov.uk/uksi/2014/2438/pdfs/uksiem_20142438_en.pdf

 

Robert Lorrimore 10.10.14