Category

Payroll Outsourcing

Childcare vouchers scheme

The Childcare Vouchers Scheme closes to new joiners in April 2018.

If an employer chooses to offer a Childcare Vouchers Scheme, it is possible for employees to purchase childcare vouchers through payroll as a salary sacrifice.  A maximum fixed amount can be provided free of tax and National Insurance, and the employer does not have to report anything to HMRC as long as the amounts are below these thresholds.

The scheme is still live, companies can still join, and employees can join existing schemes.  After April 2018 these schemes will continue to run but will be closed to new joiners.

Thresholds

The limits for childcare vouchers are as follows:

For an employee that joined the scheme before 6th April 2011:  £55 per week or £243 per month

For employees that joined on or after 6th April 2011:

Rate of Income Tax Weekly Limit Monthly Limit
Basic £55 £243
Higher £28 £124
Additional £25 £110

If the contributions exceed these limits then the benefit would be reported through a P11D (or payroll if applicable) and class 1 national Insurance is due on the amount above the limit.

Childcare Options

Salary sacrifice is a benefit that is received in exchange for a reduction in salary.  So if you are considering offering childcare vouchers as a salary sacrifice scheme, advice should be sort for the implications to your company and employees.

There are now far more options for tax free childcare, and parents can already apply for these.  Childcare providers should have this well in hand, as the roll out of the new schemes have already started.

The new schemes do not need to be put through the payroll and it appears that parents will have more control.  Tax-Free Childcare cannot be used at the same time as childcare vouchers, and HMRC have online calculators parents can use to try and work out which scheme is best for them.

Employee Duplication

We had a number of issues with employee duplication this April, but there are steps that can be taken that we would normally expect to prevent this.

What is Employee Duplication?

HMRC hold an individual record for each employee at their current employer.  Duplication is when HMRC creates a second identical record for that employee at the same employer.

Why is it an issue?

Because at this point everything is still automated, HMRC will then assume that the employee is employed twice at the same company, and will issue tax codes such as BR or D0, removing an employee’s tax free allowance.  You can also have 0T or seemingly random tax codes issued.

If the tax code changes are not spotted in time then employees may have a dramatically reduced net pay.  This will cause problems in the workplace.

What is the solution?

Once the duplication has occurred then the best way to resolve it seems to be for the employees to call HMRC individually.  HMRC may look for a better solution in the future but for now that is the best option.

If there are more than 50 BR or D0 tax codes issued then the Finance Director should promptly contact HMRC to trigger an investigation, HMRC should then be able to fix the error en masse.  If there are less than 50 BR or D0 tax codes issued then the employee has to phone the HMRC helpline on their own behalf.

When does it occur?

The usual time is when there is a change in payroll software.  It can occur at any time but it is usually triggered by a change in employee personal details or how they are reported to HMRC.

How can duplication be prevented?

This used to be fairly straightforward but there has been some unannounced changes in April that mean more employees will have been affected this tax year.  There is an indicator in the FPS (Full Payment Submission) to say that the PayId is changing.  The PayId is the unique number used for the employee in RTI (Real Time Information) submissions to HMRC, and is not necessarily the same as the employee reference number or works number.

HMRC have changed slightly how they deal with the PayId change indicator values in April.  They suggest they are still using National Insurance numbers, names and addresses to try and prevent duplication but this appears to be very unreliable.

If you do change payroll software or provider you should always provide the previous PayId.  The previous PayId must match exactly with what was previously submitted.  If you do not have the previous PayId, or are unsure, it is still possible to indicate a new reference.

Unfortunately, even if the submission is perfect, it is still possible for errors to occur.

HMRC helpline for employers  0300 200 3200

HMRC helpline for employees 0300 200 3300

Apprenticeship Levy

The Apprenticeship Levy came into force this April, and will effect companies or groups with a wage bill of £3 million or higher.  We have had many enquiries around the Levy as it is not particularly straightforward, and there has not been as much publicity as might have been expected.  Where it is a single company affected it is not too difficult, but things become more interesting where there is a group of companies.

The wage bill for the purposes of the Levy is all pay subject to secondary class 1 National Insurance Contributions, such as wages, bonuses and commissions.  The Levy is an additional 0.5% charge which will be reported through Real Time Reporting and paid to HMRC in the usual way.

In payroll we are concerned with the Apprenticeship Levy and how money is deducted through the payroll, but there have also been changes with the Apprenticeship Service and how employers source funding for their training needs.

With the Apprenticeship Levy there is a £15 000 per year allowance available per company or per group, this is where the wage bill of £3 million or higher comes in (0.5% of £3 million is £15 000).  The Levy is calculated per month on a cumulative basis, as is the allowance.  The allowance can be divided between companies within a group, or one company could take it all and the others have zero.

Some examples from our understanding of the Apprenticeship Levy –

Example 1

Company has £500 000 annual wage bill and is not part of a group.

Liability would be 0.5%, so £2 500, but the allowance is £15 000 so this company does not have to pay the Levy

Example 2

Company has £500 000 annual wage bill but is part of a group

Liability would be 0.5%, so £2 500, and the allowance has been set to zero, so this company has to pay the additional £2 500 across the year.

Example 3

Company has £2 000 000 annual wage bill but is part of group

Liability would be 0.5%, so £10 000, but they have £5 000 of allowance allocated to them, so this company would pay an additional £5 000.

Example 4

It is month 3, the year to date wage bill is £800 000.

Liability is 0.5%, so £4 000, and the company is not part of the group so has the full allowance.

The allowance available is 3/12 of £15 000, so £3 750, therefore the company has a Levy to pay of £250 to date.

 

In Example 4 if the company’s wage bill reduced and ultimately was lower than £3 million across the year, any overpaid Levy would have been credited back to the company via a reduction in their payments to HMRC.

For more information and the official site see here or see the ACAS site for a little more information on Apprentices.

Personal Tax Accounts

HMRC have requested that employers, and their payroll teams, promote Personal Tax Accounts (PTAs) to their employees.  Employees can update their address and personal details in this way.  One benefit to employers is that this may reduce the number of employee enquiries.

HMRC introduced PTAs over a year ago, and are aiming for a digital service for people to take care of their tax in the same way as they manage their banking.  Employees can go online, at a time that suits them, and have access to information such as personal information, tax credits, apply for marriage allowance, check details on company cars and other benefits, complete Self Assessment, review National Insurance contributions, review their state pension etc

It is important that employees update their address with HMRC.  Where an employee lives will have an impact on the Apprenticeship Levy and how funds are allocated, and the Scottish Rate of Income Tax threshold is going to move away from the rest of the UK this April.

Reduced time spent on HMRC telephone support services

HMRC are also hoping the PTAs are going to help with enabling employees to understand their tax position, as well as updating any change in circumstance and accessing support without the need for a phone call.  The HMRC telephone support services do not have the best reputation for speed and efficiency, so if PTAs can help with this function it will be a worthwhile exercise.

The HMRC app

There is also the ‘HMRC app’ for smart phones, giving access to personal tax information.  The app is available for Apple, Android and Windows.

How to Access the PTA

To activate a PTA for the first time you will need:

  • National Insurance Number
  • A payslip, P60 or passport
  • A phone for a 2 stage security access code

It is a little long winded but not too difficult to do, and within ten to fifteen minutes you would have access to your Personal Tax Account.  The two stage verification appears to be required, but as you are unlikely to be signing in very frequently probably will not be too onerous.

So employers should be promoting the Personal Tax Accounts to their employees, and signing up themselves.

 

Minimum Wage April 2017

The annual National Minimum Wage adjustments will be moved to April from this year, and so there will no longer be a change in October. The rates have been released and further details are as below:

Worker Category Old Rate New Rate from April 2017 % Change
National Living Wage
(Aged 25 or over)
£7.20 £7.50 4%
Aged 21 – 24 £6.95 £7.05 1%
Aged 18 – 20 £5.55 £5.60 1%
Aged 16 – 17 £4.00 £4.05 1%
Apprentice Rate £3.40 £3.50 3%

Most workers will be eligible for the minimum wage and further guidance is available on the HMRC or ACAS websites. There are some workers that are not eligible for minimum wage, but it is a criminal offence not to pay an employee the National Minimum Wage or National Living Wage if they are eligible.

The minimum wage rates must be paid for hours worked in the corresponding pay period, so it may be possible that some hours will be paid at the old rate for payrolls with a pay day in April.  HMRC guidance refers to pay reference periods, which should not be longer than 31 days and will depend upon the pay frequency.

If you have any questions about the upcoming changes please contact us.

London Vet Show

Thank you to everyone that visited our stand at London Vet Show 2016. We met many new people, as well as those revisiting us, and had fun raising the profile of our specialist veterinary payroll services. We also handed out more chocolate coins and post-it notes than last year!

We had a variety of questions raised, and were pleased that people were actually taking the time to speak to us. Payroll is not always the most exciting topic at a conference.
Congratulations to our competition winner – Anita of Shaw Veterinary Centre, Swindon.

 

cadhamperwinner2016

 

Thank you to everyone that entered.

We have been working through all the requests for follow up contact, and everyone should have heard from us at least once by now. And we do have some practices already with us, which is great.

We also noticed that people were surprised by what our standard outsourced payroll service actually consisted of, and were not aware that such a service existed. They were also pleased that we had an insight to veterinary practice and did not need every small detail spelt out, and could make suggestions with how things could be better organised to save time within the veterinary practice.

Auto-enrolment pensions were not causing as much concern as last year, which was great. We can support much of the administrative burden, and have a very low fuss approach.

 

Will the Christmas Party be Taxable?

Although I am not sure if we are allowed to discuss Christmas in early September, there have already been stirrings in the media, not the least of which is the failure of the Korean shipping company, Hanjin. So aside from concerns that there will be no toys in the shops this Christmas, do we need to worry whether the Christmas Party is taxable?

This will be relevant to some employers, and every employer should be aware of the rules governing whether a social function needs to be reported to HMRC.  If you go outside the rules, you will need to declare the Christmas Party for tax.

Rules for Reporting and Paying

Currently there are a few rules, and if your social function / party meets the rules it will be exempt and you do not need to report or pay.

  • The cost is less than £150 per head.
  • It is open to all employees
  • It is an annual event

So, if your Christmas Party does not meet these rules you will need to pay Class 1A NICs on the full cost of the event and report it on employee P11Ds.

£150 per head is an Annual Limit, and includes VAT

To arrive at a cost per head you divide the total cost by the number of employees that attend. The cost of the function includes VAT, and any transport or overnight accommodation provided.

The £150 is an annual figure, so if there are two or more functions it is the aggregate that is considered. Each function has the cost per head calculated and then they are brought together, if the total cost is over £150 then the will be a liability for reporting and paying taxes.

Where the total cost does rise above £150 the function that best utilises that limit can remain exempt, but the full costs of other functions are taxable and must be reported.

£150 is not an annual allowance

The £150 is not a tax free allowance available to spend on social functions. If a function rises above the £150 per head limit, or is not exempt, then Class 1A NICs are payable on the full cost of the event, and the event should be recorded on the P11D.

The Event is Open to All Employees

If an event is not open to all employees, for example it is only for the directors of a company, it will not be exempt and so be liable for reporting and taxes.

If a company has more than one location, then an event open at one location can still count as an open event. You can also have events per department and remain exempt, as long as all your employees can attend at least one of them.

For full details see here, or for the .gov.uk overview see here

 

Payroll Bureau

Payroll Options is a payroll bureau founded in 1991.  The aim was to simplify the process of accurately and efficiently paying employees.

What is a Payroll Bureau?

A payroll bureau is an accountancy service provider, which specialises in providing outsourced payroll services for other businesses.  Only payroll services are usually offered, but sometimes the bureau will be part of a larger organisation.

A payroll bureau will supply HMRC with information on behalf of other businesses, and may receive and act upon information from HMRC regarding those businesses.  The payroll bureau will also be a source of expertise for the business, without them employing their own payroll specialist.

Why use a Payroll Bureau?

Any business could potentially employ the services of a payroll bureau.  Businesses will outsource to a bureau where they want efficiency savings, usually with time but often cost is a factor as well.

Many businesses do not want the ‘hassle’ of payroll.  They are looking for peace of mind and reliability, and an organisation they can speak to if they have questions.  They are looking for reliable payroll and not disgruntled staff every pay day.  They may also be aiming to avoid HMRC fines and penalties.

A clear audit trail can also be an advantage.  There is a clear separation between information supplied to the payroll bureau, the information sent to HMRC and the reports received by the business.  The information sent to the payroll bureau can even come from one department, whereas the reports are sent back to another.

Some businesses outsource because they are concerned with confidentiality.  The reports can only be seen by designated members of the team, and if employee payment is made via BACS, the bank statement may only show the bulk wage transaction.  Timesheets and time and attendance approval can also be more easily delegated, as hourly rates are held at the bureau and so only hours need to be submitted.

Why use Payroll Options as your Payroll Bureau?

Payroll Options is well established and offers an accurate and reliable service.  There are numerous internal audits to ensure RTI compliance with HMRC, and every payroll it processed in parallel and then cross checked for errors.  We expect 100% first time accuracy.

By outsourcing to Payroll Options we expect you to experience hassle free payroll through a simple but powerful solution.

Contact us for more information

Why is my RTI Submission Failing?

Well there could be numerous reason for an RTI submission failing, but HMRC has highlighted an issue with some recently issued National Insurance numbers.

The importance of a valid National Insurance number

There is a database of valid National Insurance number prefixes, and certain prefixes such as GB or ZZ will not be allocated.  There are also rules such as the first letter should not be a Q, and the second letter should not be an O.

If you submit an RTI file with an invalid National Insurance number the file will be rejected.  The format is two letters, followed by six digits, then a final letter.

Sometimes HMRC will issue a temporary reference that is not a National Insurance number, this will not be in the correct format and cannot be used in its place.  HMRC will still sometimes refer to the temporary reference as a National Insurance number, but this is misleading.

Software Validation

Most software has built in validation to check if a National Insurance number is valid before it is submitted, so the error should be detected before the RTI submission is rejected by HMRC.

It is also possible to use HMRC basic tools to verify a National Insurance number, but this is not straightforward.

We will validate all National Insurance numbers before applying them to an employee as part of our normal process.

The Current Issue – KC prefixes

National Insurance numbers have recently been issued with the prefix KC, but HMRC will not currently accept these as valid.  Most software will reject the KC codes, but some people have reported that they have managed to enter the number, but when they tried to submit the RTI files the whole file was rejected.

So if you have had issues with RTI submissions it would be worthwhile a quick check that it is not an invalid National Insurance number causing the problem.

The current Solution

HMRC have issued the following advice:

  • the National Insurance number field should be left blank
  • you should make sure the employee address field is completed in those cases
  • if you/your employee has a ‘KC’ National Insurance number, they don’t need to request a new one

 

HMRC are working on this issue and hope to have everything resolved shortly.  There is a link to the HMRC update page here.

If you have experienced issues and are considering outsourcing please contact us.

 

 

What Payroll Solution Do You Need?

Payroll is a very important part of your business activities. Having a well-motivated and happy workforce can make a huge difference to a business’s performance and wellbeing.

Find the Correct Payroll Solution

Although payroll cannot give you a well-motivated, happy workforce, if you get your payroll wrong then you are very unlikely to achieve this. Find the correct payroll solution for your business and you will find life a lot simpler, but get it wrong and it can be a real chain around your neck.

The payroll solution should take a minimal amount of time to prepare, provide quick and accurate results, and meaningful and useful reports. There are many options from DIY, to cloud based SARS, to full bureau services.

The Payroll Solution to fit YOUR Business Needs

There is diversity in payroll solutions because there is no one size fits all option. So, although it may sound obvious, you need to consider what is important to you and your business, what is a must have and what is a nice to have. Sometimes there will be items to avoid.

What Should You Consider?

  • Hassle from employees because their payslip is wrong on pay day: For most people this is a very high priority to eliminate this, but some people accept this and are not worried if the problem remains and see corrections after pay day as part of the normal business process.
  • Time: How much time can be devoted to the payroll, and can it be guaranteed at every payday? So using something that is time intensive when you are already pushed, is probably unwise.
  • Straightforward Reports: This is important for many people but again this may be a lower priority. It is important you know what is happening with your payroll and why.
  • Cost: Are you able to fully calculate the costs involved with a solution, including those costs that are sometimes hidden such as training and preparation / processing time?
  • Data: Not everyone wants data but for some people this is essential. Can your payroll solution produce data, as for instance an Excel or .csv file?
  • How to transfer the information to the payroll solution: Do you want to key into an online portal, use time and attendance output, provide a complete spreadsheet or use locally installed software? Do you want to supply minimal information?
  • Training: do you want /need in-house payroll expertise?
  • Support: What level of support will you receive? Some people will be happy with just emails, others will want to phone, and some will not need any.
  • Data Protection: Do you know if your data will be held in the UK on secure servers?

There a multitude of other factors to consider as well, such as back-ups, disaster recovery, software failure, key staff absence, notice periods etc.

Summary

Choosing the right payroll solution for you is not always easy. We are a payroll bureau that do our best to provide hassle free payroll but we do not suit every company, and every company does not suit us.

If you wish to discuss your payroll needs, and see whether our bureau solution may fit, please contact us