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PAYE Reconciliation

HMRC has just announce they are starting their reconcialtion process for the PAYE system for the 2014/15 tax year, and expect to be completed by October. PAYE (Pay As You Earn) tax is that which is collected through the payroll, and is effected by the tax code.

 

There were issues last year but HMRC seems confident that the vast majority of PAYE tax payers will be correct and no action will need to be taken. If tax was overpaid a P800 notice will be issued, followed by a cheque within 2 weeks. If tax was underpaid then P800 notices will still be issued but you will be offered a few options which will also depend on how much is owed.

 

There is further guidance on what happens if a P800 notice is issued here, but as HMRC have said, very few people will receive them!

AE Pensions Simplified

We are about to start becoming very busy with new companies staging for auto-enrolment, but The Pension Regulator has made life a little more straightforward. The new ‘step by step’ guide seems to have been well thought out, and although there may well be pitfalls it seems a much more readable than some of the lengthy documents previously produced.

 

The single page check list is very helpful, and a simple way of seeing what is required. There is the proviso of seeking ‘legal or other specialist advice’ at the base, but we view this as a positive and constructive approach from The Pension Regulator.

 

What has been less publicised is the reduced correspondence burden. There are less letters to be handed to employees, and although there are still duties, one of the changes is that it appears there is only the requirement to contact an employee the first time their status changes, rather than repeated correspondence. Also several documents have been combined.

 

The Pension Regulator is clear that giving more information than the statutory minimum is still acceptable, if companies already have a system in place. The link to the detailed guidance document can be compared with the step by step guide, and shows that The Pension Regulator is trying to simplify and explain. Long may this continue.

Be Cautious with Holiday Pay

There have been various opinions on what constitutes holiday pay, and some companies have changed their policies already. We did suggest caution as there is no definitive position yet, and companies need to be careful they do not implement policies that may need to be rewritten within months. On May 5th it was announced that British Gas were appealing in the ‘Lock case’. This is one of the cases referring to commission payments that is regularly referenced, and this appeal will only add to the ongoing uncertainty with holiday payments.

 

We do not have the answer here, we have many strategies that companies have used following advice from their HR departments or advisors, but we cannot advise on what the best way forward is at the moment, or in six months’ time. Following the election maybe we will get a dynamic and conclusive answer?

Marriage Allowance

The start of the new tax year has brought a few changes, one of which is the ability to transfer tax allowance between spouses or civil partners. This is not terribly straightforward and at the moment you are still having to ‘register an interest’.

 

If an employee manages to successfully transfer part of their allowance, both parties will receive a new tax code and we expect a P6 tax notification to be issued. The maximum that can be transferred is £1060 for this tax year and the income of the person donating the tax allowance should generally be less than £10 600pa.

 

For further details you can visit the government website here.

End of the Tax Year

We are now drawing to a close the 2014 /15 tax year. This is a very busy time of year for us as we complete year end procedures and then move all the payrolls through to the new tax year. There are several changes for April 2015, as have been mentioned previously, and we have to be prepared to meet these.

 

The P60s will be produced once all other procedures are successfully completed, and will generally start to be sent out at the beginning of April. All employees employed on the 5th April should have received their P60 by the 31st May.

Pension Payment Types

Pensions can get very complicated, but if you just look at each piece separately it is possible to gain an understanding. One common question is regarding net, gross for tax and salary exchange schemes.

 

  • A net scheme is deducted after tax and NI, the tax is then reclaimed at the basic rate by the pension company.
  • A gross for tax scheme is deducted before tax but after NI.
  • A salary exchange is a benefit resulting in a lower gross salary, so before both tax and NI.

 

No one scheme will suit every employee and every company and you will need to seek further advice when choosing a pension.

Fit for Work Scheme

The Fit for Work Scheme has had some press coverage recently. It is part of the government’s attempts to assist people back to work, and away from sickness benefits. There is a free telephone number – 0800 032 6235 for England & Wales – and a website – www.fitforwork.org, or www.fitforworkscotland.scot.

 

These steps are not mandatory but the aim is to enable small companies to have access to occupational health schemes. The scheme is designed for employees that have been absent for more than four weeks, or are expected to be absent for four or more weeks. The result is a Return to Work Plan with advice and recommendations with how to get the employee back to work.

 

The referral for an occupational health assessment is free, and from the 1st January 2015 there is a £500 tax exemption per employee per year for recommend medical treatments. This has no direct impact to payroll, other than maybe there will be less SSP. If you want more information there are guidance notes available here.

New Codes for April 2015

New National Insurance Categories April 2015

Tax Allowance Changes

One of the changes from April 2015 is that part of the tax allowance can be transferred from one spouse, or civil partner, to the other. This is available if at least one partner earns below the threshold or only pays basic rate tax. There will be an online process for employees to apply for the transfer and two new suffixes for the tax codes, an M for the recipient and N for the transferor.

 

The transferor will be able to move up to £1060 of their allowance to their partner. There will then be a coding notice issued which will be applied in the usual way. We do not anticipate any issues with these changes but we imagine take up may well be very low unless HMRC embarks on a determined publicity campaign.

 

If you want some further information you can see here, but is anticipate that people would be unable to start the application process until after the 6th April 2015.

 

National Insurance Categories

As well as the new tax codes there are to be seven new NI codes introduced in April as well. These are related to the previously reported under 21s employer NIC saving, and there has even been a new NI band introduced as well. We do not anticipate this causing any problem other than a note that the employer should choose the appropriate NI code for the employee.

 

For interest the codes are as below –

 

M – Not contracted out standard rate contributions
Z- Not contracted out deferred rate contributions
Y – mariners not contracted out standard rate contributions
P – mariners not contracted out deferred rate contributions
V – mariners contracted out salary related contributions
I – contracted out salary related standard rate contributions
K – contracted out salary related deferred rate contributions

 

With V I K to be removed in April 2016.  If you want further information please see here.

Holiday Pay

 

Holiday pay should take into account the amount of wages an employee would usually receive, not just their contractual salary. This was effectively the finding from last year’s employment tribunal and the UK Government have been reviewing the findings; we do not know when to expect the final ruling.

 

The government is taking steps to try and provide some certainty and limit the impact on UK business. The current proposal appears to be a transition period of six months, and then claims cannot be backdated more than two years.

 

The UK Working Time Regulations will need to be interpreted in a new way, or changed. But it seems that things will change, we are just not quite sure what the changes shall be. If you want more information on the current proposal see here.

Newsletter January 2015

Happy New Year!

Below is an extract from our January Newsletter with  a couple of points worth noting –

 

Compulsory Dates of Birth
Due to HMRC requirements with immediate effect we must be supplied with a Date of Birth for all new employees.
Please be aware that we will not be able to add an employee to your payroll if you do not supply a Date of Birth.
If you are unsure of the information required for a new employee please consider using our ready-made New Employee Form which will provide all of the information that we require. Please complete the pink cell with your Payroll Number and Company Name, please also ensure that they select a Starter Declaration.

 

https://www.payrolloptions.com/wp-content/uploads/2014/10/Employee-Details-Form.xltx

 

Charges/Penalties from HMRC
HMRC are introducing Charges/Penalties in respect of Real Time Information (RTI):
1. Payments to HMRC must match the total due for the month as per the RTI submissions made by us
2. RTI submission must be received by HMRC on or before your pay date, as quoted on the front page of your reports, if you feel the pay date that we are quoting is incorrect please inform us immediately.