In this month’s enews we update you on pertinent announcements from HMRC for employers. We also look at issues relevant to businesses.
Please contact us if you would like any further information.
More HMRC guidance on the Employment Allowance
The Employment Allowance of up to £2,000 is available to most employers from 6 April 2014. Employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. This is called the ‘Employment Allowance’.
Employers generally won’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.
HMRC has updated the guidance on eligibility for the Employment Allowance.
For help with payroll matters please do contact us.
Internet link: Employment allowance eligibility Employment allowance key facts
P11D forms don’t get them wrong
HMRC have published a list of common errors in the completion of forms P11D and guidance that medical benefits for lower paid employees are not reportable. The information is part of the lengthy Employer Bulletin so we have reproduced the guidance below.
Common Mistakes
The following is a list of common errors which are easily avoidable but can delay processing and cause problems with employees’ tax codes each year:
- Submitting duplicate P11D information on paper where P11D information has already been filed online to ensure ‘HMRC have received it’. These duplicates can cause processing problems
- Using a paper form that relates to the wrong tax year – check the top right hand corner of the first page
- Not ticking the ‘director’ box if the employee is a director
- Not including a description or abbreviation, where amounts are included in sections A, B, L, M or N of the form
- Leaving the ‘cash equivalent’ box empty where you’ve entered a figure in the corresponding ‘cost to you’ box of a section
- Not correctly completing the declaration on the final FPS/EPS submission (for those employers operating PAYE in ‘real time’) or the box in Part 5 of form P35 (Employers Annual Return) to indicate whether or not P11Ds are due
- Where a benefit has been provided for mixed business and private use, entering only the value of the private-use portion – you must report the full gross value of the benefit
- Not completing the fuel benefit box/field where this applies. This means an amended P11D has to be sent in
- Incorrectly completing the ‘from’ and ‘to’ dates in the ‘Dates car was available’ boxes. For example entering 06/04/2013 to 05/04/2014 to indicate the car was available throughout that year. If the car was available in the previous tax year, the ‘from’ box should not be completed and if the car is to be available in the next tax year, the ‘to’ box should not be completed i.e. left blank.’
The Employer Bulletin also includes guidance on a common error relating to the incorrect completion of a form P9D in relation to private medical insurance provided to lower paid employees. The HMRC guidance states:
Are You Completing P9D’s Needlessly for Employees in Receipt of Medical Benefit?
Do you know that if your employees earn less than the rate of £8,500 AND you arrange and pay the provider directly for the treatment or insurance a P9D does NOT need to be completed.
For more information go to www.hmrc.gov.uk/payerti/exb/a-z/m/medical-treatment.htm
If you would like any help with the completion of the forms or the calculation of the associated Class 1A National Insurance liability please get in touch.
Internet link: www.hmrc.gov.uk/payerti/exb/forms.htm
Shared Parental Leave
The current system of statutory pay and leave entitlements for employed parents is to be reformed for babies due (or adopted children placed) on or after 5 April 2015. The following guidance in contained in the lengthy Employer Bulletin so we have reproduced it in full.
The Government is reforming the statutory pay and leave entitlements available to employed parents. For babies due on or after 5 April 2015 a new entitlement of Shared Parental Leave (SPL) will replace Additional Paternity Leave and Pay. The parents of babies due on or before 4 April 2015 will continue to be eligible for Additional Paternity Leave and Pay.
SPL gives families greater choice over how they arrange childcare in the first year, by allowing working mothers the option to end their maternity pay and leave early and to share untaken leave and pay with their partner. An adopter will similarly be able to bring their adoption leave and pay to an early end to opt into Shared Parental Pay (ShPP) and Leave.
It is intended to enable fathers to take a greater role in caring for a child, and to help both parents to better balance childcare responsibilities with staying in work. For businesses, this helps them keep their best talent and allows employers to recruit with confidence that their women employees will be less likely to drop out of the workforce when they have children.
How does it work?
Current entitlement to 52 weeks statutory maternity/adoption leave, 39 of which is paid, and 2 weeks of statutory paternity leave and pay is all unchanged. The first six weeks of Statutory Adoption Pay will increase to 90% of average weekly earnings.
Working parents of a baby due or an adoptive child placed on or after 5 April 2015 may be eligible for SPL and ShPP. Under SPL, mothers/adopters will be able to choose to end their maternity/adoption leave and pay early (at any point from 2 weeks after the birth/placement), and share their untaken pay and leave with their partner. Shared parental leave and pay can be stopped and started and parents can be off at the same time, if they wish.
Parents will be able to take their leave in phases, for example 20 weeks for the mother/adopter, followed by 20 weeks for the father/partner, followed by 10 weeks for the mother/adopter. So it may be the case that statutory parental pay is paid over one or two discontinuous periods. Parents must notify their employers of their plans under SPL 8 weeks before they become eligible for it, and all shared leave and pay must be taken between the birth/placement and the child’s first birthday.
What do employers need to do?
We expect the first notifications of intention to take SPL to arrive with employers from February 2015. The Government will provide an online form for parents to use. Some employers may wish to create their own requirements for how their employees notify them.
We anticipate that employers will need to update payroll systems where relevant to accommodate providing statutory parental pay to employees taking SPL, and to enable these payments to be paid discontinuously where necessary.
The Government will provide online tools to check eligibility, and publish detailed guidance on the rules around SPL. A key part of SPL is the discussion between employer and employee to agree the phasing of SPL and the return to work, and ACAS will also publish guidance to support this process.’
We will update you when further information is released. Please do get in touch if you would like further guidance on this area.
Internet links: Employer Bulletin
Icebreaker tax avoidance scheme rejected by HMRC
In a high profile decision HMRC has won a case in which the Icebreaker partnership schemes were shut down, after the tribunal ruled it was set up to shelter more than £120m in tax.
The wealthy members of the scheme, which included Gary Barlow and two of his former Take That band mates, claimed to be active partners trading in the creative industries, selling, for example, the rights to a song or an idea for a book. They claimed tax relief on greater losses than they invested in the partnerships. The return on the partners’ ‘investment’ was the tax relief, which was considerably larger than their cash contribution.
A HMRC spokesperson said:
‘HMRC has put in place generous reliefs to support genuine business investment and our tax reliefs for the creative industries work well, enabling the UK’s world-class film, television and video production companies to compete on the global stage.
But we will not tolerate abuse of the system by people trying to dodge their tax obligations. HMRC will continue to challenge in the courts and anyone who engages in tax avoidance schemes risk not only the high cost of these schemes but also lay themselves open to penalties and, potentially, prosecution.’
The scheme was rejected by a First-tier Tribunal.
Pay your PAYE on time or face in-year interest on late payments
HMRC have issued further guidance on late payment interest on PAYE and CIS payments for 2014/15 onwards and how to avoid it.
HMRC now charges interest on any late PAYE and Construction Industry Scheme (CIS) payments.
To avoid an interest charge employers should pay by the due date, the difference between the following:
- what they report on their Full Payment Submission(s) (FPS) received by the 19th of the month following the end of the tax month it relates to, together with any CIS charges for that tax month
- any deductions reported on an Employer Payment Submission (EPS), again received by the 19th of the month following the end of the tax month it relates to.
Any corrections made to wages reported on an FPS that HMRC receives after the 19th of the month following the end of the tax month it relates to will be included in the following month’s charge. In these circumstances, the amount payable for the tax month is the amount actually reported by the 19th (rather than the corrected amount).
Interest charges
HMRC will charge interest daily, from the date a payment is due and payable to the date it is paid in full.
Accruing Interest and the Business Tax Dashboard
Employers will be able to see an estimate of the interest building up on the Business Tax Dashboard.
Please be aware that HMRC have stated:
‘Accrued interest is only a guide to what may be due. HMRC will only seek payment of interest when the amount due is settled.
The Business Tax Dashboard will only show interest as accruing in the current month, regardless of when the payment was due.
It will show interest as accruing from the 19th of each month, regardless of how the employer pays. Employers who pay electronically should not worry if they see an accrued interest entry between 19th and 22nd of a month. Once the electronic payment is received, the calculation will correctly use the 22nd as the due date, and any interest charge generated between the 19th and 22nd will be cancelled.
Currently, there is an HMRC systems error which results in the Business Tax Dashboard showing interest accruing despite the employer having submitted an EPS that clears the original charges. This error will be corrected shortly. In the meantime, HMRC will not pursue this charge and employers do not need to contact HMRC about this.’
Please do get in touch if you would like help with payroll issues.
Internet links: News
VAT update and fuel scale charges
HMRC have issued guidance on a number of VAT changes including confirmation of the updated VAT Fuel scale charges which apply from the beginning of the next prescribed VAT accounting period starting on or after 1 May 2014.
Please do get in touch for further advice on VAT matters.
Internet link: VAT update VAT fuel scale charges
Proposed new rules for easier prosecution of offshore tax evaders
The government will consult on plans to introduce a new strict liability criminal offence for individuals who hide their money offshore.
HMRC would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for the offence to be a criminal conviction.
Currently HMRC have to demonstrate that even when someone failed to declare offshore income that the individual intended to evade tax. This change will mean HMRC only has to demonstrate the income was taxable and undeclared meaning it will be easier to secure successful prosecutions of offshore tax evaders.
As well as introducing the new criminal offence, the government will consult on a range of options building on the existing penalties to make sure they act as a clear and effective deterrent.
Chancellor of the Exchequer, George Osborne, said:
‘The government has taken significant steps to clamp down on those hiding their money offshore. HMRC has brought in over £1.5billion over the last two years and, through our leadership at the G8, we have taken significant steps towards greater transparency and tax information sharing.
But there can be no let up and we will continue to pursue offshore tax evaders. Those who continue to believe they can hide wealth offshore should know that there is no safe haven and that serious consequences await them.’
Internet links: News
Late payments to smaller businesses on the increase
According to a recent survey by the Forum of Private Business (FPB) almost one in four smaller businesses experienced an increase in the number of late payments during 2013.
Approximately a third of businesses surveyed reported an increase in the average number of days beyond the payment deadline that payments were made. FPB Chief Executive Phil Orford commented that more than £30 billion still remains ‘tied up in late payments’.
Internet link: Press release