In this month’s enews we report on pensions announcements and other issues pertinent to employers with many deadlines approaching.
Please contact us if you would like any further information.
HMRC guidance on new pension flexibility
Following the Budget announcements regarding pension flexibility HMRC have now issued some guidance for those individuals who may wish to review their pension options.
New rules are being introduced to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.
Internet link: Pensions flexibility
Employers no longer able to reclaim SSP
The Percentage Threshold Scheme (PTS), which allows employers to reclaim Statutory Sick Pay (SSP) in certain circumstances, is abolished from 6 April 2014.
Under PTS employers have been able to reclaim SSP where the SSP paid is more than 13% of the Class 1 NIC due for the month. Employers are not entitled to recover any of the SSP paid to their employees unless they qualify for the reimbursement scheme.
The following example explains how the scheme worked for a tax month:
| SSP paid | = | £630.00 |
| Gross NI £3,704.29 x 13% | = | £481.56 |
| SSP recoverable: (£630 – £481.56) | = | £148.44 |
From 6 April 2014 employers are unable to recover SSP however they will continue to be able to recover unclaimed SSP for previous years until 5 April 2016. Do contact us if you think this may apply to your business.
The government has announced that the current PTS funding will be moved into a new scheme to help employees who have been incapacitated for four weeks or more get back to work as part of the government’s Health Work and Wellbeing Initiative.
Internet link: Employer bulletin
Disclosure facility for those with undisclosed second incomes
The Second Incomes Campaign is an opportunity open to individuals in employment who have an additional untaxed source of income.
The new facility allows those with untaxed income to get up to date with their tax affairs in a simple, straightforward way and take advantage of the best possible terms.
If you would like any advice on this area please do get in touch.
Internet links: Second incomes campaign Guide to disclosure
More guidance on Class 3A NIC
Further guidance has been issued on Class 3A National insurance contributions (NIC).
In the autumn of 2013 the Government announced plans to introduce a scheme to allow pensioners to top up their Additional State Pension by paying a new class of voluntary National Insurance contribution, to be known as Class 3A.
‘The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the new State Pension in April 2016. The scheme is expected to run for 18 months.’
‘Class 3A will give pensioners an option to top up their pension by up to £25 a week in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low additional State Pension entitlement.’
Internet link: Publication
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 issued more guidance on the practicalities of claiming the allowance which can be found by visiting the link below.
For help with payroll matters please do contact us.
Internet links: Employment allowance detail Employment allowance key facts
Tax-free childcare
Details of the new Tax-Free Childcare scheme which is to be launched in autumn 2015 have been announced.
The scheme will be worth a maximum of £2,000 per child per year. The maximum amount due is calculated on 20% of the costs of childcare (up to a total of childcare costs of £10,000 per child per year).
The scheme will be launched in autumn 2015. All children under 12 within the first year of the scheme will be eligible. To qualify for Tax-Free Childcare all parents in the household must:
- meet a minimum income level based on working eight hours per week at the National Minimum Wage (around £50 a week at current rates)
- each earn less than £150,000 a year, and
- not already be receiving support through Tax Credits or Universal Credit.
Self-employed parents will be able to get support with childcare costs in the Tax-Free Childcare scheme, unlike the current employer supported childcare scheme. To support newly self-employed parents, the Government is introducing a ‘start-up’ period. During this period a newly self-employed parent will not have to earn the minimum income level.
The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available.
It is proposed that parents register with the Government and open an online account. The scheme will be delivered by HMRC in partnership with National Savings and Investments, the scheme’s account provider. The Government will then ‘top up’ payments into this account at a rate of 20p for every 80p that families pay in.
Internet link: News
Increase in NMW rates
The Government has approved a rise in the National Minimum Wage rates which will come into effect on 1 October 2014:
- a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour)
- a 10p (2%) increase in the rate for 18 to 20 year olds (from £5.03 to £5.13 per hour)
- a 7p (2%) increase in the rate for 16 to 17 year olds (from £3.72 to £3.79 per hour)
- a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour.
The rise will take effect in October 2014, as Business Secretary Vince Cable has accepted in full the independent Low Pay Commission’s recommendations for 2014, including plans for bigger increases in future than in recent years.
The Low Pay Commission (LPC) has said the rise, the first real terms cash increase since 2008, is manageable for employers and will support full employment.
Business Secretary Vince Cable said:
‘The recommendations I have accepted today (12 March 2014) mean that low paid workers will enjoy the biggest cash increase in their take home pay since 2008. This will benefit over 1 million workers on National Minimum Wage and marks the start of a welcome new phase in minimum wage policy.’
Meanwhile HMRC have revealed some of the excuses given for not paying the NMW.
Internet links: Press release HMRC NMW excuses
Advisory fuel rates for company cars and fuel benefit charge
Where private fuel is provided by the employer for a company car then a separate benefit is assessable on the employee. This benefit charge is calculated by applying the same percentage figure used to calculate the company car benefit to a fixed figure which for 2014/15 is set at £21,700. The percentage is linked to the car’s CO2 emission figures.
Now is a good time to consider whether this benefit is value for money for both the employee and employer.
The alternative is to reimburse the employee for business miles using the company car advisory fuel rates. The current rates are:
| Engine size | Petrol |
| 1400cc or less | 14p |
| 1401cc – 2000cc | 16p |
| Over 2000cc | 24p |
| Engine size | LPG |
| 1400cc or less | 9p |
| 1401cc – 2000cc | 11p |
| Over 2000cc | 17p |
| Engine size | Diesel |
| 1600cc or less | 12p |
| 1601cc – 2000cc | 14p |
| Over 2000cc | 17p |
Other points to be aware of about the advisory fuel rates:
- Employers do not need a dispensation to use these rates.
- Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
- The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.
If you would like to discuss your car policy, please contact us.
Internet link: HMRC advisory fuel rates
P11d deadline approaching
The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2014, are due for submission to HMRC by 6 July 2014. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.
Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form.
HMRC have updated their expenses and benefits toolkit for 2013/14 and record keeping for 2014/15. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms P11D correctly.
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 links: http://www.hmrc.gov.uk/payerti/exb/forms.htm Toolkit