Professional December 2020 - January 2021

Policy hub

NEWTO PAYROLL?

A: Looking at overpayments from the point of view of PAYE and National Insurance contributions (NICs), the court case British Railways Board v Franklin provides guidance (see HMRC’s Employment Income Manual at section EIM00815 (https://bit.ly/38fk38j)). Where the employer can only recover the net overpayment, the guidance at paragraph 1.19 of the CWG2 ( Employer further guide to PAYE and National Insurance contributions ) (https:// bit.ly/2JIRSEH), says that for current tax year overpayments of salary the employer has to correct the figures so that the payment to the HMRC would be adjusted in the following tax month. For closed tax years, the employer is expected to correct the figures and to write to HMRC to recover the tax and NICs rather than the employee requesting a refund. Previously correcting the figures was done via an earlier year update (EYU) but from April 2020 the EYU ceased to be a valid submission. For future years employers will need to use the extended FPS to revise year to date payment data after 19 April. Q: Does a deduction for an overpayment affect the national minimum wage? A: There is no statutory limit on how much can be deducted from an employee for an overpayment made by mistake. Guidance for calculating the minimum wage – National minimum wage and national living wage (http:// bit.ly/34xzzqB) – published by the Department for Business, Energy and Industrial Strategy, lists the excepted deductions from pay (and payments by workers) that do not reduce minimum wage pay. This list includes “deduction from pay or payment by the worker to recover an accidental overpayment of wages” (https://bit.ly/3eAuzZc). Q: We have an employee who has been receiving a net payment instead of a deduction for several years resulting in an overpayment. If the employee does not pay back the money, would this have to be processed as a benefit in kind? A: If you can arrange repayment (ideally over a period no longer than the period

that the overpayment occurred), this will result in status quo and HMRC will not need to be involved. If you are unable to recover the funds from the employee, you would not be able to report it as a benefit as cash cannot be classed as a benefit. Cash payments should always be subject to PAYE income tax and class 1 NICs. In this instance you would need to write to HMRC and explain that the employee has received income that was not subject to income tax or class 1 NICs so that it can raise a demand against the employee and the employer for unpaid taxes. HMRC may well choose to assert that the employer is liable fully for tax and NICs. Q: Our company wants to enable all employees to have a flu vaccination by either claiming through the employer-provided Medicash healthcare benefit, which we report as a P11D item, or if the employee did not opt for this cover and has no Medicash benefit, reimbursing for the cost incurred (average £13). What is the taxation position? A: Section 323A of the Income Tax (Earnings and Pensions) Act 2003 sets out a statutory exemption for trivial benefits. Under this exemption, if an employer provides a benefit to its employees, the benefit is exempt from being taxed as employment income if all the following conditions are satisfied: ● the cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person) ● the benefit is not cash or a cash voucher ● the employee is not entitled to the benefit as part of any contractual obligation, and

Our introduction courses are a great way to solidify your knowledge in key payroll areas

Calculating income tax Introduction to income tax andNICs

Upcoming date 18 January 2021

7 CPD points

Introduction to payroll Upcoming date 18 January 2021

10 CPD points

Introduction to statutory payments

Upcoming date 25 January 2021

7 CPD points

● the benefit is not provided in recognition of particular services

For more information or to book: Visit: www.cipp.org.uk Email enquiries@cipp.org.uk

performed by the employee as part of their employment duties (or in anticipation of such services). If the vaccination meets all the above, no reporting is required. Note that if you are reimbursing employees for their flu vaccine, this does not fall within the trivial benefit exemption as it fails the ‘not cash’ condition. n

Call: 0121 712 1044 Live chat with us

cipp.org.uk @CIPP_UK

9

| Professional in Payroll, Pensions and Reward |

Issue 66 | December 2020 - January 2021

Made with FlippingBook - Online magazine maker