Taxation
...fewer if any annual Christmas parties are likely to be provided...
breached. In such a scenario, the average cost can be used but this averaging approach is not always permissible. See the Examples. Detailed information about trivial benefits with further examples can be found in HMRC’s Employment Income Manual (https://bit.ly/38FPc55); see pages EIM21864–EIM21872. PAYE settlement agreements Employers can be more generous and offer employees more than the £50 available under the trivial benefit taxation rules, or indeed want to gift certain employees for going above and beyond, especially due to the current challenges the pandemic has posed to working life. Many employers would then wish to cover all of the associated income tax costs by doing so. For them to cover this cost, the employer will need to have a PAYE settlement agreement in place (PSA). A PSA allows an employer to make one annual payment to cover all tax and National insurance contributions liabilities on items that are minor, irregular, or
impracticable. Although a PSA can be applied for at any time, the timing of the agreement will affect the items that can be included. If a PSA is agreed before the start of the tax year, there are no restrictions on the expenses and benefits that can be included, other than the requirement to fit into one or more of the three categories above. If a PSA is agreed during the tax year, it is not possible to include items provided before the date of the agreement where either of the following applies: ● PAYE has or should have been operated on the item, or ● the item has been reflected in the employee’s tax code for the year. If a PSA is agreed after the end of the tax year, but before 6 July, it is not possible to include any items provided during the tax year to which either of the following applies: ● PAYE has or should have been operated
on the item, or ● the item has been reflected in the employee’s tax code for the year. Once a PSA has been applied for and agreed, it will remain in place for each subsequent tax year until an employer requests to either cancel or make an amendment to it. Payments due for a PSA must be paid by the 22 October after the tax year in which it applies (or 19 October if by post). Fines and interest may be payable if made after this date Annual Christmas function Given the pandemic’s effects on the economy, socialising and travelling, fewer if any annual Christmas parties are likely to be provided by employers this year. Page EIM21871 of the Employment Income Manual sets out how the trivial benefits exemption interacts with other exemptions such as that which might apply to annual functions. n
Currently being delivered
PAYROLL UPDATE 50% DISCOUNT FOR CIPP MEMBERS *
via virtual classroom
Duration Two consecutive half days
Updated every seven days **
CPD 7 points
This course covers: ● The Coronavirus Job Retention Scheme (CJRS) and other developments as a result of Covid-19 ● Tax and NI contributions ● Operating Pay As You Earn (PAYE) This focused course represents the single best opportunity to be briefed and updated on changes affecting payroll.
● Statutory pay and leave ● Statutory deductions ● Expenses and benefits ● Pension ● Employment rights and other matters
Book online at cipp.org.uk/training , email enquiries@cipp.org.uk or call 0121 712 1044 for more information.
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* Terms and conditions apply. ** Correct at time of publication. Course materials checked and updated every seven days.
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| Professional in Payroll, Pensions and Reward |
Issue 66 | December 2020 - January 2021
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