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Q: W e are to make a bonus payment to a director who left us earlier in the year. How are the class 1 NICs calculated on this payment? A: If the earnings for the director are paid in the same tax year as their appointment ends, you would add these additional earnings to the total earnings already paid. Then work out the class 1 NICs on the total earnings using the director’s earnings period; this applies even if the director has become an employee of the company. Guidance can be found here: http://bit.ly/3cijIkQ. Q: Electronic P45 forms are being sent to our new employees by their previous employer but I can’t find anything on the HMRC webpages to confirm these are acceptable. Please advise/confirm. A: Yes, employers can accept electronic P45 forms. HMRC provided guidance in the Employer Bulletin published in June 2016. A short article on page 17 explains that form P45 can be provided electronically but that the employer must ensure it contains the correct information. You can also develop your own version of the P45, for which HMRC approval is not required. Although HMRC approval is not needed, the substitute must contain specific information which matches the wording on HMRC’s current pre-printed stationery. Q: A client is asking whether the NICs for one of their employees can be deferred or reduced if this employee has more than one job? A: If the employee is earning £1,128 or more or £4,886 monthly over the two jobs, the employee can consider applying for deferment by completing form CA72A. If the application is approved HMRC will issue one of the employers with a different class 1 NICs category to operate J or Z. The employee will usually pay a reduced rate of 2% on one of the jobs instead of the standard 12%. Q: From what date are the new rates for NM/LW to be applied, as we always find this confusing for both our weekly and monthly paid staff. A: The NM/LW is calculated using an employee's pay reference period, which is usually the period of time for which an employee is actually paid. For example, if an employee is paid weekly the pay reference period is one week; if paid monthly it is one month. A pay reference period can’t be
longer than 31 days. The new NM/LW rates have effect on 1 April 2020, and you should apply these rates to the pay reference periods beginning on or after this date. For example, if a weekly pay period runs 30/3/2020 to 5/4/2020 for payment on 10 April you would not apply the increase until the following pay reference pay period e.g. 6/4/2020 to 12/4/2020 paid on 17 April. Similarly, if a monthly pay reference period is 1/4/2020 to 30/4/2020 you would apply the increase that month; but if the pay reference period is 15/3/2020 to 14/4/2020 paid April 2020, the employer does not have to increase the rate until the May payday. Q: If an employer wishes to reimburse an employee for their subscription to a professional body or if the employee pays this subscription themselves and the payment is then reimbursed by the employer, are there any reporting requirements or deductions to be made? A: The employer does not have to report anything to HMRC nor deduct tax and pay NICs if all the following apply: ● the employer pays the organisation directly or reimburses the employee for the fee or subscription they paid ● the organisation is on HMRC’s list of approved professional bodies (‘List 3’) ● the employer has an ‘exemption’ – which replaced dispensations – covering fees and subscriptions. If the subscription is not in HMRC’s List 3, and the employer: ● pays the organisation directly, the cost of the fee or subscription is to be notionally added to the employee’s earnings only for the purpose of calculating class 1NICs, and reported in the P11D return for tax purposes, or ● reimburses the employee, the cost of the fee or subscription is to be added to the employee’s earnings for the purpose of calculating both PAYE income tax and class 1 NICs through the payroll. Guidance can be found at this link: http:// bit.ly/2Fcibxv. n Annual subscription for CIPP membership The annual subscription for membership
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| Professional in Payroll, Pensions and Reward |
Issue 59 | April 2020
*correct at time of publication
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