Payroll
PAYE settlement Agreement (PSA), unless the trivial benefit or long service exemptions apply. Trivial benefits exemption Gifts to employees (or the employee’s family or household) from third parties are not reportable, taxable, or subject to NICs if the gift falls within the trivial benefits exemption which applies if all the following conditions are satisfied: ● the cost of providing the benefit does not exceed £50 ● the benefit is not cash or a cash voucher ● the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice) ● the benefit is not provided in recognition of particular services performed by the
employee as part of their employment duties. The exemption has a further cap of a total cost of £300 in the tax year if the employer is a close company, and the benefit is provided to an individual who is a director or other office holder of the company, or a member of their family or household. ...a period of not less than twenty years’ service... Long service awards Long service awards provided to employees remain exempt although increasingly the exemption does not apply. The conditions for
exemption are: ● the award must be made to mark a period of not less than twenty years’ service with the same employer ● it is a non-cash award ● the value of the award (before applying the exemption) must not be more than £50 for each year of service. Should employees report gifts? Finally, employees should also think about their reporting obligations. For those who already complete a tax return, if the gift is exempt it will not be necessary to report it. If it is cash earnings or a benefit in kind, it will need to be reported as employment income, unless the employer has already accounted for the tax and NICs due via payroll or a PSA. n
The potential effects of a March 2020 Budget
The ‘late’ delivery of the 2020 Budget has implications for payroll professionals, employees, employers and software providers, writes Mike Nicholas
F or many years it was customary for the chancellor to deliver the annual UK Budget in March. An implication was that some income tax changes (e.g. to rates, personal allowance, tax bands) were usually implemented several weeks after the start of the tax year, thereby affecting amongst other things pay as you earn (PAYE) procedures. (Generally, changes to class 1 National Insurance contributions (NICs) almost always had effect from 6 April.) The relatively recent move to delivering the Budget earlier has meant changes affecting PAYE and class 1 NICs could be implemented together with other changes from the start of the tax year. The return this year to holding the Budget in March (on 11 March) has implications for taxation and payroll procedures. The situation is complicated because although income tax can be retrospective under PAYE, this is not the case for class 1 NICs. Recovering underpayments of or making repayments of overpaid NICs requires specific action through the payroll. Neil Tonks ChMCIPPdip, legislation manager at MHR, kindly provided the
following comments to Professional magazine: “Back in the days when Budgets were always in March, the announced changes weren’t implemented until week 7 of the tax year (week commencing 18th May). We don’t currently know whether the announcements in this year’s Budget will be delayed like this, but if so it would be a double-edged sword for payroll software providers. “A May implementation date would of course give more time for the updates to be developed by ourselves and implemented by our clients, which is good. “On the other hand, it’s so long since we had a late implementation that systems would need extra testing to make sure everything worked correctly. Using a different date to normal should work, but for this kind of thing ‘should’ isn’t good enough and we’d want to make certain there were no issues. “A complication is that the student loan thresholds and minimum/living wage rates are already announced and will take effect on their normal dates. These are generally supplied to clients along with the parameters for tax, NICs etc but this year there will probably need to be two updates:
one for April and another for May. That’s an extra update for each client to remember to install. “Also, what about the statutory payment rates? These are determined by the rate of inflation last September so it should be possible to announce them in time for April. The Department for Work and Pensions needs to get a move on with this so the rates can be included in the update with the student loan and minimum wage changes. “Whatever happens, of course, everyone concerned will just get on with it and do the necessary work. Employees will get paid correctly and on time, never knowing the blood, sweat and tears this involved for payroll professionals and their software providers!” Employers, payroll professionals and payroll software providers face a very challenging situation wherein they have insufficient time to implement and apply changes to class 1 NICs (and perhaps statutory payments) from the first pay day on or after 6 April. This would mean that recalculations might have to occur with refunds or recoveries subsequently actioned. n
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| Professional in Payroll, Pensions and Reward |
Issue 57 | February 2020
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