Payroll
Conclusion The introduction of class 1A NICs on termination awards and sporting testimonials raises significant questions for the future of the class 1A NICs charge. The technical overview (http:// bit.ly/37dHZpf) provided by HMRC states that there will be certain BiKs that will remain subject to the annual payment and reporting provisions, as the liabilities can only be calculated once the income tax liability has been determined which can only be done once the tax year has ended (via the P11D). This poses a further, different question for payroll departments. It raises the concern of keeping various class 1A NICs separate for different purposes, so processing and reporting via RTI for some pay/benefit elements but processing and reporting annually on others. This could potentially be time-consuming and confusing for payroll professionals – and the wider effect of this needs to be considered. As the take up of payrolling of BiKs increases, could we expect to see real time class 1A NICs being applied? Perhaps many would argue that it should. n
Bulletin (http://bit.ly/2VTxNNP), HMRC recognised that this calculation does not fit all scenarios and announced that a new calculation could be utilised in the event that the employee is paid by twelve equal monthly instalments but has a notice period based on weeks or days. This is because the calculation was providing different figures based on when in the year the notice was given, which could be deemed as unfair. Now, in scenarios where the last pay period in relation to the PENP is a full month, the employee’s salary is paid in twelve equal monthly instalments and the notice is based on weeks days, the figure that would ordinarily be ascribed to ‘P‘ can be replaced with 30.42 (365 ÷ 12). Sporting testimonials Sporting testimonials are arranged when an esteemed sportsman is recognised for his or her contribution to their club upon retirement. A sporting event will be organised by a testimonial committee with the intention of the proceeds providing financial assistance to the retiree, who may not have reserved or accumulated enough funds to settle comfortably into retirement.
The reforms to the treatment of sporting testimonials for NICs mean that any non- contractual or non-customary payments that exceed £100,000 will attract class 1A NICs. The impact of this is predicted to be low- level as HMRC estimates that approximately 220 sporting testimonials are held each year and only the portion of proceeds exceeding £100,000 will be subject to class 1A NICs. ...liabilities can only be calculated once the income tax liability has been determined which can only be done once the tax year has ended... HMRC guidance makes clear that the £100,000 will only be applicable to one testimonial in a lifetime, which could come from one event or from a series of events held over a twelve-month period referred to as a ‘testimonial year’.
PAYROLL ASSURANCE SCHEME Don’t wait until it’s too late
With penalties for non-compliance of up to £10,000 per day * , can your business afford not to be CIPP Payroll Assurance Scheme accredited?
* Correct at time of publication
Visit cipp.org.uk/PAS , email compliance@cipp.org.uk or call 0121 712 1000 for more information.
cipp.org.uk CIPP_UK cip .org.uk @CI P_UK
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| Professional in Payroll, Pensions and Reward |
Issue 58 | March 2020
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