PART 2: TAX
STUDENT TAX EXEMPTION SCHEME - P38(S) The scheme, which was abolished on the 5th April 2013 allowed the employer to make payment exempt of tax, was initially introduced with the P38(S) as both the student’s statement of status and as a year-end process document. P38(S) forms are now simply retained for inspection, if required, by HMRC. The scheme was based on the presumption that the student’s earnings for working outside term time would not generally attract a tax liability and the P38(S) exemption avoided post year end refunding of tax by HMRC which might otherwise occur. The P38(S) exemption does not apply to NICs, which must be collected where, in any earnings period earnings exceed the LEL regardless of whether the pay period falls within term time and if the employee is aged 16 or over. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS TAXED AWARDS SCHEME (TAS) A Taxed Awards Scheme (TAS) is an agreement between HMRC and an incentive award provider (i.e. a third party not the direct employer) for payment of the tax liability on the grossed up value of non-cash benefits provided to someone else’s employees. The provider is required to maintain tax records for other people’s employees included in the scheme. From 6th April 2001 either a Class 1 or a Class 1A NICs liability arises in respect of all third party benefits payable by the supplier even if he chooses to pass the tax charge back to the employees rather than enter into a TAS - to assess which charge arises see HMRC’s A-Z of benefits at: https://www.gov.uk/expenses-and-benefits-a-to-z. The supplier must tax third party awards made in cash and their direct employer must deduct Class 1 NICs from the employee. Cash vouchers given by third parties are taxed and subject to Class 1 NICs through the direct employer’s payroll. Awards of non-cash vouchers, unless they are exempt e.g. childcare vouchers, are subject to Class 1 NICs if the direct employer has any involvement in arranging the awards. There is a full list of exempt non-cash vouchers in the CWG2 Employer further guide to PAYE and NICs: https://www.gov.uk/government/publications/cwg2-further-guide-to-paye-and-national- insurance-contributions . At the end of each tax year each higher rate tax-paying recipient of an award must be provided with a form P433 certificate showing the details of the award and the tax paid. The scheme provider must submit end of year returns P35(TAS) and P440 within 90 days of the end of the tax year. The tax is paid over by 19 July (22 July if paying electronically which is not mandatory), after the tax year to which it relates. HMRC provides the supplier with a special payslip for this purpose in the End of Year pack. If payments are late, HMRC may withdraw the TAS. No printing, copying or reproduction permitted. Increasingly HMRC are proposing that TAS providers use the PSA process to account for Income Tax and NICs as this avoids the need for detailed tax records for other employers’ employees. TAX - AN EARLY HISTORY On 3rd December 1798, William Pitt (The Younger) placed before Parliament a Bill for the introduction of Income Tax. The rising cost of the Napoleonic Wars and the trebling of existing
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