MY CIPP
The CIPP’s Advisory Service team provides answers to popular questions
Application of new national minimum wage (NMW) rates
Insurance (NI) relief. This is often referred to as payroll giving, and more information can be found here: http://ow.ly/ SSkg50Nmmha. The salary sacrifice arrangement should be ceased immediately, and the associated underpayment of both employee and employer NI addressed. If the existing arrangement hasn’t been set up through an approved payroll giving agency, there’ll probably be underpayments of tax due as well. How salary sacrifice interacts with workplace nurseries Q: Can an employee have a salary sacrifice for a workplace nursery? A: Section 318 of Income Tax (Earnings and Pensions) Act (ITEPA) provides qualifying conditions which must be met by the employer to provide a tax-free benefit for childcare under the workplace nurseries rules. This means there must be a scheme in place at a designated location. The employees must be employed by the employer that has arranged this scheme, or the employees must work at the same location of the employer who opened the scheme. Please also refer to page seven of the following link: http://ow.ly/ s2EK50NlgfB. A salary sacrifice is a contractual arrangement in which an employee gives up the right to cash in exchange for a noncash benefit, in this case the provision of a workplace nursery. So yes, a salary sacrifice scheme could be created but I would advise you to seek employment law advice as this requires a change to their
Further guidance, which includes the instruction that, “A worker must be paid the minimum wage, for the time worked in the pay reference period”, can be found here: http://ow.ly/vgSx50NmnGo.
Q: I have a question regarding when I should start paying the new rates for the NMW for weekly paid employees. I’ve read the following, “when an employee’s minimum wage increases, the new rates apply from the first full tax period after the date it increases”. Our weekly paid employees are paid a week in hand, therefore hours worked last week are paid this Friday. Can you confirm when I’ll have to increase the pay rates and the reason for this, as I may have to explain the reasoning to senior management? A: The legislation explaining this matter can be found in the National Minimum Wage Regulations 2015, Regulation 4(2), which stipulates: “The single hourly rate of the national minimum wage at which a worker is entitled to be remunerated as respects work, in a pay reference period, is the rate which applies to the worker on the first day of that period.” The legislation can be found here: http://ow.ly/7GNW50Nmn0Z. NMW is applied based on the first day in the pay period. If the first day of the pay period is in March, the increase wouldn’t apply. Only when the first day in the pay period is in April would you need to apply the new rate. In the scenario described in the question: l pay reference period Monday 27/03/23 to Sunday 02/04/23 paid Friday 7 April – increase not yet necessary l pay reference period Monday 03/04/23 to Sunday 09/04/23 paid Friday 14 April – increase must be applied.
“How do you ensure you apply NMW rates from the correct period?”
Director-only payroll Q: On a director-only payroll, a
director pays his wife a one-off salary in March to reduce his corporation tax bill for the year. Can he claim the employment allowance (EA)? A: National Insurance Contributions Act 2014, Section 2, Paragraphs 3, 10 and 12 (anti-avoidance measures), advise the director couldn’t claim the EA, as he’s paying the salary to reduce his own liabilities. Charitable giving arrangements Q: My employer lets employees donate to a charity via a salary sacrifice arrangement. Is this allowed? A: An employee cannot make contributions to a charity through a salary sacrifice scheme. Tax relief is available in scenarios where the employer has registered through an approved payroll giving scheme, but there’s no National
| Professional in Payroll, Pensions and Reward | April 2023 | Issue 89 12
Made with FlippingBook - Online magazine maker