MY CIPP
The CIPP's Advisory Service team provides answers to popular questions
Q: Employees have had to work late nights to meet our deadlines, so we have provided at least sixteen taxis for them to get home safely. Does this incur a taxable benefit? A: Section 248, subsection 2, of the Income Tax (Earnings and Pensions) Act 2003 provides an exemption for late night journeys paid by the employer if all of the following conditions are met (see page EIM10210 in the Employment Income Manual (https://bit.ly/3m5nHGC)). ● the journey occurs because the employee is required to work later than usual, and until at least 9pm, and ● late working is irregular, and ● by the time the employee finishes work, public transport is either unavailable for the journey home, or it is unreasonable to expect the employee to use it, and ● the transport paid for or provided by the employer is by taxi or similar private road transport. However, this exemption covers only the first sixty taxi journeys per employee in a tax year (see EIM21831 (https:// bit.ly/3jYnL9e)). If more than sixty taxis journeys are provided in a tax year, a tax liability arises under the pecuniary liability principle (see EIM00580 (https://bit. ly/3jXLztL)) where the employer pays the employee’s debt. Also, if the sixty- journeys limit is exceeded in a tax year, this will not disqualify the first sixty from the exemption. Q: The private roads into our sites can be littered with nails and other. Are we able to reimburse our employees for the cost of replacing or repairing tyres on their own cars when punctures occur when commuting to work at these sites? A: If you were to reimburse the employees you would be settling their personal debt (see EIM00580 https:// bit.ly/3jXLztL et seq). The amount reimbursed would have to be processed as a notional payment through payroll for class 1 National Insurance contributions (NICs) and for income tax purposes reported via the P11D return.
Q: As an employer if I want to introduce a salary sacrifice scheme for fully electric cars available for personal use to my employees what and when must I report details to HM Revenue & Customs (HMRC)? Also, what are the appropriate percentages for fully electric cars? A: A salary sacrifice scheme is a contractual agreement to give up the right to cash in exchange for a benefit. Under optional remuneration arrangements (OpRA) some salary sacrifice arrangements no longer benefit from the income tax and NICs advantages previously available (see EIM44131 (https://bit.ly/3hbPnG3) for items excluded from the exemption). In general, OpRA rules involve tax being charged on the higher of the benefit in kind value or the amount of the salary sacrificed by the employee. The rules do not apply to cars with CO2 emissions of 75 grams or less per kilometre. Such cars continue to be taxed on the cash equivalent of the benefit without having to make a comparison with the salary foregone. However, all zero emission company cars will attract a reduced appropriate percentage of 0% in tax year 2020/21, 1% in 2021/22, before returning to the planned 2% rate in 2022/23. Q: We employ some 1,700 cleaners. We want to change their pay frequency from fortnightly to four-weekly. What do we need to consider? A: Employers can change pay frequency, but they would have to consult with the employees and give valid, honest reasons why they need to do this. Employers should also give them a reasonable notice period of from when these changes will become effective as this will be a change to their contractual terms and conditions. The employees will have to change direct debit/standing order mandates to manage their finances. You may also want to consider offering loans to employees as there will be a gap in receipt of earnings in the
transition. You should also be aware that running a four-weekly payroll may involve running a week-56 payroll as there will be some tax years when there is an extra pay day. You must also inform HMRC if you intend to pay your employees less often (see https://bit.ly/3bA0N5e). Q: What divisor should we use for calculating the national minimum wage (NMW)? A: Under regulation 21(3) of the National Minimum Wage Regulations 2015, a worker is entitled under their contract to be paid that salary or salary and performance bonus in respect of a number of hours in a year, whether those hours are specific in or ascertained in accordance with their contract. Neither the Department of Business, Energy and Industrial Strategy (BEIS) nor HMRC promote a specific divisor that employers should use. The guidance is that it is for employers to ascertain how the annual number of hours that the salary represents are calculated. BEIS guidance states that for a salaried-hours contract, if a contract sets out the weekly number of hours, the hours for the whole year cannot be determined by multiplying the number of weeks in a year because the days in a year cannot be divided by 52. Q: Can the £1 admin fee deducted when operating an attachment of earnings order affect NMW compliance? A: Regulation 12(1) of the National Minimum Wage Regulations 2015, states that deductions made by the employer in the pay reference period, or payments due from the worker to the employer in the pay reference period, for the employer’s own use and benefit are treated as reductions except as specified in paragraph (2) and regulation 14 (deductions or payments as respects living accommodation). Therefore, by deducting an administration fee for handling the transaction for the worker, this will reduce
| Professional in Payroll, Pensions and Reward | October 2020 | Issue 64 8
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