MEMBERSHIP INSIGHT
Q: Due to the abolition of contracted- out NICs a client has decided to pass on the cost of the additional employer NICs to the workforce. How should this be deducted from pay, and is it a legal right that this deduction can be taken from employees? A: An employer is allowed to change the rules of the pension scheme without permission from the pension’s scheme trustees in regard to the extra cost to the pension scheme, due to the abolition of contracted-out NICs, but not for the extra cost of the employer’s NICs to be deducted from employees’ pay. So it will depend on the rules of the scheme as to whether employee pension contributions will increase. However, if there is an increase in pension deduction the employee would be entitled to tax relief. Q: Please could you confirm the tax code that is applied to a new starter who signs statement C on the starter checklist? And what tax code would apply were the form not to be signed? A: If the employee signs statement C you would use code BR cumulatively, and if they have not signed the starter declaration apply code 0T on the non-cumulative (week 1/month 1) basis. This link – http://goo.gl/Rg82TN – is to GOV.UK guidance which assists employers in deciding which tax code to use in these situations. Just click into start and tick the box ‘you don’t have their P45’ and follow the directions. Q: The company has multiple PAYE schemes. How will the apprenticeship levy allowance of £15,000 applied? A: The apprenticeship levy allowance is available to one PAYE scheme for the full year. The levy allowance is operated on a monthly basis which accumulates each month. Where the allowance is not used up in a tax month it can be carried forward to the following month until the end of tax year is reached. Where the employer does not use the whole of the levy in the allocated PAYE scheme by the end of the tax year, the employer can apply the residue to another PAYE scheme. Q: If an employee works a keeping in touch (KIT) day would you pay the employee SMP for the day(s) and a salary for the hours worked? A: SMP can be offset against any
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Advisory
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Q: An employee has just requested that her employer cancels the salary sacrifice and makes a refund of childcare vouchers of £3,000. Is this possible? A: A company can choose to refund the salary sacrifice for childcare vouchers; however, this could mean that the scheme could be invalidated. This is because it could change the scheme from one where the employee can receive vouchers that can be exchanged for childcare only, to one where the vouchers can be exchanged for cash or childcare. The exemption from pay as you earn (PAYE) and National Insurance contributions (NICs) is satisfied only if the vouchers can be exchanged for childcare. So, great care should be taken before refunding the value of any childcare vouchers to the employee. However, there would be an exemption where a life-changing event occurred e.g. the employee was made redundant. For clarity, please refer to HMRC’s Employment Income Manual , page EIM16051, at http:// goo.gl/cNxYwF. Q: What tax code is applicable when the employee is a student working during the holiday period? A: The employer must ensure the employee completes a starter checklist and use the appropriate tax code appropriate to the statement the employee has signed. Until the introduction of real time information any students who worked outside of term time could fill in a P38(s) form and be exempt from PAYE if they did not exceed the earnings threshold in the tax year; however, this form can no longer be used.
Q: A weekly paid employee is due to take statutory maternity leave (SML). During the last week of the set period the employee has been paid a week’s holiday pay in advance. Should the earnings be divided by eight or nine to calculate the average weekly earnings ? A: The week’s holiday pay would be classed as a mistimed payment, and therefore instead of dividing the payments in the set (relevant) period by eight you would divide the payment by the number of weeks paid, which in the scenario above is nine weeks. This link – goo.gl/dr8k4o – to HMRC’s Statutory Payments Manual provides examples of how mistimed payments occur, and one of them is when an employer pays holiday pay in advance. If the employer pays two weeks’ pay in advance then the employee has been paid ten weeks, and the total paid should be divided by ten instead of eight. Q: An employee satisfies all criteria to be eligible for statutory maternity pay (SMP) and SML. She plans to visit Spain. Is there a rule that states she would not be allowed to receive SMP if she is out of the country for more than four weeks in a row? A: If the employee satisfies all the requirements and is entitled to SMP, it can be paid to the employee anywhere in the world. This link – http://goo.gl/fi3Cyi – is to the NI17A technical guidance on GOV.UK for future reference. Please refer to the end of paragraph 3.4 which explains that SMP can be paid anywhere in the world, if the employee travels abroad.
| Professional in Payroll, Pensions and Reward | November 2016 | Issue 25 8
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