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Holiday pay and leave
A: It really depends on the type of BiKs. For regular benefits such as company cars, HMRC receives the details via the P46(Car) return. HMRC will collect tax in real time through the tax code as there is an anticipation of the ongoing provision of the BIK. When an employer begins to payroll BiKs, steps should be taken to ensure employees do not pay tax on the regular benefits at source through payrolling while still having the benefit in their tax code. Therefore, it is important to agree the benefits that are to be payrolled with HMRC, along with an agreed date to commence payrolling, so that adjustments to the tax codes in respect of regular benefits can be made in time. For ad hoc benefits relating to the previous year, they must be reported to HMRC by 6 July using the P11D return. On receipt, HMRC would adjust the tax code later in the tax year; so, in theory, the person's tax code could change again after July to collect any extra tax due. Q: As an employer, we are very unsure when our computation for PSA needs to be submitted. The guidance is very vague. Please can you advise? A: The employer and HMRC must agree on the types of benefits that will be included in a PSA by 5 July following the end of the tax year in which the benefits were provided. Note that a PSA cannot be retrospectively agreed. Upon receipt of two copies of form P626 from HMRC, the employer must sign, date, and return both copies to HMRC. HMRC will return one of these, which will be the employer’s PSA. An employer can now begin the PSA computation using form PSA1. The CIPP’s advice would be to then ensure all agreed benefits have been captured, and all employee tax thresholds have been established (not forgetting that employees living in Scotland and Wales may have different income tax rates). The appropriate PSA1 computation form should be populated with the data and sent to HMRC as soon as possible. This should then give HMRC enough time to raise any questions relating to the submission before the electronic payment deadline of 22 October (or 19 October, if paying by cheque). For further guidance visit http://ow.ly/ oQ0v30rQ92j. n
that it should be included in the cash equivalent reported in the P11D returns. Should we include the delivery cost even though it does not form part of the list price, nor is it an accessory? A: The law defines the list price as the price of the car before the 'on-the-road' charges are added. It includes standard accessories, any relevant taxes – value added tax, car tax (where appropriate), any customs or excise duty, any tax chargeable as if it were a customs duty – and delivery charges that relate to the sale of the car to a car dealer following manufacture. It does, however, exclude the new car registration fee because it is an administration fee, not a tax. Although the initial delivery charge is included in the manufacturer’s list price, the charges relating to the onward delivery of a company car from a fleet company to a business would not impact the list price of that car. (See: ss 122 & 123 of the Income Tax (Earnings and Pensions) Act 2003, https://bit.ly/3i0iU7X, and HMRC’s guidance: https://bit.ly/2VpTk4A.) Q: A former employee received a company loan of £15,000 in 2020 but this has still not been repaid. The ex-employee has not made any repayments towards this loan and HMRC has advised this would be a benefit in kind (BIK) and would need to be reported via P11D returns. How would this be reported as P11D returns must not be issued to ex-employees? A: Where a benefit in kind has been provided beyond an employee’s leaving date, the P11D return is not applicable. Employers are required to provide a statement of the benefits provided after termination to both HMRC and the individual concerned by 6 July. The statements can take the form of a letter on company headed paper. Q: An employer has formally agreed with HMRC to begin payrolling benefits from the start of the new tax year, so that tax can be collected at source through the payroll. As the time has come to report the benefits for tax year 2020/21 using P11D returns, we are concerned that the employees will be taxed on two years’ worth of BIKs. How should we inform them of this?
Duration One half day
CPD 3 points
Case law continually produces changes to employees’ statutory holiday leave and pay entitlement, which are covered in this informative course, along with the various types of leave and the calculation of pay.
Visit cipp.org.uk/training to book your place
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| Professional in Payroll, Pensions and Reward |
Issue 73 | September 2021
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