The Act will bring about reforms that will more closely align the treatment of employer NICs (Class 1A) on termination payments in excess of £30,000 that are subject to PAYE income tax. At present some forms of termination awards are exempt from both employee and employer NICs and the first £30,000 is free from Income Tax.
The Act will not affect: •
Employee NICs treatment of termination awards • NICs treatment of statutory redundancy pay and compensation
Income Tax changes were made in the Finance (No 2) Act 2017 which took effect from 6 April 2018.
Sporting Testimonials
The Act aligns the NICs treatment of income from sporting testimonials with the income tax treatment by: • bringing payments from sporting testimonials that are non-contractual or non-customary and organised by an independent testimonial committee within the scope of Class 1A NICs • applying the existing £100,000 Income Tax exemption to the NICs treatment • ensuring the new NICs threshold will apply to only one testimonial in a lifetime, which could come from one event or a series of events held over a 12 calendar month ‘testimonial year’
Income tax changes were made in the Finance Act 2016 and took effect from 6 April 2017.
National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019
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CIPP response to consultation on The Employment Allowance (Excluded persons) Regulations 27 August 2019
We recently held a think tank roundtable where CIPP members and representatives met with HMRC officials to discuss the impact of the Employment Allowance (Excluded Persons) Regulations from April 2020.
Thank you to Armstrong Watson for hosting the event and thank you to all those who took the time to attend and provide your important opinions, views and experiences. This evidence has helped form the CIPP’s response to the technical consultation which can be found, in full, within the My CIPP/Policy hub on our website.
A summary of our response is below which highlights the key concerns and recommendations expressed within the policy think tank.
Impact of Employment Allowance becoming de minimis State Aid
By restricting the Employment Allowance (EA) to employers with secondary Class 1 NIC contributions of less than £100,000, HMRC consider that Employment Allowance is now classified as de minimis state aid, and as such requires an extended level of record keeping for HMRC to ensure that eligible employers do not breach limits that exist under the rules of state aid. The CIPP is disappointed that government considers that payroll processes using the Real Time Information (RTI) system and specifically the EPS (Employer Payment Summary) are the most cost-effective method for HMRC to ensure such accurate accounting records are maintained to evidence the employer’s right to claim EA.
Accounting for state aid is not a payroll process and as such raises the following concerns:
• Although the EA indicator is already on the EPS the current requirement is to send this only once unless the circumstances change. From April 2020 it will be required to be sent each new tax year. This requirement will add to the employer administrative burden.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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