Payroll insight
inevitable financial impact on the business and affected employees, so an effective communication strategy will need to be implemented. Consideration should also be given on how to monitor the position relating to new starters post 5 April 2017 and how to practically administer two sets of rules. Critique of these new rules This author’s opinion is that this new legislation is unfair and ill-thought out. HM Revenue & Customs (HMRC) has offered little empirical evidence for its view that salary sacrifice schemes are increasing significantly, and that there is indeed a real ‘problem’. If you are going to count any new schemes surely you also have to identify, and deduct from that equation, any closed schemes? The new legislation focuses on the potential tax/NICs cost to the Exchequer primarily, whilst overlooking the real driver for most flexible benefits; i.e. to give the employer a competitive advantage when recruiting and retaining staff. (In most cases only pension salary sacrifice, which HMRC ‘approves of’, tends to deliver significant employer savings.) Other HMRC
commentary suggesting that salary sacrifice ‘creates an uneven playing field’, and that this has a significant effect on state benefits are (in my view) exaggerated or misplaced. ...transitional rules will come to an abrupt end... This solution does not seem to have been thought through fully. The idea is that, to identify arrangements caught under these rules, an employer (or indeed HMRC) should be able to apply a simple distinction between a voluntary benefit and one in which the employee has no choice (the latter being unaffected). This seems wrong in principle and would be extremely difficult to apply in practice. Surely, if a level playing field is desired, the objective should be to ascertain what benefit the employee does actually enjoy, then tax this appropriately and even-handedly, rather than looking at what the employee might have received. Contractual changes often involve convoluted points of employment law and we very much doubt that HMRC
understands the minefield it proposes to open here, in trying to apply an over- simplified distinction. Changes to contracts may be implemented by numerous different methods; however, the employer’s systems and employee documentation will not necessarily provide for an easy distinction, nor will this necessarily allow for the employer to identify any additional reporting obligation. The timing for change will also create a great deal of consternation, particularly among larger employers where changes to payroll and other systems do not ‘just happen’ but have to be planned (and paid) for. Many benefits (particularly cars) are agreed perhaps on the basis of an employer leasing commitment for three or four years, and a material change mid-term may have substantial cost implications. If HMRC and the government has a genuine concern about salary sacrifice then we suggest the only workable solution would be to reconsider the benefit-in- kind rules, and to apply these evenly. For example, in cases where a specific statutory exemption applies, it would be possible to ‘qualify’ that exemption if implemented in conjunction with salary sacrifice. n
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Our team of experienced professionals will design, maintain and review your employee benefit arrangements so that they work efficiently and deliver real value. We can also help you to communicate pensions and benefits in clear, simple language – so that your employees understand their true value. For instance, we can help you satisfy your auto-enrolment obligations by: o Advising upon amendments to your existing pension arrangements to make them auto-enrolment compliant o Advising upon and implementing alternative pension arrangements if these provide a preferable solution than your existing pension scheme o Preparing compliant auto-enrolment communications, including employee presentations We are a BACS authorised pension payment bureau paying many 1,000’s of pensioners each month at a competitive rate, thus saving your payroll team the time and expense of doing so. We can advise on the “best” methods for making pension contributions, including salary exchange. This is backed up by a careful communications program for your employees so that they better understand the benefits. We offer tailored, practical services that work for your business, whatever your needs. Our experience and expertise means you can have confidence in your employee benefits package – knowing that with us, you are in safe hands.
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Issue 29 | April 2017
| Professional in Payroll, Pensions and Reward |
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