COMPLIANCE
Penalties There are no statutory penalties for sending HMRC late PAYE settlement calculations. However, as mentioned earlier, there is a risk that the PSA could be revoked by HMRC if it doesn’t receive the calculation by the payment date and a Regulation 110 Determination would be sent. A late payment penalty of 5% of the outstanding amount could apply if the payment isn’t made within 30 days of the due date. Another 5% is incurred if there are amounts outstanding after six months. Finally, a further 5% penalty applies for amounts outstanding for more than 12 months from the due date. Statutory interest will apply to overdue payments of the PSA liability. Summary The PSA process can be complex but if operated correctly provides a useful tool for employers to manage unexpected or irregular tax liabilities on employee benefits. If you’re still not certain whether you should apply for a PSA, see our decision tree here: https://ow.ly/Sj8250SyBwX. n
grossed-up tax and class 1B NIC amount due. The employer then has 30 days to appeal the determination notice. PAYE settlement calculation The PAYE settlement calculation itself is simple but up to three calculations may be required; one that covers employees who are English and Northern Ireland taxpayers, another that covers Welsh taxpayers and one than covers Scottish taxpayers. HMRC has thoughtfully produced a booklet under its Guidelines for Compliance series – Help with PAYE Settlement Agreement calculations (GfC1) that goes into further detail on the PAYE settlement calculation. The calculation itself isn’t an exact science and HMRC is flexible on the approach used by employers, as it recognises that it can be difficult to apportion certain benefits. HMRC will accept a sensible approach used for benefit apportionment purposes. The actual cost or the apportioned benefit cost is then grossed up at the relevant employees’ marginal rate of tax. If an employee doesn’t pay any tax, then it’s
taxed under the PSA on its first marginal rate. For Scottish rate taxpayers, this would be at their Starter rate. For England, Wales and Northern Ireland taxpayers, this would be at the basic rate. The class 1B NIC liability is then calculated on the value of the benefit and the grossed-up tax. Technical and other aspects There is a technical aspect to PSAs, often overlooked by employers, in connection with the NIC position. Any benefits provided which are liable to class 1 (both the employer’s and the employee’s) NICs covered by the PSA from the year that it applies up to the point that the PSA has been signed by HMRC must have both class 1 employer’s and employee’s NIC operated. Any benefits covered by the PSA provided from the date it was signed by HMRC will be subject only to class 1B NIC. In practice, I have rarely seen HMRC pick up on this point and it often accepts a PSA calculation with only class 1B NIC operated. However, from a technical standpoint, this does potentially give rise to an underpayment of employee class 1 NICs.
Go beyond the basics of payroll administration PAYROLL SPECIALIST CERTIFICATE
ENROLMENTS CLOSE 23 SEPTEMBER
The Payroll Specialist Certificate online qualification takes individuals beyond the basic knowledge and skills of payroll administration, into the complexities surrounding payroll legislation and contractual obligations.
Developed, delivered, assessed and awarded IPP Education
Visit www.ippeducation.co.uk or scan the QR code for details and to book your place
Scan to book
OFQUAL REGULATED
A subsidiary of the Chartered Institute of Payroll Professionals
19
| Professional in Payroll, Pensions and Reward |
Issue 103 | September 2024
Made with FlippingBook - Online magazine maker