Payroll insight
What are your views on the extent of employer understanding of the implications of the changes? Samantha: We have to acknowledge that 2016/17 was a year of elections – general, local and, of course, the EU referendum – which have played a significant part in the delay to the normal publication timetable for HMRC. However, late publication of draft guidance appears to becoming the norm when it comes to new or revised policy delivery. This does not help employers, or the professionals (service delivery, advice and software solutions and design) who serve employers to be able to prepare well and ensure good compliance from day one. No revised P46(car) and equally no indication of what the revised P11D return (although by now we would hope to have sight of it) is also no help in guiding our understanding of how the revaluation of the cash equivalent will work in practice. Susan: From the employers I have spoken to, those with salary sacrifice schemes are generally aware of the impact. There is a concern for those with other forms of optional remuneration such as car versus cash alternatives, who have not necessarily realised this legislation applies to them. However, with the final legislation published less than three weeks prior to the start of the new rules, it is likely there will be areas of non-compliance, especially in the first year. This is not helped by little clear guidance on some of the problem areas from HMRC. For example, the rules cover pre- employment and it is not clear at what point they are triggered. Many senior individuals are used to negotiating their package in the run-up to joining an employer and these discussions could be caught. Those employers that payroll benefits in kind have struggled as they have an immediate requirement to have their processes in place for new joiners after 6 April 2017. For employers that complete P11D returns, the impact of making sure the right amount of the benefit (cash equivalent) is calculated will not be felt until the completion of the 2017–18 P11D returns at the end of the tax year and before 6 July 2018. For employers that have registered for payrolling benefits in kind for 2017–18, HMRC has recently recognised that there
Richmal Price payroll advice team leader, Employment Advice Services, Peninsula
will be a burden on them as they may need to send two separate returns for the same benefit in kind. HMRC has therefore proposed the following concession for employers in this position for 2017–18 only. Where the employer has registered with HMRC to payroll benefits in kind outside of OpRA for the 2017–18 tax year and is deducting tax for a benefit in kind which is subject to the OpRA reform/ rules, there will be no requirement to complete a P11D return as long as the employer reports the relevant amount (per the valuation rules in ITEPA) along with the taxable amounts for payrolling periods through real time information. The relevant amount under the ITEPA OpRA legislation is the higher of: ● the amount foregone (the amount of salary sacrificed), or ● the modified cash equivalent of the benefit. This concession only applies to employers that registered to payroll benefits in kind for 2017–18 outside of OpRA and have been payrolling the relevant amounts where there is tax due. Claire: I think most are concentrating on the payrolling of benefits and haven’t really looked at the tax implications of the salary sacrifice legislation. With the constant changes to payroll legislation, I think it is difficult for employers to keep up; especially when the documentation isn’t even finalised. Richmal: I think there are employers that are not aware or au fait with the changes from April this year and how these will affect them. I believe some companies will carry on the way they are with their existing salary sacrifice schemes, without knowing that from April 2018 the cash equivalent of the benefit (or the taxable value of the benefit if it is higher than the cash equivalent) will be liable to tax. They might potentially then only be ‘stung’ when it comes to P11D return submission time for the 2018/19 tax year when discovering the true implications
contributions and cycle-to-work. With these areas not covered by the change many employers are not impacted. The most significant work the vast majority of employers have had is communicating to employees the changes to their salary sacrifice arrangements. This helps to mitigate any tensions relating to the changes. It is beneficial that the revisions are government-set rather than company-led, and employees may even have seen information in the press. I would recommend employers – if they haven’t already – to give their workforce sufficient information to appreciate their individual financial position to help them make well-considered decisions going forward. There is an increased admin burden on all employers with such arrangements now; for example, in reassessing staff benefits on an employee-by-employee employers with larger teams and specialist software in place may well be in a better position to navigate the transition than those that do not have this. Claire: At the moment, clients have been very quiet about the subject. Most already have benefits packages in place and have time to review their offerings over the coming tax year. I think when the 2016/17-year P11D returns are out of the way employers will start asking more questions and start looking at how to hand the new changes and review their offerings. basis and tracking this information (keeping an audit trail). It means
Claire Treadwell, senior bureau manager, IRIS Software Group and Cascade Human Resources
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| Professional in Payroll, Pensions and Reward |
Issue 34 | October 2017
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