PAYROLL INSIGHT
of the cost both for the employee and themselves.
salary sacrifice arrangement, with same remuneration package. Richmal: I do not think these changes are entirely fair. If HMRC’s end goal was to reduce the numbers of those entering into a salary sacrifice scheme, or to dissuade employers from creating them, then I believe different measures could have been put in place. For example, stopping salary sacrifice schemes altogether except for childcare vouchers, cycle to work, low emission cars and pension schemes. In this way, it would be clearer for employers to know where they stood. Samantha: Increasingly the concept of fairness is entering policy consultation papers and discussions, but there is nothing remotely fair about the tax system. When considering salary sacrifice we immediately think about the increasing number of employees who are excluded from all or some parts of their employer reward offerings simply because they are paid on minimum wage rates: is that fair? We also need to remember that there is no legal obligation on an employer to design and offer attractive pay, pensions and reward packages. Minimum hourly rates and minimal contributions to a workplace pension through automatic enrolment are legal obligations. However, when it comes to benefits in kind – perquisites (‘perks’) – these are entirely optional and led only by the business needs of the employer, employee demand or sector demand. Susan: Government in recent years has expressed the desire to have a simple and fair tax system, but I do not think these changes achieve that objective. I also think we need a clear system with comprehensive guidance so employers can understand and operate the rules correctly. This change resulted in pages and pages of extra legislation and it will be interesting to see if it delivers on the government objectives, plus the extra £85 million tax in 2017/18 rising to £260 million in 2021/22. To what extent do you think the new rules will curtail salary sacrifice/OpRA going forward? Richmal: I think that in the next two years there will be a steady reduction in salary sacrifice schemes, other than those for which the existing tax benefit will continue (i.e. childcare vouchers, auto-enrolment
Samantha Mann MAAT, MCIPPdip,
Based on your experiences to date, are all employers correctly calculating the cash equivalent of benefits caught by the new rules and correctly operating PAYE and National Insurance in respect of the amounts/benefits? Susan: This is hard to say. Many employers are still not payrolling benefits, so the impact will not be seen until they complete P11D returns for 2017/18 and beyond. Before then I am hopeful we will have more guidance from HMRC and possibly have some of the current problem areas in the legislation ironed out, with changes in the next Budget or Finance Bill this year. For those that are payrolling, I am concerned about whether they have managed to track all the information needed in order to check the impact of the new rules correctly, so soon after the rules have come in. There may be some catching up to do. I hope HMRC will be lenient with the application of penalties in the first year. Claire: All our clients have pre-existing schemes that are protected until April 2018. We are planning on communicating the changes so they understand the actions that will need to be taken. The materials available are limited and HMRC’s booklets 480 and 490 are not updated yet and the Employment Income Manual is not yet finalised. This makes it very difficult to put together our communication strategy. Once finalised we will provide the documentation required by our client base, to ensure they remain compliant. This will provide practical advice about what they should be looking at and how they should be communicating this to their
senior policy & research officer,
employees. As a service, we always check any new pay/deductions elements that a client requests to ensure they are correct and compliant with legislation. Richmal: I do not believe all employers are correctly implementing the new rules, or will correctly implement them in the future. Our members have been contacting us saying they are unsure of what the new rules in respect of salary sacrifices and OpRA mean for them, so we have advised each one what they need to be doing moving forwards on a case-by- case basis. There is a common perception amongst employers that the rules and regulations behind salary sacrifices are unclear and complicated, which I believe translates into the incorrect treatment of them for tax and misunderstanding of how the new rules will work. Indeed, without an accurate 480 booklet guide to taxation or an up-to-date Employment Income Manual how is that possible? There will be a significant increase to the administrative burden this year as employers revise cash equivalent calculations – particularly for those that have signed up to voluntary payrolling – to ensure that by the end of the tax year the correct values have been subjected to income tax. In your opinion, are these changes fair in terms of taxation, given that employees who enter into an optional remuneration arrangement could end up having a greater income tax liability than another employee with the same employer who receives exactly the same overall remuneration package but does not participate in OpRA? Claire: No, the idea behind OpRA is fairness and ensuring employees aren’t better off than others not entering a National Insurance purposes. Samantha: There is still much
| Professional in Payroll, Pensions and Reward | October 2017 | Issue 34 28
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