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settlement agreement would not attract these deductions, and dependant on the ex gratia payment being subject to NICs or not, this factor will determine whether they should be considered for them. Q: We have an employee who currently earns an annual salary of £22,000 per year and also has a plan 2 student loan in place. So far this year their gross pay does not reach the annual earnings threshold so no student loan deductions have been taken. However, in their June 18 pay they received a £1,000 bonus which increased gross pay, so a deduction occurred. If their gross pay to date does not reach the £25,000 threshold by the end of the tax year, should I refund this deduction? A: Firstly, remember student loan deductions are based on a monthly or weekly threshold when you run the payroll each month, so yes student loans deductions will have to be taken by the employer and paid over to HMRC accordingly if the employee’s pay reaches the monthly threshold in any single month. If at the end of the tax year 2018–19 the employee’s annual salary plus bonus (gross taxable pay to date) falls below the annual threshold they can simply apply to the Student Loan Company (SLC) for a refund but you the employer would not refund any deductions. Unfortunately, the SLC and HMRC currently only reconcile student loan deductions on an annual basis, so the employee will not be able to apply to get a refund until at least May or June 2019. Q: Currently we pay shift premiums one month in arrears, so any shift premiums worked in March would be paid in April which is where we would take the ‘ordinary pay figure’ from for the purposes of gender pay gap (GPG) reporting as this includes the snapshot date of 5 April. What is defined as ‘ordinary pay’ in
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Q: I am being challenged by a colleague regarding childcare vouchers and the basic assessment that we are required to carry out each year. Please can you advise why we do this? A: The law changed on 6 April 2011 so that any new entrants to the employer supported childcare voucher scheme must be assessed annually. The employer is required to carry out the basic earnings assessment to establish which type of tax payer the employee is. From that the employer will know how many childcare vouchers (CCV) they can give the employee tax and National Insurance (NI) free. The aim is that all types of tax payers should receive the same amount of tax relief on the CCV. Without there being a liability to tax or class 1 National Insurance contributions (NICs): basic rate tax payers can receive a maximum £55.00 per week worth of CCVs; higher rate tax payers can only receive a maximum of £28.00 per week of CCVs; and additional rate tax payers can receive a maximum of £25.00 per week of CCVs. If the employer provides more than these values the difference must be reported in a P11D return for tax and NICs deducted through the payroll. The government has provided guidance regarding the way the employer should carry out the assessment at this link: https://bit.ly/2v5UHET. Q: A new employee joined the company recently, and the date on the P45 form provided is October 2017 with a tax code of 0T month/week 1.
Do I apply the 24-May rule to the code, so that 1185L month/week 1 is applied instead of the 0T code? A: Whether the employee joined the company before or after the 24 May does not apply here. Because the tax code on the P45 is 0T, this means it supercedes the rule and you will have to use the tax code on the P45 form. HMRC provide a calculator to work out which code to use for a new employee which can be found at https://bit.ly/2A7se7c. If you follow the questions asked you will be guided to use the code from the form P45. The employee should contact HM Revenue & Customs (HMRC) to request they sort out the correct tax code for them. Q: What earnings should be considered when calculating student loan deductions? I have some employees who will either be getting a settlement agreement or an ex gratia payment; are these kinds of payments included for student loan deductions? A: All earnings which are subject to class 1 NICs will be considered for the student loan deductions. Hence, I can confirm a
| Professional in Payroll, Pensions and Reward | September 2018 | Issue 43 6
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