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Policy hub
Policy hub
Off -payroll working (IR35) and other employment status considerations Mediumand large organisations in all sectors of the economy will become responsible for assessing the employment status of individuals whowork for them.
reimburse the employee. How should this be dealt with for tax and NICs purposes? A: There is an exemption for the payment of legal fees where those fees are in connection with the termination of employment and whereby the payment is made directly to the solicitor involved. Legislation in section 413A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) discusses this exemption. As the employee has already made payment to the solicitor, any reimbursement would not come within the above exemption, however, the only reason that the payment is being made is because of the termination of employment. This would make the payment a relevant termination award under sections 401 to 403 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), and so subject to the £30,000 exemption from income tax, class 1 and class 1A NICs. For reference, see: https://bit.ly/2ZAGfHU. Q: In this tax year, the gross wage bill of one of the payrolls we process looks like it could exceed £3 million. Are we liable to pay the apprenticeship levy in the current tax year, or must we wait until the next tax year? A: HMRC’s Apprenticeship Levy Manual ALM09200 provides an excellent example of this scenario: “Example 5 – Single employer whose pay bill increases unexpectedly over the tax year Company E is not connected to any other companies. It had an annual pay bill of £2.5 million in the tax year 2016 to 2017, and had no reason to believe that its pay bill would increase in the tax year 2017 to 2018, so there is no need for Company E to report and pay the levy in April 2017. However, in October 2017 Company E’s pay bill increases significantly, leading the company to believe that its annual pay bill for the year will exceed £3 million. Company E must therefore begin reporting and paying the levy. Company E will still be entitled to the full annual levy allowance of £15,000, pro-rated over the 12 months of the tax year. Because Company E does not begin reporting the levy until October, its pro-rated annual levy allowance for October will be £8,750 (£1,250 x 7 – because October is the seventh month in the tax year).” For reference, see: https://bit. ly/3i8HiFu. ■
has only worked eight weeks within the reference period, for example, then total pay for the period should be divided by the eight weeks that have been worked to establish ‘normal remuneration’ for a week’s holiday pay. For reference, see: https://bit. ly/39GSUL9. Q: As an employer, we operate a three-month postponement period on automatic enrolment (AE) for all new starters – is it mandatory to advise employees that we are doing this? A: An employer must notify their employees if they are using postponement. Staff must receive written notification to inform them there will be a delay in the AE process. Notification must be issued within six weeks from the date the employees become eligible to be automatically enrolled into the pension scheme. For reference, see: https://bit.ly/3ueeWOS. Q: We have received a direct earnings attachment (DEA) for a contractor who is processed as an off-payroll worker. We are aware that this individual is not an employee, but the Department for Work and Pensions (DWP) is insisting that we should operate the DEA. Any advice would be welcomed. A: Contractors who are captured by the off-payroll working rules have their deemed employment income processed via PAYE for the purposes of tax and NICs only. The reason for this is that they are not classed as employees, therefore any other deductions, including DEAs should not deducted from them. Guidance published by Her Majesty's Revenue and Customs (HMRC) confirms that only tax and NICs should be deducted. Employers must ensure that the off- payroll worker indicator is ticked within their software when processing an off-payroll worker to avoid deduction requests being sent. If deduction notices are still sent, then the CIPP advises that you contact the sender to advise them you will not be making the deduction. Q: We have an employee who is leaving under a settlement agreement. It appears that the legal fees have been settled personally by the individual. Under the terms of the settlement agreement, the company are liable for the payment and so now must
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| Professional in Payroll, Pensions and Reward |
Issue 75 | November 2021
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