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This link to the Tax Information and Impact Note on the GOV.UK website also provides guidance: https://goo.gl/HtMEh3. Q: Our organisation has an employee who is paid on a monthly basis and receives a cash allowance instead of being provided with a company car. They also wish to take part in the cycle-to-work scheme and they intend to cycle to work a number of days each month. I believe HMRC have a rate of 20p per mile for using a cycle to complete a business journey; can this rate be applied to these business journeys and would the car allowance the employee is receiving have any impact on the rate? A: The 20p per mile rate for cycle payments for business travel is referring to motor cycles not bicycles, and there is no mileage rate for using a bicycle for business miles. In many cases a car allowance is usually given to employees to assist them in buying and/or replacing the existing car or as an alternative to an actual company car. This car allowance would usually not affect any payment for business journeys but it depends on how the employment contract of employment is written as to what elements are covered in respect of the car allowance. Q: We have received a request from our human resources team in regard to a long-serving employee who is retiring and for whom the company wishes to pay this exiting employee a £50,000.00 retirement gift in the form of a cheque. Please can you advise how we should deal with this scenario? A: Where the employer gives the employee cash as a ‘gift’, this amount will need to be processed via the payroll as it is subject to pay as you earn (PAYE) income tax and Class 1 NICs. Even if the employer had a long-service award scheme in place, the fact that this payment
is ‘cash’ means it would always be subject to PAYE and NICs through the payroll. Q: Our bureau has a client who has recently started a business and is now a new employer. What is the automatic enrolment staging date for this client? A: All new employers paying PAYE income for the first time between 1 April 2012 and 30 September 2017 will have a staging date of between 1 May 2017 and 1 February 2018. For example, where a new employer has the first occurrence of PAYE income between 1 October 2016 and 30 June 2017 the staging date will be 1 January 2018. The Pensions Regulator has provided a table of dates which can be accessed from the following link: https:// goo.gl/ekOn4F. Q: I have discovered that on our monthly payroll we have an employee who is set up as a director but for whom for the past four years salary has been processed for Class 1 NICs as a normal employee, rather than operating the annual NICs rule. Please can you advise on how we are able to correct this scenario and previous tax years? A: The employer must apply directors’ NICs correctly to the current tax year now. The method you are currently using could be seen as applying the alternative method of calculation whereby a monthly or weekly earnings period is applied until the final salary payment of the tax year and then the annual earnings period are applied in this final period. This would then correct and resolve the current tax year 2016/17. For previous tax years the employer should: ● recalculate the NICs using the annual earnings period and where appropriate send a RTI earlier year update return for each affected tax year to HMRC to correct the NICs due, and ● pay over any additional NICs due to HMRC as soon as possible. For any years that are prior to RTI the employer will need to send amended P14 and P35 returns for each tax year. The error must be disclosed to HMRC which may mean that there is interest and penalties due for not operating NICs correctly in the first place. Also, the employer cannot recover any primary NICs from the employee for the previous closed tax years. n
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Issue 28 | March 2017
| Professional in Payroll, Pensions and Reward |
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