Student loan repayments The income on which student loan repayments is assessed does not include BiKs (unless these attract class 1 NIC). Employees making student loan repayments need to complete a self-assessment return. Yet, where benefits are payrolled, the self-assessment process is unable to distinguish between BiKs which are expressed as taxable income by means of the benefits code and any balancing PAYE income, and an anomaly arises. The result is that student loan repayments appear as if they are due on the whole amount, including payrolled benefits. In the absence of changes to HMRC systems, which would be the best route, a suitable workaround needs to be found to overcome this anomaly and EPG members will be happy to liaise with policy teams on this. Employment legislation Employers will need to consider that contractual terms may need to be revised, together with salary sacrifice and flexible benefits / reward statements and websites. Suitable employment law advice may need to be sought in this regard to ensure employers are not falling foul of any traps for the unwary. In a unionised setting, employers will need to formulate a way forward with the relevant union. All of which will incur upfront additional costs in professional fees, time and administration. Training and administrative focus Payroll and human resources staff will need to understand the changes being made so they can handle queries and make changes to employee handbooks and intranet information and explain payslips to employees. They will need to understand how to process the BiKs in respect of new starters and leavers. If someone has a company car with a high BiK value, for example, how will the balancing charge be treated when they leave the employment? Will they be keeping the car, or handing it back? Will they be in receipt of a termination payment? All and any such scenarios need to be carefully thought through. Engagement letters and fees Engagement letters and service level agreements will need to be reviewed for those running outsourced payroll bureaux, so that services can be defined, responsibilities specified and work fully costed out. The loss of revenue from P11D work will hit some accountancy practices fairly hard and this may not be able to be fully recouped through charging additional amounts per payslip for those employees who receive BiKs. Employers often miss the detail when it comes to preparing payslips and fail to appreciate the work which goes on behind the scenes. Further thoughts There are numerous other considerations such as employee communications, employees working under ‘modified payroll’ arrangements, double taxation agreements 8 and NICs certificates of coverage 9 mechanisms. We understand that draft legislation will be published later this year for consultation as part of the tax legislation cycle. It will be interesting to see what is planned, what effect the payrolling of BiKs has on the tax-geared penalties regime and the inevitable employer compliance focus that will accompany it. The EPG hopes that the PAYE Regulations and guidance will also be amended with our input and review. It is vital that the above matters are clear and unequivocal, and employers must understand what they are permitted to deduct through payroll so as to ensure that no employee falls into hardship.
I and other members of EPG are keen to meet you and your senior policy colleagues to discuss the above issues at a time of your choosing.
I look forward to hearing from you.
Yours sincerely,
Signed on behalf of the EPG forum non-HMRC members,
Justine Riccomini MSc FFTA AIPA Chartered MCIPD ChFCIPP EPG non-HMRC co-chair Head of tax (employment and devolved), ICAS
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| Professional in Payroll, Pensions and Reward | May 2024 | Issue 100 26
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