MY CIPP
The CIPP's Advisory Service team provides answers to popular questions
Q: Do expenses form part of attachable pay for the purpose of calculating deductions under an attachment of earnings order? A: Payments the employer makes to reimburse expenses the employee incurs in the employment are not within the definition of attachable pay for attachment of earnings orders. If you are unsure whether a particular item is within scope you could contact the originator of the order to seek confirmation. Q: An employee who is being made redundant this month had purchased a bicycle under the cycle-to-work scheme. The salary reduction was first due to occur this month. Are we able to deduct anything more under salary sacrifice? A : Unfortunately, you are not able to make any deductions through salary sacrifice. You should refer to the terms of the agreement reached between the employee and the employer to establish what happens if, amongst other things, the employee ceased employment during the loan period. Such a relevant provision might, for example, require return of the cycle and/or permit a deduction from the employee’s net pay. If the cycle is less than five years old and ownership is transferred to the employee, a taxable benefit arises based upon the cycle’s age at the date of transfer, its original cost and the acceptable disposal value percentage. The employer would pay class 1A National Insurance contributions (NICs) on this amount. For reference purposes, see pages EIM21664–EIM21668 in HM Revenue & Customs’ (HMRC’s) Employment Income Manual (https://bit.ly/3gmAsd2). Q: An employee would like to buy their employer-provided laptop from the business. Is there a reportable benefit?
A: As the company owns the laptop, which the employee is purchasing, there would be a transfer of an asset and therefore a taxable benefit arising under section 206 of the Income Tax (Earnings and Pensions) Act 2003. The taxable benefit would be reported in the P11D return at section A. The cost of the benefit would be the market value of the asset at the time of transfer less any amount made good by the employee. Even if the amount made good reduces the taxable benefit to zero, this will still need to be reported in the P11D. Q: A third party customer wishes to pay a cash bonus to a client’s employees for their hard work during the coronavirus pandemic. Is this taxable? A: Yes, this will attract both PAYE (pay as you earn) income tax and class 1 NICs; however, the collection of this isn’t as straightforward as normal. When an award is given to an employee from a third party, it is classed as a third-party award. As this award is being given in cash, the following must be applied. The third party must process the value of the award for PAYE tax purposes, which mean obtaining details from each employee being given the award. The third party would then process the payment via their payroll for tax purposes only, with many grossing this up so that the employee receives the full cash amount. The employer must then be notified of the cash amount gifted and the tax associated and paid on the cash given. The employer then adds this to their employee’s PAYE record as a class 1 NICs liability only, thus both the employee and employer paying class 1 NICs on the value. Guidance on third party awards is available here: https://bit.ly/2K1OC84 and here: https://bit.ly/3mvjIlx.
Q: An employee has received a temporary National Insurance number (NINo) due to the Coronavirus pandemic. Should we operate this in the payroll system? A: You would not use the temporary NINo in the payroll system as they are not accepted by the Quality Standard. If, when submitting a full payment submission (FPS) for the employee, the employer does not know their NINo, the NINo field should be left blank but the employee’s date of birth and gender entered in the appropriate items. See page NIM39110 of HMRC’s National Insurance Manual (https://bit.ly/3qCvRbJ) for guidance. Q: How many keeping in touch days are parents entitled to during statutory shared parental leave (SShPL)? A: For the purpose of whether a parent is considered to be ‘working’ which would affect payment of statutory shared parental pay and continuation of entitlement to SShPL, a parent can undertake work on twenty SPLIT (shared parental leave in touch) days. Q: Why is there a fluctuation of 20p in an employee’s tax deduction this month? A: The fluctuation is due to the rounding in the taxable pay amount (e.g. after deducting the tax free pay), as the calculation of the tax is based on whole pounds. When working out income tax cumulatively under pay as you earn, eventually the previously ignored pence make a whole pound and then 20% of this is 20p, which is where the difference comes from. Q: When submitting a P46(Car) return for an employee who is giving up a cash allowance and taking a company car, do I show the annual value of the
| Professional in Payroll, Pensions and Reward | February 2021 | Issue 67 8
Made with FlippingBook - Online magazine maker