a total of £1,484 in tax exempt childcare vouchers per year, saving £623 in tax and NICs. David receives no relief. On TFC, David and Sarah would receive the full £2,000 top up for Amelia’s care and £669 for Oliver’s care (per annum). Their total top up is £2,669. This family would be better off financially on TFC.
Example 2: Family with children aged 6 and 10 years old
Tarun and Ameena have two girls (Gita and Heema) aged 6 and 10. Tarun is employed and receives tax exempt childcare vouchers through his work via salary sacrifice. Ameena’s employer does not offer a childcare voucher scheme. Both Gita and Heema go to an afterschool club for 38 weeks of the year, and also attend a holiday club for seven weeks of the year. Tarun and Ameena’s total annual childcare costs are £5,301.60. As a basic rate taxpayer, Tarun receives £2,915 in tax exempt childcare vouchers per year, saving £932 in tax and NICs. On TFC, Tarun and Ameena can receive a top up of £1,060, compared to the savings of £932 through the voucher scheme. This family would be better off financially on TFC.
Note: In these examples, it is assumed that a year’s worth of childcare is 48 weeks.
Occupational pension and Off-payroll working rules – Student and Postgraduate Loans
Student or Postgraduate Loan (PGL) deductions should not be taken from either Occupational pension payments or payments subject to PAYE under the Off-payroll working rules.
Occupational pension payments
Student Loan or PGL should not be deducted from an occupational pension that is paid to a former employee. The “Occupational pension” indicator on the employee’s FPS should be selected to inform HMRC that the payment is in relation to an Occupational pension. Where Student Loan or PGL has been deducted in error, but the Occupational pension indicator has been selected, HMRC will send a generic notification message or call the relevant party to advise them to take corrective action. If the Occupational pension indicator has been selected by mistake, it should be unselected.
Payments subject to PAYE under Off-payroll working rules
Companies are not responsible for deducting Student Loan and / or PGL for workers who are engaged through their own companies. The worker will account for Student Loan and PGL obligations in their own tax return.
Where Student Loan or PGL has been deducted and the ‘Off-payroll worker subject to the rules’ indicator has been selected, HMRC will send a generic notification message or contact the relevant party to tell them to correct the issue. Where the “Off-payroll worker subject to the rules” indicator has been selected in error, it should be unselected. At present, the indicator must only be used in relation to contractors that provide services to the public sector and have been determined to be inside the Off-payroll working rules. From April 2021, however, the indicator must also be used against contractors providing their services to medium and large sized non-public sector organisations, who are determined as being inside the rules.
The worker’s FPS should be checked to ensure that Student Loan and / or PGL deduction entries are correct, and that “Occupational Pension” and the “Off-payroll worker subject to the rules” indicators have not been selected in error.
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Employer Bulletin: UK Transition Special Edition 25 January 2021
HMRC has published a UK transition special edition Employer Bulletin, which contains a wealth of information relating to new rules following the end of the transition period, on 31 December 2020.
The key areas relate to:
Trading with Europe
•
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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