MY CIPP
How do you treat e-vouchers and NI purposes?
The CIPP’s Advisory Service team provides answers to popular questions
Tax treatment of payments made where an employee stays with a friend or family member Q: When an employee stays at a friend or relative’s house instead of a hotel, the employer makes a fixed payment to the employee per night. What’s the correct tax treatment of this? A: Since the abolition of dispensations, there’s no scale rate or benchmark rate available for overnight stays at a friend or family member’s house. Instead, any payment to reflect such a stay (that isn’t to reimburse a directly incurred expense) is considered a round sum allowance and is wholly liable to pay as you earn (PAYE) income tax and class 1 National Insurance contributions (NICs). The following link corroborates this: https://ow.ly/Hc8I50PK3sK.
would attract liability to income tax and class 1 NICs. You can account for the tax due by processing them through the payroll as you have outlined, but only if the organisation has registered to payroll this benefit category before the commencement of the relevant tax year. As you’ve indicated this registration hasn’t been undertaken, the vouchers would have to be reported on a P11D under section C. The NICs meanwhile, must be accounted for through the payroll, regardless of whether the organisation has registered to payroll the benefit. In the pay period(s) a voucher is gained by an employee, an element should be added to their pay which is NICable, but not taxable, pensionable or affecting gross pay. A possible alternative could be to add these vouchers under a PAYE settlement agreement (PSA). It might be worth highlighting this option to your client. Apprentices and the national minimum wage (NMW) Q: A new employee joined our organisation on 15 May 2023, with the job title of apprentice finance administrator. They haven’t signed an apprenticeship agreement and aren’t due to be enrolled on to their college course until September 2023. It hasn’t been reported via payroll that they’re on an apprenticeship. Should we be paying them at the apprenticeship NMW rate or at the standard rate for their age? A: The apprenticeship rate can only apply from the pay reference period in which the person starts their apprenticeship. If they’ve been hired earlier than this, the rate to apply will be based on the minimum wage rate for their age bracket. Once they start their apprenticeship, they need to sign the apprentice contract of employment, and for the first year, they could be paid the apprentice rate or the age-related rate (this is the employer’s choice). However, for the second year of the apprenticeship onwards, the apprentice rate won’t apply, and they’d need to be paid the minimum wage rate based on their age banding.
What happens to SMP where there’s a TUPE transfer?
Treatment of statutory maternity pay (SMP) in Transfer of Undertakings (Protection of Employment) (TUPE) scenarios Q: We’ve taken over a new business and its employees are being transferred to us under the TUPE Regulations. One of the employees is currently on maternity leave and in receipt of SMP. Can you confirm whether the new employer should take over payment of the SMP to the employee? A: If this is a true TUPE situation, this won’t affect SMP. In TUPE arrangements, the employee moves to the new employer’s payroll, but nothing should change for the employee; it should be like they haven’t moved employer. So, the new employer takes over where the old employer left off, paying SMP to the employee to ensure payments continue seamlessly. The employee may be transferred onto a new payroll, but their SMP payments will not be affected. See here for further details: https://ow.ly/wrLm50PK8p0. Can you reinstate a previously cancelled employer PAYE scheme? Q: One of my clients ceased her payroll scheme in September 2022 as she was decreasing her workload in preparation for retirement. Her business has recently taken off again, so she wants to re- register as an employer. Does she need to apply for a new scheme or is there a way of reinstating her previous scheme? A: We would refer you to the following guidance from HM Revenue and Customs (HMRC): https://ow.ly/obX350PK6wU. This states:
How do you treat e-vouchers for tax and NI purposes?
Tax and NIC treatment when providing e-vouchers Q: Our client’s employees collect points and can trade them for e-vouchers from different stores such as Amazon, Adidas, Mango and Ikea. We’ve been advised to add this to payroll for tax purposes and then deduct the net value so that tax is calculated but employee pay doesn’t increase. There’s no mention of NICs. Isn’t the correct process to ensure that non-cash vouchers are reported on P11Ds for tax, but NICs are deducted in real time through the payroll? The employer isn’t registered to payroll benefits, hence the P11D requirement. I don’t think the NICs exemption applies to those vouchers. Is this right? A: Non-cash vouchers such as these
| Professional in Payroll, Pensions and Reward | October 2023 | Issue 94 10
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