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A: It depends on the circumstances: if the employee still is liable to class 1 NICs on their pay the student loan deduction will still apply. For example, the employee could be temporarily seconded to work abroad and the earnings could be subject to class 1 NICs for first year; or a Form 1 may have been applied so that class 1 primary (employee) NICs will be deducted for at least two years and it would follow that the student loan should be deducted. Even if the student loan does not need to be deducted via the payroll, it may not cease the employee’s liability to pay this. The employee should contact the Student Loan Company to ascertain their liability. Q: We are assessing our employees who receive childcare vouchers. One employee who has been classed as a higher rate tax payer in the past appears to have become a basic rate tax payer. Based on the following information would you agree? Salary 2019/20: £50,972.06 Taxable benefit: £1,327.58 Pension at 7%: £3,568.04 salary sacrifice Tax code: 1250L A: After adding the benefit to the salary and reducing it by the salary sacrifice and personal allowance of £12,500 the taxable pay is assessed as £36,231.60. As the basic rate tax band has increased to a maximum of £37,500.00 this current tax year (2019/20), the employee based on the information provided is now classed as a basic rate tax payer and therefore entitled to have £243.00 worth of childcare vouchers free of tax and NICs liabilities.. Q: I have a challenge where I need to explain what a change in tax basis is to an employee/pensioner. I am trying to keep this to one or two short sentences. Can you suggest how best I can explain this please? A: This link to HMRC's PAYE Manual explains an employee’s tax code: http:// bit.ly/2ITbHYl. I have also included the following extract as although it is longer than a couple of sentences, it is easy to understand. “The week 1 / month 1 basis gives a proportion of any allowances and rates of tax for each pay period. However, it differs from the cumulative basis in that it ignores previous pay and tax. In effect all payments are taxed as though it was week 1 or month 1 of the tax year.” n
● Deductions made by an employer that is a higher or further education institution for the provision of living accommodation and the accommodation offset does not apply (NMWM10190). Q: There are several employees who donate to ‘give as you earn’ and the employer is withholding a percentage for admin fees. Should this be deducted from net pay rather than tax free? A: The process that should happen is the employee could donate, say, £300 for example, and all the money will go to the payroll giving agency. The agency can deduct an admin fee from the donation, but the employer cannot as the employee has not agreed to this. In addition, had the employee agreed to the admin fee it would not be exempt from tax, so would have to be deducted from net pay after PAYE and NICs have been applied. Q: We have an employee who is a doctor working for a National Health Service Trust and moves from one hospital to another for training. As far as we know the employee is not moving to a new house but has been told up to £8,000 in travel costs will be paid for relocation free of tax and NICs. I believe this to be incorrect as the employee has not relocated to a new property. Can you advise please? A: This depends on the employment contract which sounds like a rotational contract. If the employee is not moving their main residence then there would not be an exemption from tax and NICs. Usually each hospital in the rotation is operated by a different Trust and because the doctor will work at only one hospital at a time it would be classed as a permanent workplace so no exemption applies for travel from home to the hospital. A less common situation would be where there is a single contract for a five- year training programme, and in this case the individual hospitals could be seen as temporary workplaces as each duration could be less than twenty-four months. HMRC has provided information specifically on junior doctors on rotational contracts which can be found at http://bit.ly/2Vz2dr9. Q: Please can you confirm whether we should or should not be deducting student loans from employees who are currently working overseas?
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| Professional in Payroll, Pensions and Reward |
Issue 51 | June 2019
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