Payroll insight
taxable on the employee it is taxed on the employer business by counting towards business profits instead of being deducted from them. The table can be helpful when constructing an expense claim form for employees to complete or when creating expenses protocols for checking that expenses are being taxed on the employees or included in the accounting process which feeds into the business tax return. Once again, a comprehensive list of expenses payments can be found in HMRC’s booklet 480, as can definitions of business travel, subsistence and entertaining expenses. Cash and non-cash vouchers A ‘cash voucher’ is something which is redeemable for cash to approximately the same value as the cost to the business of providing the voucher, whereas a non-cash voucher is only redeemable for goods and services. Cash vouchers should always be payrolled in the pay period in which they are given and subjected to pay as you earn (PAYE) and class 1 NICs. However, non-cash vouchers are still liable to class 1 NICs but should be declared in a P11D return unless the business has agreed to payroll benefits in kind with HMRC (http:// bit.ly/2H5LAuV). Some vouchers, such as those qualifying as a trivial benefit, are exempt but must still be reported. Company cars and vans One of the most common and costly errors made by employers relates to the private use of company cars and vans by directors and employees. The term ‘company car’ or ‘company van’ relates to any vehicle provided by a business to its employee or a director. Errors can arise when vehicles available for private use are not identified, the wrong list price or CO2 multiplier is used, and where private fuel provided is not reported in the P11D returns or payrolled. It is also important for the business to be able to reclaim VAT on the fuel purchases – but to do this the employee must retain all receipts to avoid the VAT element being disallowed, which can have an adverse effect on the employer’s cash flow. Bearing the cost of income tax As long as items are classifiable as minor, irregular or not practicable to operate PAYE or value for P11D inclusion, they can be
included in a PSA. Bear in mind though that due to the grossing up calculation and the class 1B employer’s NICs due, this method can be costly to the employer – especially where higher and additional rate taxpayers are concerned – but it is up to every business to decide whether this is a cost it wishes to bear. ...is taxed on the employer business by counting towards business profits... PSAs cannot be retrospective. For existing PSAs, the requirement to renew annually has been removed from 6 April 2018 and been replaced by ‘enduring agreements’, which are only renewed where there is a change or annulment. A brand-new PSA should ideally be in place by the start of the new tax year – so applying to HMRC in February is probably a good idea. This also allows items which may carry a class 1 NICs liability (and which should otherwise be processed through payroll for the pay period in question), such as vouchers, to be included in the settlement instead of being taxed on the employee. For further information see http://bit.ly/2WsyfSJ and for further guidance see http://bit. ly/2VqsSHu. Payrolling Has your business or client chosen to payroll benefits in kind? Currently there is a facility to payroll most benefits in kind but beneficial loans and living accommodation benefit cannot be payrolled. Whilst payrolling benefits removes the need to make P11D returns, it does not remove the need to complete and submit a P11D(b) return to HMRC by 6 July following the tax year in which the benefits are provided and pay over the class 1A NICs due on the benefits by 19 July to avoid a penalty. Further information can be found at http://bit.ly/2uL3egN and examples at http://bit.ly/2JoLnoq. Payrolling is generally a good idea, because it means that employees tend to be paying the tax on their benefits whilst enjoying them, rather than being assessed a year later. n
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| Professional in Payroll, Pensions and Reward |
Issue 51 | June 2019
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