COMPLIANCE
Beneficial loans and other benefits on offer A cheap or interest free loan could help employees to buy season tickets or help them consolidate expensive debt. For tax purposes, there may be a taxable benefit if the amount of the loan exceeds £10,000 in the tax year. This is worked out based upon an assumed interest charge at the official rate of interest, less any interest the employee has paid. Benefits in kind that aren’t taxable aren’t treated as income for UC, so as well as most beneficial loans, other useful benefits an employer could provide in the current climate that wouldn’t impact on a UC
their pay frequency to weekly instead of monthly, to allow employees to access their earnings more regularly. Providing this isn’t done mid pay period, the transition should be smooth for payroll purposes. However, there might be UC issues. If employees are paid monthly, then one month’s net pay should fall into each assessment period, and as a broad rule their UC payments shouldn’t vary significantly from month to month if their net pay remains broadly the same. (There can be exceptions to this where the pay day is close to the beginning or end of an assessment period.) However, if employees are paid weekly, they should be aware that some assessment periods are likely to have four weeks’ net pay in them and others will have five weeks’ net pay in them. This means their monthly UC payment will change according to whether there are four or five wage payments in the assessment period. Employees may need to take care to budget for these peaks and troughs in the payment cycle. Indeed, it may be the case that in five-week periods, the extra amount means they receive no UC payment at all. There’s further information about this on GOV.UK: http://ow.ly/PaG050M344w, which can help employees understand when they might see changes to their UC award as a result of their pay frequency (see http://ow.ly/MZE250M349L). Some employers may be considering changing their pay frequency to weekly instead of monthly, to allow employees to access their earnings more regularly
out in other ways, which will require careful consideration. Some employers may want to pay or reimburse employee business mileage at more than the HMRC ‘approved’ amount. As explained in a recent publication (see bit.ly/3djadY6), this brings with it an administrative burden for employers as well as tax and NI implications for employees that they may not be aware of – and yes, you guessed it – potential knock-on effects for UC. None of the difficult UC interactions mentioned in this article are arguments for employers not to help staff. If anything, they’re arguments that the tax and benefits rules for lower paid employees could probably do with being rethought! The point of the article is to raise awareness, so that the issues can be communicated, and any impacts anticipated and even mitigated. None of the difficult universal credit interactions mentioned in this article are arguments for employers not to help staff We appreciate that many employers won’t know whether their employees receive UC or not. Even if they do, they’re unlikely to be privy to the personal circumstances that determine how the different options could impact them. One practical suggestion for employers who may have employees on UC and who want to help them by implementing one or more of the options covered, is to signpost them to a welfare rights adviser such as Citizens Advice, for guidance on how their UC could be impacted. n * Please note that this article was originally published in September 2022, when the NI rates included the 1.25 percentage point increase for the health and social care levy.
award are things like: l welfare counselling
l goods provided at a discount (provided that the amount the employee pays is at least the cost incurred by their employer in making the goods) l free or subsidised meals. It’s of note that ‘employed earnings’ for UC are defined as any amounts that HMRC treats as ‘general earnings’ – but leaving out any amounts treated as earnings under the benefits code. This means that benefits in kind which HMRC would normally treat as earnings, are not currently treated as income for UC purposes. A full list of benefits in kind not yet treated as earnings can be found in Advice for Decision Making (ADM) Chapter H3, Paragraph H3081 (see bit.ly/3S7OjWo). Although we don’t cover tax credits in this article, it’s worth us pointing out that this isn’t the same situation as for tax credits, where taxable benefits in kind are generally counted as income. Other thoughts Other solutions may not leave employees worse off or inconvenienced from a UC perspective but may still require careful thought where you have low paid employees. For example, implementing a salary sacrifice scheme to help employees with pension saving can not only save them employee NI but the reduction in contractual pay can increase their UC award. However, remember that strictly those at or near the minimum wage shouldn’t participate in salary sacrifice – and some lower paid employees may lose
This article was originally featured in Tax Adviser magazine (as a full-length version), here: http://ow.ly/T9oW50MrFeR..
| Professional in Payroll, Pensions and Reward | February 2023 | Issue 87 22
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