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Further thoughts There are numerous other considerations such as employee communications, employees working under ’modified payroll’ arrangements, double taxation agreements and NICs certificates of coverage mechanisms. Draft legislation will be published later this year for consultation as part of the tax legislation cycle. It will be interesting to see what’s planned and what effect the payrolling of BiKs has on the tax-geared penalties regime, as well as the inevitable employer compliance focus which will accompany it. We hope the PAYE regulations and guidance will also be amended to take account of what an employer is permitted to deduct through payroll to ensure no employee falls into hardship. n Links corner Chapter 5 of ITEPA 2003: https://ow.ly/qS5U50Rp4Bb Chapter 7 of ITEPA 2003: https://ow.ly/KXrN50Rp4G0 Income Tax (PAYE Regulations) 2003: https://ow.ly/oiU750Rp4Re The ‘overriding limit’: https://ow.ly/Xf6250Rp4YY Double taxation agreements: https://ow.ly/EWks50Rp55y Certificates of coverage: https://ow.ly/obfN50Rp5aj Read the letter sent to the FST: https:// ow.ly/WejK50Rp5hn.
Training and administrative focus Payroll and human resources staff will need to understand the changes being made so that they can handle queries and make changes to employee handbooks and intranet information, as well as explain payslips to employees. How will new starters and leavers be handled? If someone has a company car with a high BiK value, how will the balancing charge be treated when they leave the employment? Will they be keeping the car, or handing it back? Will they be in receipt of a termination payment? All of these questions will need to be considered. Engagement letters and fees Engagement letters and service level agreements will also need to be reviewed if you run an outsourced payroll bureau. This is so that services can be defined, responsibilities specified and work fully costed out. The loss of revenue from P11D work will hit some accountancy practices fairly hard and this may not be able to be fully recouped through charging additional amounts per payslip for those employees who receive BiKs. Employers often miss the detail when it comes to preparing payslips and fail to appreciate the work that goes on behind the scenes. Historically, many accountancy practices have sold payroll services as a loss leader – perhaps it’s time to change this perception once and for all.
2026/27 tax year. In some cases, this may result in hardship and employers will need to consider what steps they might be able to take to mitigate that possibility. Student loan repayments The income on which student loan repayments is assessed doesn’t include BiKs (unless these attract class 1 NICs). Employees making student loan repayments need to complete a self- assessment (SA) return. But, where benefits are payrolled, the SA process is unable to distinguish between BiKs that are expressed as taxable income by means of the benefits code and any balancing pay as you earn (PAYE) income, and an anomaly arises. The result is that student loan repayments appear as if they’re due on the whole amount, including payrolled benefits. In the absence of changes to HMRC systems, which would be the best route, a suitable workaround needs to be found to overcome this anomaly. Employment legislation Employers should be aware that contractual terms may need to be revised, along with salary sacrifice and flexible benefits / reward statements. Employment law advice may need to be sought in this regard to ensure employers aren’t falling foul of any traps. It’s also advisable in unionised settings for employers to formulate a way forward with the union.
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| Professional in Payroll, Pensions and Reward |
Issue 101 | June 2024
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