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Foundation Degree in Payroll Management Join over 15,000 qualified payroll professionals in the UK
Q: We have five connected companies, the largest of which has a pay bill greater than £3 million per annum. I understand that we only have one apprenticeship allowance of £15,000 because we are connected companies, but do we aggregate all five companies when calculating the levy or treat each company separately? A: As all the companies are connected this will mean that all the companies are liable to pay the levy and it will need to be calculated on all payrolls. You can decide to split the levy allowance exactly how you wish over the five PAYE schemes, but remember that even though the small companies when taken in isolation have a pay bill of under £3 million, they will still pay the levy as they are connected payroll. In other words the levy should be calculated on each payroll individually and then depending on how the levy allowance has been split will affect how much each connected company has to pay. Q: My question is about optional remuneration. If an employee has the choice of cash allowance or a company car and decides to take the cash allowance of £200.00 per month which is subject to PAYE/NICs via the payroll, what would be reported in the P11D return? Also, what happens if the employee doesn’t take the cash allowance but chooses the car instead as the benefit in kind? A: Where the employee has the choice between a company car or a cash allowance, three things need to be considered: firstly, what is chosen; secondly, is the car cash equivalent benefit in kind (BiK) value higher or lower than the car allowance; and, thirdly, if the car allowance is higher than the company car BiK, is the employee allowed to receive the difference as a cash allowance which is paid through the payroll. If the company car is chosen and the car allowance and company car cash equivalent are the same then the value to report in the P11D is the same as normal for the company car. Where the car cash equivalent BiK is less than the cash allowance, but the employee is not entitled to receive the residue, then you report the higher value. However, if the employee is allowed to receive the residue in the form of a cash allowance
and it is paid through the payroll that has been subjected to PAYE and NICs you would only report the normal car cash equivalent BiK. Q: An employee who is taking part in our cycle to work scheme has been loaned a bicycle that cost the company £475.00 inclusive of VAT plus accessories of £29.99. This employee has asked to purchase the bicycle at the end of the agreement period. On what should the calculation for the second-hand value be based? A: The calculation of the original price of the bicycle would not include the safety equipment. At the end of the agreement if the employer decides to allow the employee to keep the bicycle the employer must decide what needs to be reported as a benefit in kind, using the second- hand value of the bicycle excluding the accessories. For easement, HMRC allows employers to use a simplified valuation approach. It all depends on the original price of the bicycle, and how old the bicycle is at the date it is transferred to the employee. In your scenario, the original price of the bicycle is under £500.00 – and estimating the age of the bicycle as being one-year old – an acceptable second- hand value would be 18% of this value; i.e. £85.50. If the employee paid this amount or more to the employer then the employer would not be required to report anything in the P11D return. Where the employee pays less than the second hand-value for the bicycle (£85.50), the difference would have to be reported in the P11D. Finally, if the employee is given the bicycle but does not pay the second- hand value, this whole second-hand amount is reported in the P11D. HMRC’s Employment Income Manual provides guidance at https://goo.gl/JBx6Se. n
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Covering a comprehensive range of topics, the Foundation Degree in Payroll Management offers students a work-based learning experience to gain knowledge, understanding and confidence in their role, and provide a fundamental grounding in payroll administration.
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Issue 32 | July/August 2017
| Professional in Payroll, Pensions and Reward |
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