Employer Bulletin, December 2016, is published

The Employer Bulletin December 2016 contains much of interest to employers and payroll bureaux.

We summarise key issues below. 

Some of the  changes are scheduled to come into effect from 6 April 2017. But at the time of writing, the law is still in draft, full guidance is not available and HMRC has not provided detailed specifications to payroll IT software houses. As a result the software for employers and payroll bureaux to use from April 2017 is being designed on the basis of best estimates. 

One of the changes relates to benefits-in-kind (BiK) provided to employees who can choose whether to take cash or the BiK; this is known as salary sacrifice or an allowance. From April 2017, employees who choose to take a BiK instead of cash will be taxed on the higher of the value of the BiK using the normal rules and the cash foregone. This applies even to BiK that would normally be exempt, for example mobile phones or workplace car parking spaces. The employer will pay Class 1A NIC on the same value.

Pension contributions, childcare provision including childcare vouchers, bicycles and ultra-low emission cars (ULEV), ie below 75g CO2/km emissions, will not be affected. 

There will be grandfathering for arrangements entered into before April 2017 until the earlier of a change in the arrangements, renewal or modification or  on April 2018. In the case of ULEVs, and school fees, the revised tax treatment will begin from April 2021.

The Bulletin also covers:

  • termination payments – as noted in our Legislation Day report, although the £30,000 threshold remains, the rules have been tightened. Payments in lieu of notice will be taxable, tax will have to be applied to the equivalent of an employee’s basic pay if notice is not worked, and foreign service relief will no longer apply. NIC will be due on elements of the payment over £30,000 where tax is due.
  • time limit for making good for BiK – will be 6 July following the end of the tax year.
  • employee liabilities and indemnity insurance – employees (or former employees) called to give evidence, for example at an inquiry, will be able to receive legal support funded by their employer tax-free. Currently only those requiring legal support because of allegations against them can benefit from the tax relief.
  • assets made available without transfer of ownership – employees will be taxed only on the period(s) for which the asset is available for private use.

Also covered is the change to the intermediaries legislation (often known as IR35) for workers’ services provided to the public sector through intermediaries. Responsibility for operating the off-payroll working rules, and deducting any tax and national insurance contributions (NIC) due, will move to the public sector body, agency or other third party paying an individual’s personal service company (PSC). The 5% tax-free allowance for general business expenses, available to workers currently applying the rules, will be withdrawn for PSCs working in the public sector. Public sector bodies will be responsible for determining whether or not the rules apply and will be required to share this information with agencies so they can operate the rules correctly.

There is also guidance on changes which have applied since April 2016, eg trivial BiK, and how employees can claim tax relief re deductible expenses of their employments, e.g. business mileage, travel and overnight expenses and professional fees,. 

The Bulletin reminds larger employers about the  apprenticeship levy which starts from 6 April 2017. This will be at the rate of 0.5% on payrolls with payrolls, or  ‘pay bills’, of over £3m (ie earnings used to calculate secondary Class 1 NIC starting from £nil).  Associated employers and single employers with more than one PAYE scheme will have to decide at the start of the tax year how they will allocate the levy allowance of £15,000 across relevant PAYE schemes.

Paying HMRC

There is also a reminder that PAYE payments must reach HMRC by the due dates (19/22 December) and be accompanied by the 13 character accounts office reference (not the employer reference) and the additional four character year and month indicators only if paying early or late. Do not leave spaces or insert spaces or punctuation. It is not necessary to pay the tax and the NIC as separate payments.

Paying PAYE electronically letters, and employer payment booklets, will be issued in January. Employers who paid electronically in the current year will be sent the former. If paying PAYE at a bank or post office using a payslip it is important to use the HMRC payslip rather than for example one produced by payroll software as the HMRC payslip will show the correct HMRC bank account.

In January the electronic payment deadline of 22 January falls on a Sunday.

There are additional topics covered in the Employers Bulletin which we have not covered in this article so we recommend that you have a look through the full Bulletin.

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