A recent judgment has bent the rules under the Working Time Regulations and moved the UK closer to EU law
Calculating the correct amount of holiday pay owed to an employee under the Working Time Regulations 1998 has historically proven to be a tricky task for employers. The regulations require employers to identify an employee’s ‘normal working hours’ and a ‘week’s pay’ when calculating holiday pay and specifically say that non-contractual hours of work should be ignored. In practice, this isn’t as easy as it sounds.
A 2011 case, Williams v British Airways, shed some light on the situation. The European court held the regulations should be interpreted in the spirit of European working time law and that holiday pay should be calculated with reference to both basic pay and any other pay “intrinsically linked” to the work, such as overtime. Now those principles have been tested for the first time in the case Neal v Freightliner 
Neal worked a 35-hour week at Freightliner’s depot in Birmingham. His contract required him to work 7-hour shifts, and also stated that he may have to work overtime when necessary. His shifts and working hours were determined by a roster system. He regularly worked up to nine hours each day and occasionally up to 12 hours to cover for his colleagues. He received enhanced pay premiums when working over and above his contractual seven hours a day. Neal believed he had to work the significant hours set out in the rosters and felt his holiday pay should reflect the actual pay he received rather than his basic salary alone.
The employment tribunal, applying the Williams case, highlighted that the Working Time Regulations do not adequately implement European law on working time. The tribunal held that hours worked by Neal over and above his contractual seven hours were “intrinsically linked” to his performance of his role, and it was irrelevant whether the overtime was voluntary or not.
It rejected the employer’s argument that workers might be encouraged to undertake paid overtime to manipulate the level of their holiday pay, concluding that, in practice, employers control the levels of overtime offered and accepted by their staff.
Neal had been underpaid in respect of his holiday pay entitlement and the parties arranged an out of court settlement.
This decision could be tested by the higher courts but, for the time being, any paid overtime (whether voluntary or not) should now be considered alongside other premiums in employers’ holiday pay calculations. In effect, these calculations are moving towards being based on workers’ average earnings in the 12 weeks leading up to their holiday.
Employers should review their overtime arrangements to ensure they have sufficient control over them, and can avoid abuse and manipulation of holiday pay. As an added complication, this decision relates to the four weeks’ holiday pay that workers are entitled to under European law. It does not apply to the additional 1.6 weeks’ holiday that workers receive under UK law. So it seems likely that the judgment will be appealed to clear up the confusion and avoid a situation where there are different rules for different weeks of a worker’s holiday. As always, if in doubt, employers should seek legal advice when calculating holiday pay to avoid receiving a costly and time-intensive tribunal claim.
Although approximately 400,000 people with higher incomes have opted out of receiving Child Benefit, parents on higher incomes who still receive Child Benefit must register with HMRC for self assessment by 5th October to avoid a steep penalty.
HMRC is currently writing to 2 million high rate taxpayers reminding them that if their income is above £50,000 and they or their partner have received Child Benefit in the tax year 2012/13, they are required to complete a self assessment tax return and pay the High Income Child Benefit tax charge.
If they fail to do so and this was intentional, HMRC says it may levy a penalty of between 10pc and 100pc of the amount due.
Introduced on 7th January this tax commences when one person earns an annual income of £50,000. Households with one person earning £60,000 or more lose the payment completely. Child Benefit is worth £20.30 a week for the first child and £13.40 a week for every sibling.
HMRC estimates around 600,000 people will be affected by the charge, which has been widely criticised as unjust because households where both partners earn £49,000 are able to keep the full payment.
If you opted out from receiving Child Benefit then no further action is required.
A spokesperson for HMRC stated, "HMRC is committed to helping people pay the right amount of tax. If you have had certain changes to your income in the last year, including those affected by the changes to Child Benefit, you have until October 5 to register for self assessment."
BrightPay has been shortlisted as a finalist in the 'payroll software product' category for the Payroll World Awards 2013! The full list of finalists will be publicised on the Payroll World Awards website, via email and in the magazine on the 30 August.
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As well as helping us to improve BrightPay, your feedback could also enable us to become one of the lucky few shortlisted for a prestigious AccountingWEB Software Satisfaction Award!
AccountingWEB are offering those that participate in the survey the chance to win a top prize of £1,000 in Amazon vouchers or one of five £100 Amazon vouchers.
Following a judging which took place on Friday 16 August 2013, we are delighted to announce that CIPP have short-listed BrightPay for the CIPP’s payroll and pensions excellence awards.
BrightPay has been shortlisted in the "Payroll product of the year" category.
The winner will be announced on 26th September 2013.
It has been confirmed that the new NMW rates which take effect from 1st October 2013 will be as follows:
HMRC has published a message on their website regarding RTI reconciliation issues.
"We have received feedback that some PAYE schemes have experienced difficulties in reconciling the difference between:
· the tax we say is due, and
· the tax they think is due
We have set up a dedicated team to identify the cause of these discrepancies.
The team is working with a number of PAYE schemes to work through their examples to examine what is causing these discrepancies, and then to resolve them.
This will also enable us to:· understand the issue in greater depth, and · take the steps necessary to prevent them arising in the first place."
A “quirk” in the tax system that occurs once every 20 years has resulted in Asda staff owing more than £12m in outstanding tax to HMRC.
The supermarket’s 170,000 employees were affected by the payroll anomaly that occurs for companies with four-weekly payroll systems, where 14 payments are made in a tax year rather than the usual 13. Most of the employees were paid 14 times between 6th April 2012 and 5th April 2013 – the 2012/13 tax year – rather than the usual 13 times.
The payroll provider, said: “This is an anomaly within HMRC and there is no means of getting round it by payroll providers.”
Following the incident HMRC posted advice on its website on “dealing with ‘week 53’ payments”. When completing a Full Payment Submission it says: “Do not change the final tax code to week 1 if the only reason you have used week 1 is to calculate a payment on week 53."
Please use the following points as a checklist to ensure that you have covered all aspects before sending in your company’s CIS repayment claim to HMRC. These are the top issues that are likely to affect how quickly we can process the claim.
Please send your claims to:
PAYE Employer Office
1. Ensure the company’s Agent is authorized specifically for PAYE to act on its behalf for CIS repayments. Form 64-8 is used for this purpose and can be downloaded from the HMRC website here. Please send it to:
HM Revenue & Customs Central Agent Authorisation Team Longbenton Newcastle upon Tyne NE98 1ZZ
Further information on authorization can be found here.
2. Double-check that the Unique Taxpayer Reference (UTR) and the company subcontractor’s name are correct on all documents.
3. Check that all the company’s Payment and Deduction Statements that HMRC have requested to process the claim are sent and that they are for the correct period (the tax year runs from 6 April in one year to 5 April the following year).
4. If the company was incorporated during the year, please ensure that its claim for repayment is only for deductions taken from the company’s payments and not any for periods before incorporation.
5. Check that the CIS deductions taken from the company’s subcontractors are correct and have been reported correctly on the monthly returns.
6. Check that the company has no outstanding returns (CIS300) in its capacity as a contractor within CIS.
7. Ensure that form P35 - or the final Employer Payment Summary (EPS) under Real Time Information (RTI), showing CIS deductions taken from the company’s payments, has already been submitted.
8. Submit any information requested within the timescale specified by HMRC, such as following receipt of a ‘CIS suffered letter’ and that you have included everything that HMRC has requested.
9. Where there are overpayments that do not relate to CIS, please verify how these have arisen by providing supporting documentary evidence to HMRC along with the company’s claim for repayment.
10. Where the company has ceased trading, please remember to send in all outstanding returns for the subcontractors.
Further to our Blog of 4th July HMRC have now confirmed that they have a fix in place to deal with the requests they have received from employers since April 2013 requesting to change their PAYE scheme to annual.
All requests that have been made since April will be accepted and those schemes changed to annual schemes. Employers will NOT be notified when that change has been made.
An annual scheme must meet the following criteria:
If you are making an annual payment to an employee using BrightPay remember to tell BrightPay the payment frequency for the FPS is annually, if you have any queries please phone the BrightPay Support Team.
When a business is registered as an annual scheme, the employer is not required to submit an Employer Payment Summary (EPS) for the 11 months of the tax year where no payments are made to the employees.
If an employer that is registered as an annual scheme pays an employee or employees and submits a Full Payment Submission (FPS) for more than a single month in the year HMRC will automatically cancel the annual payer status for that year and the following years and will write to the employer to advise them of same.
Full details can be found on the HMRC Website, http://www.hmrc.gov.uk/news/annual-schemes.htm