HMRC says payroll managers must appeal disputed charges as soon as they receive them and has outlined a common reason they may occur.
Addressing delegates at Ceridian’s annual conference last week, Phil Nilson, from HMRC’s customer and stakeholder engagement team, explained that disputed charges may occur due to a misunderstanding by payroll managers.
He said: “We used to reconcile annually and you used to send us money during the year. You didn’t send any information relating to that money until the end of the year when you submitted your P14s and P35. Only at that point could we start reconciling the money with the information.
“Now, thanks to RTI we are doing that on a monthly basis, we are doing it tax month by tax month.
“Using tax month one as an examples from 6th April to 5th May, HMRC looks at all the Full Payment Submissions (FPS) you have sent in month one on either the 6th, 7th or 8th of May, and then starts the reconciliation process to try to determine the charge that is due.
“Once you’ve sent your FPSs, in an ideal world, they will be visible to you from the 12th of the following month on your dashboard. So in the example used that would be from the 12th of May. So, theoretically, you would send in your FPSs and then by the 12th of May you could go online and could see what we think is due from you.
“But, sometimes things come in late and you may need to send information about payments beyond the end of the tax month, but which relate to the earlier tax month.
“This is vital. If an FPS comes in between the 6th and 19th of May you can put it back into tax month one, where it should be, and the charge will be adjusted accordingly. However, if that FPS comes in after the 19th of the following tax month it won’t go into the dashboard for that month, of tax month one in this case, because the 19th is the cut-off date – the date we want the payment in.
“That may affect your view of what you think is due and we think is due.
“By looking at FPSs it gives us the total amount that is due – but to be taken away from that is anything you want to claw back by way of the Employer Payment Summary (EPS), that should be submitted by the 19th of the following month. So, for tax month one, that will be the 19th of May. In terms of looking at your online account, if you sent that EPS before the 12th of May it will be reflected by the 14th – you will see it within two days.
“I hope that helps you get a better understanding of what we do.”
Article taken from www.payrollworld.com
From April mothers will be allowed to share up to 50 weeks of their maternity leave and 37 weeks of their pay.
However, TUC analysis published shows that 40% of working dads with a child under the age of one would be ineligible because their partner is not in paid work. Mothers who are not employed or self employed do not have a right to share maternity leave or pay.
The TUC says that it welcomes SPL, but is concerned the scheme will have a limited impact because of the rules around eligibility and low statutory pay.
According to government projections, as few as 5,700 men are expected to apply for shared parental leave over the next 12 months. However, it estimates that shared parental leave would be open to around 200,000 more fathers each year if their rights to take it were not dependant on the mother being in work.
Half of new dads in the UK do not take their full two weeks’ statutory paternity leave – a rate that rises to three-quarters of fathers on the lowest incomes. The TUC says that without better rights to leave and pay, many men will continue to miss out on playing an active role in the first year of their child’s life.
Under RTI employers running payroll are required to report their employees’ pay and deductions to HMRC in regular Full Payment Submissions (FPS) through the year. A final end of year FPS (or EPS) must be submitted by 19 April.
Employers will no longer be required to answer extra questions on the payroll submissions they make to HMRC at the end of the tax year.
The seven extra questions, which are only included on the final FPS of the year, were inherited from the old P35 form, which had a submission deadline of 19 May. This gave employers and agents much more time to ascertain the correct answers to the questions, such as whether any special payments have been received in the year from third parties.
Removing the requirement to submit this information at year end will significantly reduce burdens on employers but will most definitely reduce burdens on agents and bureaux, and make a busy time of the year just a little less frantic by removing the mandatory need for the employer (client) to provide confirmation to the answers to seven questions.
The change is expected to take effect from 6 March 2015, avoiding the need to complete the checklist for the 2014/15 tax year.
From 6 March 2015 HMRC will accept a final FPS or EPS for 2014/15 and 2015/16 with or without a completed checklist, but employers should still report the Final Submission for Year indicator.
More than 130,000 people will escape the higher rate of tax, as it rises in line with inflation for the first time in five years.
The higher rate threshold – where taxpayers pay a 40 per cent rate – will jump from £41,865 to £42,385 next year, George Osborne announced in the Autumn Statement.
The £100 rise to the personal allowance was also passed on in full to higher rate tax payers.
Mr Osborne said the increase to the higher tax rate threshold was a “down-payment” on the government’s promise to raise it to £50,000 by the end of the decade.
The Chancellor also revealed an increase in the personal allowance – the amount of money that can be earned tax-free every year – to £10,600 from next April, £100 more than the £10,500 expected.
It has also been announced that business who employ apprentices under the age of 25 will no longer have to pay national insurance contributions for them.
Among the other measure announced was an extension of the £2,000 Employment Allowance to carers, freezing Universal Credit work allowances for another year and cutting tax credits when overpayments are certain.
An Employment Tribunal has ruled that overtime should be taken into account when holiday pay is calculated, in what’s thought to be a “bombshell” decision that could cost UK businesses billions of pounds.
Experts predicted that up to 5m people could claim for extra holiday pay dating back as far as 1998 if the ruling was in the employees’ favour, but despite the Employment Law Tribunal (EAT) ruling that non-guaranteed overtime must be taken into account for the purposes of calculating holiday pay, the scope for workers to bring claims for arrears of holiday pay is limited.
The EAT reached 3 key conclusions;
• “Non-guaranteed” overtime should be taken into account when calculating holiday pay for the purposes of the four weeks’ holiday entitlement that derives from the Working Time Directive. This is because under EU law workers are entitled to receive their “normal remuneration” when taking such leave and the overtime in these cases had been so regularly required by the employers as to amount to normal remuneration.
• The Working Time Regulations (WTR) implemented in the UK in 1998, must be interpreted so as to give effect to the requirements in the Working Time Directive. The EAT said that it was obliged as far as possible to interpret the WTR in light of the wording and purpose of the Directive and it was prepared to read words into WTR to achieve this but significantly
• The scope for workers to recover underpayments of holiday pay by unlawful deduction from wages claims is limited. The EAT concluded that the workers could not claim any consequent holiday underpayment as being an unlawful deduction from pay under the Employment Rights Act 1996 using each shortfall as the last of a series of deductions where in any case a period of more than three months had elapsed between the deductions. Squire Patton Boggs says this part of the judgment is of great significance and potentially more so than the adjustment of rates going forwards, and is likely to limit significantly the extent to which workers can look backwards to recover historical underpayments.
Following legal action brought against Sports Direct they will be forced to re-write their Employment Contracts for future zero hours staff to state the roles do not guarantee work.
In a legal settlement aimed at securing better working rights for the retailers 20,000 plus zero hours workers, Sports Direct is required to:
• Produce clear written policies setting out what sick pay and paid holiday its zero hours staff are entitled to
• Re-write its job adverts and employment contracts for future pay zero hours staff to expressly state that the roles do not guarantee work
• Display copies of the new policies in all staff rooms used by zero hours staff across its 400 plus stores in the UK
• Send copies of its equal opportunities policy to all store managers and assistant managers with a written reminder that the policy and principles apply to zero hours staff.
The employees for Sports Direct will now have the right to take holidays and to be paid when they take them. They have the right to statutory sick pay and they will have a right to request guaranteed hours. The changes that have been made mean that there will now be total transparency about what sort of contract is on offer.
As an employer, have you taken the necessary steps to ensure your workforce has an understanding of auto enrolment? A recent study showed that one in four workers had yet to receive any information from their employer concerning automatic enrolment.
The study showed that out of more than 1,000 full time employees there was a significant uncertainty surrounding the changes to pensions, and a startling 6.1m workers in the UK are ‘confused’ over the changes to workplace pensions arrangements. 56% of them find the term auto enrolment confusing and could not say what it relates to.
As the employer, you are an important and effective channel of communication for your staff throughout the automatic enrolment process. The information you present to them can have a real impact.
In your workplace you could:
• Leave messages around on why saving for retirement is important, this can help engage staff with the subject of workplace pensions.
• Staff appreciate an explanation of what automatic enrolment means for them. For example, information about how much they'll contribute and when.
• Details of where staff can find out more on the matter e.g. online articles, email, posters and blogs.
HMRC will be able to deduct up to £17,000 a year from high earners salaries to recover tax debts under new rules that came into affect recently. From April 2015 tax codes will be issued to recover money from those believed to have underpaid income tax, capital gains or National Insurance contributions.
Deductions of £17,000 would only affect those earning over £90,000 and HMRC confirmed it would not deduct more than half the salary of those liable, and it does not affect those earning less than £30,000. HMRC is required to send a letter to the taxpayer explaining their intention to withdraw debts from the taxpayer’s salary, but a taxpayer cannot prevent this from happening unless they make other arrangements to pay. Letters are expected to be issued from January next year.
A spokesperson from HMRC said: “Taxpayers welcome the option to have tax debt collected by instalment. This is a very longstanding feature of the payroll system but the increase n the current threshold will allow more tax debts to be aid in this way.”
The changes are expected to raise £115m in the 2015-16 tax year.
In the unfortunate circumstances where an employee dies, your payroll department must calculate the final pay amount owed to the employee. You should make sure this is paid to the deceased employee’s personal representative. You will need to consider whether the employee was;
• Due any outstanding payments of wages
• Due to make any payments from their salary, i.e. student loan or child support
• A member of a company share scheme
• Receiving statutory payments, i.e. maternity pay
• Due any payments for untaken holidays
If an employee has untaken holidays and subsequently dies, a payment instead of holidays can be claimed by the employee’s family or person handling their estate. This was recently confirmed during a European case, though in theory it solely applies to the minimum four weeks’ leave under EU law. Whereas rare in practice, an employee on holidays who then dies could have several years’ untaken holidays.
Payments made after an employee’s death are still subject to the same tax rules. However, Class 1 National Insurance Contributions (NIC’s) – from both Employer and Employee do not have to be made.
The death of an employee terminates the contract of employment automatically by reason of “frustration” i.e. the contract can no longer be performed as envisaged. There is no obligation on the employer to pay notice but salary to the date of death should be paid in the normal way.
Regardless of whether Scotland obtains independence or not, from the 6th of April 2016 the Scottish government will be given the power to vary income taxes.
The power was given under the Scottish Act 1998 that recreated the Scottish Parliment but was never used. Due to the tax powers already given to Scottland, from 2016 accountants believe tax will become more complicated for payroll departments in relation to around 265,000 Scottish employees.
Scottish rates will be 10% lower than the rates set by Westminister and then the Scottish goverment will have the power to add on the ‘Scottish Rate’. Currently in the UK income tax rates are at the 20%, 40% and 45% rates. In comparission to if the Scottish rate is set to 5% the income tax rates for the Scottish people would be 15%, 35% and 40%.
This differs from the existing power given to the Scottish Parliament which permits it to vary the UK basic rate of income tax by just three percentage points either way. The new power increases the variance to ten percentage points, and extends it to all rates of income tax, and not just the basic rate.
What this could mean to the employer:
• Having the ability to vary income tax rates could prove to be a PAYE nightmare for those who have employees working on both sides of the border
• Employers could find themselves having employees on S (tax) Codes which are liable to Scottish income tax. Regardless of where the employer is based the payroll must operate the Scottish rates of income tax rates for Scottish residents.
• Employers could have employees working in both Scotland and the UK doing the same job for the same pay but with different tax rates having to be applied.
The Scottish parliament says it would set the income tax rates in its autumn Budget 2015 and, with this done by 1 December HMRC would be able to incorporate it into tax codes issued around Christmas – ready for April 2016.
That said, a yes vote will create issues over double taxation – new treaties would need to be signed quickly – [certainly] one with England.