As an employer, your declaration of compliance is a legal duty. If you do not complete it within 5 months of commencing your Automatic Enrolment (AE) duties, then you have not completed your legal requirements of Automatic Enrolment and may face fines. Even if an employer did not enrol any member of staff, a declaration of compliance must be completed.An employer can process their own declaration or authorise an agent to complete this on their behalf. The declaration is completed via The Pensions Regulator’s website. You can start the declaration now by clicking here.
Don’t delay or you could face prosecution – it is a criminal offence if an employer fails to put their employees into a pension scheme and/or provide false information in a declaration of compliance. The maximum punishment can be 2 years in prison if The Pensions Regulator proceeds with prosecution. The Pension Regulator’s checklist provides details of all the information you need when submitting your client’s or your own AE declaration.
You need your letter code and PAYE reference to access the online service. The letter code is unique to every employer and a 10-digit reference beginning with ‘1’. It is on all correspondence an employer receives from The Pension Regulator, you can contact firstname.lastname@example.org if you do not know it or have never received it. To contact customer service you must provide:
An employer’s PAYE reference can be found on correspondence from HMRC when first registered as an employer or from their payroll software.
The Pensions Regulator (TPR) is ensuring that all employers fulfil their duties required by the Pensions Act 2008. It is essential that all employers understand that even if they employ only one person they have certain legal duties for Automatic Enrolment. And if they choose to employ a new member of staff after 1st October, 2017 those duties apply from the day the new employee starts.
Remember, Automatic Enrolment is a continuous duty for all employers, and does not end after the staging date or duties start date (if you don’t have a staging date).
Avoid penalties by understanding how to meet your duties:
All responsibility ultimately lies with employers.
The Pensions Regulator (TPR) is ensuring that all employers fulfil their auto enrolment duties required by the Pensions Act 2008. It is essential that all employers understand that if they employ just one person, they have certain legal duties for automatic enrolment. After the 1st October 2017, new employers who employ their first member of staff will have to comply with auto enrolment from the day the new employee starts.
Brexit is becoming the “elephant in the room” for many companies waiting for government updates and its implications on how the new deal will work out. Many HR and payroll professionals are no doubt anticipating how such a huge shift in the political scene will change existing legislation.
However, while it’s easy to get distracted by how Brexit will change the current HR and payroll landscape in the future, there are more current, pressing concerns at hand.
Remember these key Legislative Compliance Payroll Updates:
Data Protection Changes
It is now confirmed that the upcoming General Data Protection Regulation (GDPR) will affect all UK companies. Businesses will need to start future-proofing their procedures and policies before the data protection changes come into effect in May 2018.
Non-compliance by businesses could lead to fines of up to £20 million or 4% of a company’s annual global turnover in the prior year. Bringing your company’s policies in line with the approaching changes will ensure a smoother transition and avoid any penalties for non-compliance.
Gender Pay Gap Reporting
If a business, either private or voluntary, has more than 250 employees it needs to be aware of legislative changes regarding gender pay gap reporting. The new law came into effect on 5th April, 2017 with employers required to publish their first report on 5th April, 2018 relating to their data from 2016/17. The results must be published on the employer’s website and a government website. Failing to do so will result in enforcement proceedings.
You can find more information on what the EU is doing regarding Gender Pay Gap Reporting by clicking here.
Pay Rate Changes
New rates for the National Living Wage and National Minimum Wage came into effect April 2017. The Living Wage rose to £7.50 for employees aged 25 or over and who are not in their first year of apprenticeship. The National Minimum Wage rose to £7.05 for employees aged between 21 and 24, it increased to £5.60 for those between the ages of 18 and 20 and lastly, it increased to £4.05 for 16 to 17 years old.
Statutory Maternity/Paternity/Adoption Pay has risen to £140.98 per week. It is a company’s payroll department that have the responsibility of ensuring the above increases have already taken place since their implementation dates last April.
Last April, salary thresholds for foreign employees increased. The Tier 2 (general) salary increased to £25,000 for experienced workers and Tier 2 (intra-company transfer) rose to £30,000. There was also a reduction to £23,000 for graduate trainees with the number of places rising to 20 a year for each company.
Changes to the immigration rules means that businesses who sponsor foreign employees on a Tier 2 (general) visa now must pay a skills charge of £1,000 per employee. For companies with less than 250 employees, the charge is £364. Both charges are on top of normal visa application fees.
Case against Dudley Metropolitan Borough Council
A recent judgement by the Employment Appeal Tribunal (EAT) confirms that payment for normal voluntary overtime must be included in the calculation of workers holiday pay.
Be Prepared, Be Proactive
Payroll Managers should be proactive and aware of the above current legislation. Key changes are on the way once Brexit finally arrives but it is so important to keep an eye on developments and focus on current issues at hand, making allowances for existing legislative changes.
Employers must operate PAYE and NICs in the normal way regardless if your foreign employees are working for you on a permanent or temporary basis. You are still treated as their employer and you are responsible for recording, reporting their earnings and PAYE deductions.
Your new employee from abroad will not have a required HMRC P45 so you’ll need to get the following information from them:
Full Name; Gender; Date of Birth: Full Address (incl. Post Code); National Insurance Number (if known).
To process what deductions are taken from their pay you must get an employment declaration and enquire if they have an existing student loan. For further information please click on the following HMRC link: https://www.gov.uk/new-employee-coming-to-work-from-abroad
Employees being paid by another overseas company are called “seconded employees”. If your new employee falls within the definition of a seconded employee, you are responsible for PAYE deductions on their earnings but what tax code to use and what to include in their payroll record are different. If you have a seconded employee on your payroll you must report this to HMRC.
For more information regarding seconded employees and exceptions to the rule please click on the following link http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=2Abcj2SjIsA&formId=7398
Please remember, before employing someone from abroad, you are required to check this new employee has the legal right to work in the UK, please use the following online tool to assist you:
HMRC have started a new campaign targeting employees with second incomes and who have not paid tax on this second income source.
This drive is the latest in a series of targeted tax clampdowns on certain professions or areas, like consultancy work, with warnings that HMRC will be using all resources available to trace offenders.
Examples given within the Campaign Scope are as follows:
- Receiving payment for organising parties/events or providing entertainment.
- Making and/or selling Craft Items
- Taxi Driving; Hairdressing; Fitness Training; Landscape Gardening; Regular Car Boot Sales, Market Stalls, etc.
- Consultancy Fees or Public Speaking or Training Fees
As in previous campaigns, HMRC have adopted a “carrot and stick” approach where they offer more lenient terms if any tax due is paid voluntarily. HMRC stated they will take account of the level of help provided and the accuracy of details given when offering reduced penalties but also warn those choosing not to declare their second income - “Where additional taxes are due HMRC will usually charge higher penalties…up to 100% of the unpaid liabilities or up to 200% for offshore related income.”
HMRC has announced more than 12,950 employers in the south east are being urged to send their employees’ Pay As You Earn (PAYE) information in real time or face penalties.
For example a total of 405 employers in Portsmouth are yet to file PAYE returns in real time. Employers who have not used the system were recently sent an email from HMRC, telling them to complete it by the end of March.
As mentioned in previous blogs, RTI should be the standard for the majority of employers now but there are those who are still struggling to achieve compliance.
Last June HMRC released a statement saying they “appreciated that many employers” (over 600,000 at that specific time) “are still getting used to this new way of reporting” and provided a reminder of the PAYE payment position for reporting for compliance with RTI.
With Auto Enrolment now being phased in, the pressure on employers to comply with the law and HMRC’s RTI is growing.
Through the new Employment Allowance employers can reduce the amount of NIC they pay for their employees by up to £2,000.
An online calculator is now available for employers to see the effect the new Employment Allowance could have on their National Insurance Contributions bill.
The new Employment Allowance can be claimed from 6 April 2014. You are not required to pay any employer National Insurance Contributions if you pay less than £2,000 a year.
It is estimated up to 1.25 million businesses and charities will benefit from Employment Allowance, with 450,000 businesses and charities not required to pay any Employer NIC at all.
Employment Allowance is for nearly all employers that pay Class 1 National Insurance contributions on their employees’ and directors’ earnings. This includes:
• Community Amateur Sports Clubs
The Prime Minister has proposed married couples should get breaks worth up to £200 a year.
However the allowance will not be available to couples that include higher rate taxpayers – in which one spouse is paid £42,285 from 2015/16 – this could be a double blow for higher earners, particularly in the wake of the child benefit cuts on families with one earner on more than 60,000 a year.
The proposal, will also let people transfer £1,000 of their personal tax allowance to their spouse or civil partner.
The measure will come into force in April 2015 if passed by parliament, just one month before the next national election and is expected to benefit around 4 million couples including same-sex couples in civil partnerships. From next year, same-sex couples will be able to marry under a new law passed by parliament in July.
Childcare vouchers play a vital role for employers as they endeavor to hold onto their skilled and experienced workforce and also cut costs. By introducing childcare voucher schemes employers can reap financial benefits.
Employers who provide childcare vouchers for employees can save up to 12.8% on National Insurance Contributions (on the value of the vouchers up to £55 per week). The more employees with nursery/crèche costs are encouraged to claim childcare vouchers; the greater the saving for your business.
Childcare vouchers allow working parents to save on registered childcare costs through their employer. By taking part of their salary in vouchers, rather than paying the child-minder or registered crèche directly from their net pay, a working parents' tax burden is reduced and their employers also save money - so it is a “win-win” situation for all involved.
Childcare vouchers are a flexible, legal method for working parents to pay for all forms of registered childcare including day nurseries, registered child-minders, crèches and playgroups, after-school and breakfast clubs, holiday schemes and workplace nurseries.
So How Do Childcare Vouchers Work?
The first £55 per week (£243 per month) of childcare vouchers that an employee receives through their payroll is exempt from income tax and national insurance contributions. This means that a parent paying basic rate tax could save up to £77 per month on registered childcare.
Couples who work for companies each offering the childcare voucher scheme are both entitled to claim up to £243 each per month of their salary as childcare vouchers. These joint tax exemptions could mean a family saving of as much as £154 per month on registered childcare costs.
Childcare voucher schemes are very easy to set up and put into practice. Due to the tax incentives involved childcare vouchers are a business investment, not an expense.
To find out more about childcare vouchers visit http://www.employersforchildcare.org
To find out how to set up Childcare Vouchers in BrightPay see http://www.brightpay.co.uk/docs/13-14/processing-payroll/childcare-vouchers/
167,000 employers have missed one or more deadlines for the new RTI reporting system for PAYE income tax. These employers will now receive a letter from HMRC.
HMRC previously sent a chasing letter to companies that missed a deadline in June, and instructions on how to use RTI were sent in October 2012 and again in February 2013.
Although a few companies may not report because their PAYE scheme is unused or no longer operating, but in these cases employers are still required to let HMRC know by contacting the Employer Helpline.
Certain employers are also required to operate a PAYE scheme for employee expenses and benefits, in this case they should either submit a nil EPS every month, or contact HMRC to change their scheme to annual reporting. The Tax Office will not contact employers who have already registered their PAYE scheme as an annual scheme.
Over 85 percent of employers - 1.6 million employers and 40 million individuals - are now using RTI, with HMRC recently contacting employers via an on-line survey to estimate how companies are coping.
A temporary relaxation for small businesses was recently extended to April 2014 due to manageability concerns as The Institute of Chartered Accountants in England and Wales warned it would be "impossible" for many businesses to comply.