Category Archives: HMRC

Providing services to a public sector – off payroll working

In the latest Employer Bulletin HMRC advise those providing services to a public sector client through their own limited company to ensure they are ready for the new rules which take effect from 6 April 2017.

The new rules for off payroll working, commonly referred to as IR35 or the Intermediaries legislation, take effect from 6 April 2017.

These changes mean individuals working through their intermediary in the public sector will no longer be responsible for deciding whether the intermediaries’ legislation applies and then paying the appropriate tax and National Insurance contributions (NICs). This responsibility will instead move to the public authority client, agency, or third party that pays the worker’s intermediary, and they will also now become responsible for making sure that, where the rules apply, the relevant income tax and NICs are deducted and reported through PAYE in real time.

The public authority client is required to tell any agency or third party its view as to whether the rules apply. HMRC have been consulting on these new rules and the legislation has yet to be finalised.

HMRC confirm that ‘work is continuing on the development of the new Employment Status Service, and the online tool should be available for use in March. We have launched an off-payroll working in the public sector page on GOV.UK where you can find guidance for fee-payers, PSCs and public authorities to use, and links to material such as the technical note’.

If you have concerns in this area please contact us.

Internet links: Employer Bulletin Technical note

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Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 March 2017. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2017 are:

Engine size Petrol
1400cc or less 11p
1401cc – 2000cc 14p
Over 2000cc 22p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 14p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 11p
Over 2000cc 13p

Other points to be aware of about the advisory fuel rates:

  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

Pay the NMW – no excuses

The government has revealed ten of the most bizarre excuses used by unscrupulous business owners who have been found to have underpaid workers the NMW.

These employers used excuses such as ‘only wanting to pay staff when there are customers to serve and believing it was acceptable to underpay workers until they had ‘proved’ themselves’.

The government has launched an awareness campaign to encourage workers to check their pay to ensure they are receiving at least the statutory minimum ahead of the NMW and NLW increases on 1 April 2017.

Employers need to ensure they are paying their employees at least the NMW and NLW.

Rate from 1 October 2016 Rate from 1 April 2017
NLW for workers aged 25 and over (introduced and applies from 1 April 2016) £7.20 £7.50
the main rate for workers aged 21-24 £6.95 £7.05
the 18-20 rate £5.55 £5.60
the 16-17 rate for workers above school leaving age but under 18 £4.00 £4.05
the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship £3.40 £3.50

This will be the second increase in six months for the NMW rates. Going forward the NMW and NLW rates will both be reviewed annually in April.

In a recent article in the Employer Bulletin, HMRC cite common errors:

  • not paying the right rate, perhaps missing an employee’s birthday,
  • making deductions from wages which reduce the employee’s pay below the NMW/NLW rate,
  • including top ups to pay that do not qualify for NMW/NLW,
  • failure to classify workers correctly, so treating them as interns volunteers or self employed and
  • failure to include all the time a worker is working, for example time spent shutting up shop or waiting to clear security.

What are the penalties for non-compliance?

The penalties imposed on employers that are in breach of the minimum wage legislation are 200% of arrears owed to workers. The maximum penalty is £20,000 per worker. The penalty is reduced by 50% if the unpaid wages and the penalty are paid within 14 days. HMRC also name and shame employers who are penalised.

If you would like help with payroll issues please contact us.

Internet link: GOV.UK NMW news

Increase in NMW rates

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2016.

  • the rate for 21 to 24 year olds will increase by 25 pence to £6.95 per hour
  • the rate for 18 to 20 year olds will increase by 25 pence to £5.55 per hour
  • the rate for 16 to 17 year olds will increase by 13 pence to £4.00 per hour
  • the apprentice rate will increase by 10 pence to £3.40 per hour.

The mandatory National Living Wage (NLW) applies for workers aged 25 and above. This is £7.20 an hour.

NLW and NMW rates will in the future be uprated every April starting in April 2017.

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC may ‘name and shame’ non-compliant employers.

National Living Wage hits small business costs

According to research, 47% of small business owners blame increased wages following the introduction of the NLW as the main contributor to rising costs.

The research, carried out by the Federation of Small Businesses (FSB), revealed that a third of FSB members claim that the NLW has led to a small increase in their wage costs while one in five have said that their staff costs have increased significantly. Although 59% of FSB members absorbed the increased costs through reduced profitability, 35% have increased prices, 24% reduced staff hours and 23% cut investment.

Updated guidance

HMRC have updated their guidance on payroll reporting including what employers should include on the Full Payment Submission (FPS) and Employer Payment Summary (EPS) returns.

Please contact us if you would like help with your payroll.

Internet links: ACAS article FSB press release Payroll guidance

HMRC guidance for employers

The April Employer Bulletin includes articles on:

  • reporting expenses and benefits in kind for 2015/16 using form P11D
  • Scottish Rate of Income Tax coding notice issues
  • Class 1 National Insurance contributions for apprentices under the age of 25
  • changes to Student Loans Deductions including the introduction of type 1 and type 2 loans and the reminders which HMRC will issue to employers who fail to make deductions.

The Bulletin also includes links to HMRC’s guidance on the restriction to Employment Allowance for Single Director Companies.

If you would like any help with payroll or P11D completion issues please contact us.

Internet link: Employer Bulletin

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 March 2016. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2016 are:

Engine size Petrol
1400cc or less 10p
1401cc – 2000cc 12p
Over 2000cc 19p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 8p
Over 2000cc 13p
Engine size Diesel
1600cc or less 8p
1601cc – 2000cc 10p
Over 2000cc 11p

Other points to be aware of about the advisory fuel rates:

  • Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
  • The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC.

If you would like to discuss your car policy, please contact us.

Internet link: GOV.UK AFR

Business rates appeal proposals are a ‘barrier to justice’

The Enterprise Bill is currently going through Parliament. Part of the Bill reforms the business rates appeals system. The government’s changes have been criticised by rates experts and business groups, amid concerns that the changes will act as a ‘barrier to justice’.

The Valuation Office Agency (VOA), which is part of HMRC, is responsible for compiling and maintaining non-domestic rating lists. Currently officers of the VOA are prevented from sharing the information they collect about properties and ratepayers with local government. This means that businesses have to provide the same information twice to the VOA and local government. It can also mean that the properties have to be inspected by both the VOA and the local authority.

The Bill therefore allows the VOA to disclose information to a ‘qualifying person for a qualifying purpose’ such as a local authority.

The changes have been criticised by some people. They say the legislation will act as a ‘barrier to justice’ for businesses seeking to appeal.

Transparency around how business rates or tax on commercial property is measured has long been called for by small businesses. Critics of the bill claim that it has failed to address this issue, as it permits the VOA to share rate measurement information with local authorities but not with individual businesses.

Jerry Schurder, former chairman of the Royal Institution of Chartered Surveyors said:

‘In business rates, your own liability depends not on your own property but what’s being paid by lots of other people and you have no right to obtain that information. In any other tax, the taxpayer has the relevant information to make an appeal but not on rates.’

Meanwhile John Allan, national chairman at the Federation of Small Businesses, commented:

‘While we support moves to make it easier to navigate business rates appeals, we have concerns around the proposals in the Bill.

Their primary aim seems to be reducing the number of appeals by making the process more difficult, rather than by addressing the underlying issues, in particular making the appeals system and the VOA more transparent.

If increased transparency is not delivered, then confidence in the business rates system will continue to be undermined.’

Internet links: Link to legislation  Telegraph