HMRC have published their Employer Bulletin for October 2016. We summarise the key content for you, with links to our detailed guidance on the topics covered.
Making tax digital
HMRC launched a series of consultations on Making Tax Digital in August, including “Making Tax Digital: Transforming the tax system through the better use of information”.
HMRC draw employers’ attention to the impact that this will have on them in connection with the use of RTI data and PAYE coding notices, in particular warning employers that they will likely see an increase in the number of coding notices issued.
HMRC have identified three questions form this consultation which they are asking employers to respond to:
- Question 1: Where events during the year result in a change to a customer’s tax projection, what is the appropriate format and regularity of notification that HMRC should send to employers and customers?
- Question 12: What opportunities do current and potential information providers and software providers see for a stronger partnership with HMRC to enhance our customer experience?
- Question 13: What new sources of third party information would most enhance the customer experience and best contribute to the aim of ending the tax return for all?
The Making Tax Digital consultations close on 7 November 2016.
PAYE late filing penalties
HMRC began to issue the late filing penalty notices for Quarter 1 in September.
HMRC remind employers that:
- A late filing penalty will not be charged for delays of up to three days after the statutory filing date.
- HMRC might contact employers who consistently file after the statutory filing date, and these employers do risk being considered for a penalty.
- HMRC will not generally charge a penalty for the first month that a filing deadline is missed; a zero penalty notice will be issued which the employer can appeal if there is a reasonable excuse for filing late.
- The online appeals service offers the quickest and easiest way to appeal a PAYE penalty.
Employment intermediary quarterly reports
The latest quarterly reporting period finished on 5 October 2016 and the return should be submitted to HMRC by 5 November 2016 to avoid a late return penalty.
Employers need to file a nil return if no workers have been supplied.
Employers should also let HMRC know if they are no longer an employment intermediary.
The Apprenticeship Levy is introduced from 6 April 2017:
- The Department for Education has released information about proposed funding rates for employees.
- These rates will apply whether or not an employer pays the Apprenticeship Levy.
- Levy paying employers will be able to purchase training from the start of May 2017.
- Non-levy paying employers will continue to access the current funding system until 1 May 2017.
National Insurance numbers with a ‘KC’ prefix
A small number of employers have not been able to submit RTI data for employees with a National Insurance number with a KC prefix. This problem should be fixed from 15 November 2016.
In the meantime, employers should leave the National Insurance number field blank for these employees and make sure the employee address field is complete.
Employers whose payroll software does not update to solve this problem from 15 November 2016 (which will include those using HMRC’s Basic PAYE Tools) should continue to follow this guidance when submitting returns.
In October, the electronic payment deadline of the 22nd falls on a Saturday. To make sure payment reaches HMRC on time you need to have cleared funds in HMRC’s accounts by the 21st unless you are able to arrange a Faster Payment to clear on the payment deadline.
HMRC changed bank accounts earlier this year. Most employers should be unaffected as sort codes and account numbers were moved across.
Overseas payments are affected and changes are needed to the account number (IBAN) and Bank identifier code (BIC). Each type of tax has its own IBAN and BIC details, to find out the correct one to use check here.
HMRC also ask employers to:
- Pay the right amount of PAYE
- At the right time
- Using the correct 13 character Accounts Office reference.
- If paying something other than PAYE to use the appropriate reference, for example interest or penalties references start with an X.
HMRC want to make repayments “safer and more cost effective for customers”.
If you have received a repayment by payable order, expect to be contacted by letter or phone to hear about the many benefits of receiving repayments electronically or by Direct Debit.
Please note that HMRC will never ask customers for their bank details in a letter, phone call, text message or email.
Similarly, if you make payments to HMRC by cheque through the post, you will also be contacted by letter or phone and be asked to consider making electronic payments by online or telephone banking, direct debit, or by debit or credit card online.
National Minimum Wage (NMW)
The NMW rate per hour increased from 1 October 2016 as follows:
- The main adult rate (for workers aged 21 and over) is £6.95
- The rate for workers aged between 18 and 20 is £5.55
- The rate for workers aged under 18 is £4.00
- The rate for apprentices aged 16-18 and those over 19 who are in their first year is £3.40.
- Other apprentices are entitled to the National Minimum Wage for their age.
The National Living Wage rate for adults age 25 and over will remain at the rate of £7.20.
National Insurance credits for Forces spouses
Armed Forces spouses and civil partners can apply for National Insurance credits towards a future state pension if:
- They reach state pension age on or after 6 April 2016, and
- Have been married to or in a civil partnership with an Armed Forces member, and
- Have accompanied their spouse or civil partnership on an overseas posting since 6 April 1975.
Apply for NI credits by following the links at www.gov.uk/dwp/ni-credits-armed-forcespartners
Statutory maternity leave and child care vouchers
HMRC remind employers that where child care vouchers are provided under an employment contract and outside of any salary sacrifice scheme then the vouchers must continue to be provided during maternity leave.
An Employment Appeal Tribunal has recently found that whether or not an employer must continue to provide child care vouchers to a person who is participating in a salary sacrifice scheme depends on the terms of the contract of employment. If the contract says that an employee on maternity leave will not continue to receive child care vouchers then they do not have to be provided.
HMRC remind employers that:
- The threshold for employees with Plan 1 loans (pre-2012 loans) will increase to £17,775 from 6 April 2017.
- Student loan start and stop notices (SL1s and SL2s) should be implemented from the first available pay date after receipt.
- If your employee doesn’t know their plan type they can check their information online at http://www.slc.co.uk/students/loan-repayment.aspx
- If your employee cannot confirm their plan type you should use plan type 1.
Reimbursed employee expenses
HMRC remind employers that:
- Reimbursed expenses that are fully deductible from earnings are no longer subject to tax and NICs.
- You do not have to include these on forms P11D, and employees no longer have to claim the deduction.
- Dispensation agreements no longer apply.
Avoid errors on the Employer Payment Summary
The Employer Payment Summary (EPS) should be used to apply for any reduction on what is owed from the Full Payment Summary (FPS).
HMRC are seeing errors being made on EPS forms, especially for CIS deductions, and advise that:
- You should not declare CIS deductions suffered unless you are a subcontractor reporting as a limited company
- You should not declare CIS deductions suffered if you are a subcontractor with gross payment status
- The figure you enter for CIS deductions suffered should be CIS deductions made, by contractors, from payments you received for work in the construction industry. Enter the total amount of year to date CIS deductions
- If you are also a contractor, do not use the CIS deductions box on the EPS to declare payments you’ve made to subcontractors each month. These should be reported either through HMRC’s CIS online service or commercial CIS software.
- Send the EPS by the 19th after the end of the tax month.
- If you make a mistake in the current tax year send an EPS with the correct year-to-date figures.
- If you have made a mistake in previous tax years send an EPS with the correct final year-to-date figures for the relevant tax year.
Use the correct payment frequency in your Full Payment Summary
HMRC advise that employers are using an “Irregular Payment” code (IR) when an employee is paid regularly.
The following payment frequencies are all regular, and the appropriate code should be used:
- Weekly (W1)
- Fortnightly (W2)
- 4 weekly (W4)
- Monthly (M1)
- Quarterly (M3)
- Twice a year (M6)
- Annually (MA)
If one off payment is made the code to use is IO.
Only use IR if the payment pattern does not fit in with the above.
What to do when your business stops employing people
If your business stops employing people, tell HMRC straight away by submitting a final payroll return, either an EPS or an FPS.
- Select the ‘Final submission because scheme ceased’ box
- Put the date you closed your PAYE scheme in the ‘Date scheme ceased’ box – you cannot put a date in the future
- Deduct and pay any outstanding tax and National Insurance to HMRC
- Enter a leaving date on each employee’s payroll record
- Give your employees a P45
- Submit any expenses and benefits returns to HMRC.
P11D Nil Returns
HMRC advise employers that if they have received a P11D(b) or reminder notice for 2015/16 but didn’t provide any expenses or benefits to anyone during the year, that they should notify HMRC that they don’t owe any Class 1A NIC using the online service.
Agent’s can email an online form to tell HMRC that a client doesn’t owe Class 1A NIC.
Employer Bulletin: October 2016
A link to the published Bulletin can be found here or accessed via HMRC's website www.gov.uk.