Employer bulletin: December 2018

HMRC have published their Employer Bulletin for December 2018. We summarise the key content for you, with links to our detailed guidance on the topics covered.

Budget announcements

Company cars and vans: from 6 April 2019:

  • The car fuel benefit charge and flat rate van fuel benefit charge multipliers will increase to £24,100 and £655.
  • The flat rate van benefit charge will be increased to £3,430.

Company car tax emission regime:

  • Finance Bill 2019-20 will include legislation to confirm that for Company car tax  the applicable carbon dioxide figure for cars will be based on the new Worldwide harmonised Light-vehicles Test Procedure (WLTP).
  • The government will publish a review into the impacts of adopting WLTP on the company car tax system, reporting at Spring Statement 2019.
  • For cars registered pre 6 April 2020, HMRC will continue to use the current New European Driving Cycle (NEDC) test procedure for collecting company car tax.

Changes to the treatment of expenses for unpaid office-holders: from April 2020

  • Finance Bill 2019-20 will include legislation so that expenses paid or reimbursed to unpaid office-holders are exempt from income tax when incurred because of their voluntary duties.
  • Corresponding legislation will be introduced for National Insurance contributions.

Finance (No 3) Bill 2018-19 Measures

The following are subject to the Finance (No 3) Bill receiving Royal Assent, which is expected shortly. See Finance Act 2018: tax update and rolling planner

Beneficiaries of tax-exempt employer-provided pension benefits:

  • Finance Bill 2019 widens the scope of an existing tax exemption for premiums paid by employers for an employee into life assurance products or certain overseas pension schemes where the beneficiary is the employee or a member their family or household.
  • The employee will be able to nominate any individual or a charity as a beneficiary without suffering income tax as a benefit-in-kind on the contributions paid by an employer.
  • The changes will apply from 6 April 2019.

Employer-provided charging for electric vehicles:backdated to 6 April 2018

  • Charging for batteries of employee owned electric vehicles at or near the workplace will be exempt from tax where an employer provides a charging point as a Benefit in Kind (BIK).
  • Employers will not need to include the provision of an electric charging point on form P11D.

Changes to Optional Remuneration Arrangements (OpRA) rules for taxable cars and vans

New legislation applying from 6 April 2019 will:

  • Ensure that when a taxable car or van is provided through OpRA, the amount foregone, which is taken into account in working out the taxable benefit in kind, includes any amount foregone in connection with associated costs (such as insurance and servicing).
  • Adjust the value of any capital contribution towards a taxable car when the car is made available for only part of the tax year.

Change to the income tax and NICs treatment of emergency vehicles available for private use:

These changes which apply from 6 April 2017:

  • Extend the current exemption for emergency vehicles made available for private use to cover all commuting journeys
  • Introduce transitional arrangements for the period 6 April 2017 to 5 April 2020 for calculating the value of the benefit for emergency vehicles under the ‘use of assets’ legislation
  • Allow the cost of fuel to be excluded from the calculation of additional expenses for the year where:
    • the employer has not provided any fuel for private use.
    • the cost of fuel for any private mileage has been made good in full by the employee.
    • any reimbursement for fuel by the employer is only for fuel used for business mileage.

Abolishing receipt checking requirement for benchmark scale rates from 6 April 2019:

  • Employers will no longer be required by HMRC to check details of employee expenditure (receipts) when paying or reimbursing expenses at or below the published benchmark scale rates for allowable travel expenses.
  • Employers will only be required to ensure that employees are undertaking qualifying business travel on the occasions on which payments or reimbursements are made.
  • This does not apply to payments or reimbursements made under bespoke scale rate payments or industry-wide rates.

Legislating overseas scale rates from 6 April 2019

  • HMRC’s overseas scale rates  provide employers with maximum guideline amounts for reimbursing or paying employees allowable travel costs when they travel abroad on business.
  • The legislation puts the concessionary accommodation and subsistence overseas scale rates (OSR) onto a statutory basis.
  • The same reduced checking requirements as for benchmark scale rates will apply.

Employers choosing to reimburse their staff for the cost of the EU Settled Status scheme:

  • From 30 March 2019 EU citizens and their family will be able to apply to get either settled or pre-settled status.
  • Where an employer pays or reimburses their employees’ application, this will be taxable as employment income as the payment is of direct monetary value to the employee.
  • Employers can choose to pay the tax charge for their employees. For many employers this can be managed using their existing PAYE settlement agreement (PSA)

Visa Costs being met by UK employers:

Under current rules migrants outside of the European Economic Area (EEA) or Switzerland who wish to come to the UK to take up employment need to apply for a visa.

  • Where a non-domiciled individual comes to the UK to take up employment and an employer covers the costs there will be no liability to income tax and National Insurance contributions.
  • This is because the visa application costs are considered to be travel related and are covered as a deduction under s373 ITEPA 2003 as “provision of travel facilities”.
  • These payments will be liable to income tax and NICs when the applicant is already in the UK; they cannot be regarded as “provision of travel facilities” and do not meet the general deduction rules under s336 ITEPA; they are not incurred “in the performance of the duties of the employment” but they merely put an employee in a position to eventually perform those duties.

Employer-provided living accommodation – the ‘customary’ test under s99(2) ITEPA 2003:

  • s99(2) ITEPA 2003 provides an exemption when Employer provided living accommodation is provided for the better performance of the duties and the employment is one of the kind where it is customary for employers to provide living accommodation.
  • HMRC are taking this opportunity to remind employers who do offer accommodation to employees that ‘customary’ in this context does not apply to a specific employer alone.
    • A practice is customary if it is recognisable as the norm and if failure to observe it is exceptional.
    • The ‘customary’ test is satisfied where it is the normal practice to provide living accommodation for a class of employee (e.g. in an employment sector).
    • HMRC guidance confirms that there is no ‘custom’ where less than half of the employees in a particular kind of employment are provided with living accommodation. If this test is not met, and the ‘representative occupier’ provisions do not apply, the amount of the benefit is liable to income tax and Class 1A NICs.

Welsh rates of Income Tax (WRIT)

  • In November 2018 HMRC wrote to over 2m customers with a main residence in Wales telling them about Welsh rates of Income Tax . This includes people living in Wales with an active record of employment (regardless of where they work).
  • In February/March employers will receive ‘C’ PAYE codes for all employees where HMRC records show they are Welsh resident. Employers should ensure that the correct tax code is used with effect from 6 April 2019.
  • HMRC will continue to administer WRIT as part of UK Income Tax system.
  • Employees do not need to do anything unless they move home. HMRC asks employers to remind employees to notify HMRC if they do.

Toolkits – helping to reduce errors

  • The National Insurance Contributions & Statutory Payments toolkit contains comprehensive sections that address areas such as Class 1 NICs and statutory payments.

Basic PAYE Tools for 2019-2020

  • The April 19/20 version of Basic PAYE Tools (BPT) will be available for customers to download on GOV.UK in time for the start of the new tax year.

Off-payroll working in the private sector

  • At Budget 2018, following consultation, the government announced reforms to address non-compliance with the off-payroll working rules (IR35) in the private sector.
  • The reform does not introduce a new tax; it tackles non-compliance with the off-payroll working rules.

From April 2020, where an individual is engaged by a medium or large-sized business and works through a company, the business will become responsible for assessing the individual’s employment status.

  • If the rules apply, the business, agency or third party paying the individual’s company will be responsible for deducting income tax and NICs through PAYE as for employees, and paying employer NICs.
  • Existing rules will continue to apply for engagements with small businesses. The definition of a ‘small business’ will be based on the Companies Act 2006 definition of a small company.
  • The Check Employment Status for Tax (CEST) service is available to help businesses determine whether the off-payroll working rules apply. HMRC will continue to work with stakeholders to improve CEST and associated guidance before the reforms come into effect.
  • HMRC will be publishing a further consultation early 2019 to seek views on the detailed operation of rules in the private sector.

Company Car Tax

Diesel Supplement:

  • There was an increase in the diesel supplement for company cars from 6 April 2018.
  • Diesel cars which meet the levels of Nitrogen Oxide (NOx) emissions, permitted by Euro standard 6d, are exempt from the entire diesel supplement.
  • For cars manufactured after September 2018, the DVLA Vehicle Enquiry Service will help identify whether a car meets Euro standard 6d or the information can be found on form V5C.
  • From 6 April 2019 a new fuel type will be shown on form P46 (car) called ‘Fuel Type F Diesel cars meeting Euro standard 6d’. This fuel type should be used for reporting diesel company cars which are Euro standard 6d compliant.

If you have registered to payroll the car and car fuel benefit charge in the 2019/2020 tax year for a Euro standard 6d compliant diesel car:

  • Calculate the cash equivalent using the appropriate percentage for ‘Fuel Type F’.
  • Enter this amount in ‘Box 182’ of the Full Payment Submission (FPS)
  • Enter ‘F’ in ‘Box 177’ of the FPS.

New entitlement to Parental Bereavement Leave and Pay

The Government is introducing a new workplace right to Parental Bereavement Leave and Pay for parents who lose a child under the age of 18, including those who suffer a stillbirth from 24 weeks of pregnancy. The commencement date will be 6 April 2020.               

Those who qualify will be entitled to:

  • 2 weeks of Parental Bereavement Leave
  • Parental Bereavement Pay, paid at the statutory flat weekly rate of £145.18 (or 90% of average earnings, where this is lower) where the parents has at least 26 weeks continuous service at the date of their child’s death and earnings above the Lower Earnings Limit .
  • In all cases, eligibility will be based on facts that will be clear to both the employee and their employer in order to minimise confusion.
  • The Employer Bulletin provides more details on entitlement and eligibility.

Paying HMRC

HMRC are encouraging all customers to pay electronically by using Direct Debit, Online or telephone banking and Debit/Corporate Credit card online.                

Making payments to HMRC easier:

A green ‘pay now’ button will be added to the GOV.UK pay employers’ PAYE guidance page around 31 December 2018.

RTI payroll submissions

Incorrect and late RTI payroll submissions can lead to increased and unnecessary contact for employers from employees.

This can be avoided by:

  • Submitting payroll on or before your employees’ pay day with accurate and up to date employee information.
  • Using the starter checklist on GOV.UK regardless of whether the employee does not give you a recent P45.
  • Providing correct start dates and starter declarations for new employees
  • Ensuring that leaving dates are included for leaving employees and are consistent where the final FPS submission for a period of employment has to be amended.
  • When changing employees’ payroll ID, ensure that the old payroll ID is provided and the change of payroll ID field is completed
  • Where changing payroll software do not include starter information and ensure that the year to date figures are correct. If your new software automatically assigns new Payroll IDs ensure that the old payroll ID is provided and the change of payroll ID field is completed.

Changes to Student Loans from 6 April 2019

From 6 April 2019 the thresholds for Student Loan Plan 1 and Plan 2 will increase to:

  • Plan 1: £18,935
  • Plan 2: £25,725.

Deductions will remain the same at 9% for Plan 1 and Plan 2 loans.

Starter checklist:

  • The starter checklist will be updated to ask your employee if they have both Plan 1 and Plan 2 student loans.
  • If your employee ticks both, continue to deduct using only one Plan type at a time. If you do not know which Plan type to use, default to Plan 1 and check the student loan start notice (SL1) from HMRC.

Postgraduate Loans (PGL)

  • The earliest taxpayers can start repayment of PGL is April 2019
  • The threshold for PGL for England and Wales will be £21,000, with deductions being taken at 6%.
  • The starter checklist will be updated to include a section for PGL
  • Form P45 will not change and will still only indicate whether an employee is already repaying a student loan.
  • Form P60 will be updated to include a new box for PGL deductions.

NMW: Top 10 mistakes

HMRC have listed the top ten mistakes employers make when paying the National Minimum Wage: 

  1. Failure to apply the annual minimum wage rate increase as they go up each year on 1 April.
  2. Missed birthdays as employees turn 18, 21 or 25 years old and move from one NMW rate to another.
  3. Paying the apprentice rate to somebody who isn’t actually an apprentice. Recognised apprentices must have an apprenticeship contract and undergo an element of structured training.
  4. Continuing to pay the apprentice rate for too long. The apprentice rate only applies to apprentices who are under the age of 19, or if aged 19 or over within the first year of their apprenticeship.
  5. Making wage deductions for items or expenses that are connected with the job. This could include, for example, safety clothing, uniforms, tools etc.
  6. Making wage deductions that are deemed to be for the employer’s “own use or benefit”. For example a Christmas club saving scheme. It doesn’t matter that the worker can choose to buy into the scheme and the employer doesn’t have to make a profit from it.
  7. Charging a worker more than the stated offset rate for living accommodation, currently £49 a week.
  8. Not paying for all the time worked such as time spent travelling, training or downtime at the employer’s disposal.
  9. Not paying for additional time worked such as time spent clearing security checks once a worker’s shift has finished.
  10. Including elements of pay that don’t count towards minimum wage such as tips and the premium element of pay associated with shift premium.

HMRC Taxes Helpline

The employer Helpline is no longer able to check tax codes are correct or reissue tax codes due to in year PAYE triggers. Calls to check tax codes or reissue tax codes should be made to the Taxes Helpline on 0300 200 3300.

Termination Payments and income from Sporting Testimonials

  • The government will legislate for reforms to the NIC treatment of termination payments and income from sporting testimonials, with effect from April 2020.
  • HMRC is working to deliver this through Real Time Information (RTI).

An update on UK traders EU Exit preparations

Earlier this month HMRC published their latest letter to UK traders that only trade with the EU to help them prepare in the event that the UK leaves the EU without a deal on 29 March 2019.

The letter advises these businesses on the three actions they must take to ensure they can continue to trade the day after the UK leaves, this includes registering for a UK Economic Operator Registration and Identification (EORI) number. The full letter can be read only on GOV.UK.

The government has opened the grant scheme to help support training and IT improvements for customs intermediaries and traders who complete, or intend to complete, customs declarations. Further information on these grants and who can apply is available on GOV.UK.

External Link:

Employer Bulletin December 2018