HMRC have published their Employer Bulletin for August 2019. We summarise the key content for you, with links to our detailed guidance on the topics covered.

Some of the items included in this update were also included the Agent update August/September 2019, rather than duplicate these we have linked to that update accordingly where appropriate.

PAYE RTI penalties – continuation of the risk-based approach to charging penalties

Following a review, HMRC has decided to continue the risk-based approach to PAYE late filing and late payment penalties throughout the 2019/20 tax year. The approach is based on areas of greatest risk and non-compliant behaviour.

  • Penalties for 2019/20 will be issued from September 2019.

Late Filing Penalties:

  • HMRC will not charge penalties automatically for 2019/20 provided a Full Payment Submission (FPS) is filed within 3 days of the payment date.
  • Where there is a pattern of persistent late filing within three days of the statutory filing date, employers will be reviewed and may be charged a filing penalty.

See Penalties: RTI (Real Time Information) for PAYE

Reporting payroll information accurately and on time

  • Where reports are late, or inaccurate information is provided, your employees may be negatively affected, and not paid the correct amount of Universal Credit.
  • The payment date you report on your Full Payment Submission must be on or before the date you pay your employees, not the payroll run date, or another date from your payroll system.
    • Incorrect recording of this date is one of the most common reasons for the issue of a late filing penalty.
    • If you are cannot report payments on time, and you have a reasonable excuse, use a late reporting reason code for every payment on the FPS where the circumstances apply.
    • HMRC will send you an electronic receipt to confirm a submission has been received although this doesn’t mean that it’s correct or on time.

See Penalties: Errors in Returns and Documents 

Generic Notification Service (GNS) electronic warning messages

Electronic messages contain important information and should not be ignored.

The circumstances when HMRC will send you a message are:

  • each month where a FPS is later than the payment date, with no valid reason
  • on the 11th or 12th of the month if they haven’t received an FPS for the month just ending on the 5th, or an Employment Payment Summary stating no employees were paid in that month
  • around the 5th of each month where the previous month’s payment has not been paid on time or in full and there is an outstanding charge of over £100.

Class 1A liabilities payable on Termination Awards and Sporting Testimonial Payments

From April 2020:

  • A Class 1A NICs liability will be introduced on non-contractual “cash” (or cash equivalent) taxable termination payments over £30,000 which have not already incurred a Class 1 NICs liability.
  • This will be chargeable on the employer and payable at the same annual Class 1A percentage rate (13.8%) that applies to existing Class 1A liabilities on Benefits in Kind but will not be payable and reported via the annual P11D(b) payment/reporting process.
    • From 6 April 2020 onwards, termination awards that comprise of cash payments will be paid and reported through the PAYE/RTI process.
  • The same rules apply to non-contractual and non-customary sporting testimonial payments in excess of £100,000; Class 1A applies and this is payable and reportable through RTI.

See Agent Update August/September 2019  for more details of the changes.

What employers and sporting testimonial committees need to do to prepare for reporting the new Class 1A NICs liabilities through RTI:

Before 6 April 2020, employers must make sure that their payroll systems have been updated to enable them to pay and report the new Class 1A NICs liability arising on termination payments. Sporting Testimonial Committees will need to ensure that whatever payroll system they are using, it has the capability to report Class 1A NICs liabilities through RTI.

HMRC will shortly be consulting payroll software providers on this.

Off-payroll working rules from April 2020

The government is reforming the operation of the off-payroll working rules from April 2020 to mirror the reforms introduced into the public sector in 2017, making medium and large organisations and agencies responsible for ensuring the contractors they engage pay the right tax and NICs.

Businesses can prepare for reform by:

  • Identifying and reviewing their current engagements with intermediaries, including personal service companies and agencies that supply labour to them
  • Reviewing their current arrangements for using contingent labour, particularly within the organisation functions that are more likely to engage off-payroll workers
  • Putting in place comprehensive, joined-up processes to ensure consistent decisions about the employment status of the people they engage; and
  • Reviewing internal systems, such as payroll software, HR and on-boarding policies to see if they need to make any changes.

See also Agent Update August/September 2019 and Off-payroll working: At a glance

Disguised Remuneration loan charge

See Agent Update August/September 2019. Those who have not concluded the settlement of their schemes by the date in their letter from HMRC will have to pay the loan charge.

Basic PAYE Tools – New Release

An update to the Basic PAYE Tools (BPT) is due to be released in September 2019. This update is just for general maintenance and does not alter the functionality of the tool.

Toolkits – Revisions published

Seasonal Workers

Like other staff, seasonal and temporary workers must be assessed to see if they qualify for automatic enrolment into a workplace pension.

See Agent Update August/September 2019 for more details.

Contractors operating CIS – new VAT reverse charge on building and construction services

The new reverse charge on building and construction services comes into effect on 1 October 2019. HMRC are holding webinars in September; find out if the charge affects you, how it may impact your cash flow and how to prepare for the changes. Register online here

See Construction Industry reverse charge and Agent Update August/September 2019

‘Trivial Benefits’ for your employees – get them right

Neither employer nor employee has to pay Income Tax or NIC on the cost of an employer-provided benefit, if the exemption for trivial benefits applies.

  • Where the exemption applies you are not required to report these benefits to HMRC either in a PAYE Settlement Agreement (PSA), on a P11D or through the Payrolling of benefits in kind

Myth Busting:

Just because the cost of the benefit being provided to an employee is below £50 it does not automatically mean it qualifies under the trivial benefits in kind exemption; there are other conditions to be met.. All of the following must apply before the benefit qualifies for the exemption:

  • the cost of the benefit in kind must not be over £50, and
  • the benefit in kind must not be cash nor a voucher redeemable for cash, and
  • it must not be given as part of salary sacrifice or any other contractual obligations, and
  • it must not be provided in recognition for work performed.

There is a £300 limit on the cost of all benefits provided in a tax year to directors of close companies.

To apply the exemption correctly employers should ask yourself some basic questions:

  • What is the cost of providing the benefit?
  • Is it really below £50 per employee?
  • If a benefit is provided to a group of employees, and it is impracticable to work out the exact cost per person, what is the average cost per employee?
  • Is there a contractual obligation to provide the benefit?
  • Are you sure the benefit is not related to how the employee has performed in the course of their duties?

See Trivial Benefits

Welsh rates of Income Tax

Welsh rates of Income Tax came into operation from 6 April 2019 and tax codes for PAYE taxpayers living in Wales are now prefixed with the letter ‘C’.

It is your employees’ responsibility to ensure that they provide you with their correct address, and to inform HMRC if they change address. They can do this online at www.gov.uk/tell-hmrc-change-of-details.

See Agent Update August/September 2019 for more details on recent changes and Welsh Income Tax Rates.

Student Loans

See Agent Update August/September 2019 for details about student loans and using new starter checklists. 

Good Work Plan: Proposals to support families

The Government has launched a new consultation on high-level options and principles to enable parents to balance the gender division of parental leave and proposals for a new Neonatal Leave and Pay entitlement, for parents of premature and sick babies who need to spend a prolonged period in neonatal care following birth.

For more information, read the full consultation here, it is open until November 2019 .

Did you know that sickness absence costs employers around £9 billion per year?

The Department of Health and Social Care and the Department of Work and Pensions have published a consultation seeking your views on how they can best reduce the significant numbers of people that leave work each year for health reasons.

The proposals include:

  • Making legal changes to encourage employers to take early action in a period of sickness absence
  • Reforming Statutory Sick Pay (SSP)
  • Improving access to occupational health

You can access the consultation here, it is open until 15 October 2019.

External Link:

Employer bulletin: August 2019

 

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