HMRC have published their Employer Bulletin for February 2020. We summarise the key content for you, with links to our detailed guidance on the topics covered.
Review of off-payroll working rules from April 2020
The government has commissioned a review of the upcoming reform to the off-payroll working rules.
- The review will consider if there are any further steps the Government can take to ensure the smooth and successful implementation of the reform, due to come into force on 6 April 2020.
- HMRC have published draft technical guidance in the Employment Status Manual and a factsheet for contractors on the operation of the rules from 6 April.
- See Call for evidence: Extension of the off-payroll working rules to the private sector.
Enhancements to the Check Employment Status for Tax (CEST) service and supporting guidance
On 25 November 2019, HMRC published enhancements to the CEST service and supporting guidance.
NIC thresholds and statutory payments rates 2020-2021
- The government has confirmed NIC thresholds will rise to £9,500 per year for 2020/21.
- A typical employee will save about £104 in 2020/21; the self-employed will save £78.
- All other thresholds to rise with inflation, except the upper NIC thresholds which will stay at £50,000.
Electronic payment deadline falls on a weekend
In February, the electronic payment deadline is on a Saturday. To ensure your payment reaches HMRC by the 22nd, you must have cleared funds with HMRC’s by the 21st or use Faster Payments.
Student and postgraduate loan thresholds for April 2020
- The thresholds for Plan 1 and Plan 2 student loans are increasing from 6 April 2020. Both plans will be calculated at 9%.
- Plan 1: £19,390
- Plan 2: £26,575.
- The postgraduate loan threshold will remain at £21,000 with loan deductions at 6%.
- If you receive a student loan and or Postgraduate Loan (PGL) Start Notice (SL1/PGL1) from HMRC, you must check and use the correct:
- loan/plan type on the start notice.
- start date shown on the notice and take deductions from the next available payday.
- If earnings are below the thresholds, update the employee’s payroll record to show they have a loan and file the start notice. Deductions should continue until HMRC notifies you to stop.
Get ready for the rise in the National Minimum and National Living Wage rates on 1 April 2020
- The National Living Wage for workers over 25 will increase to £8.72 per hour on 1 April 2020.
- National Minimum Wage rates for younger workers will increase in line with inflation.
End of year reporting 2020
- Your last Full Payment Submission (FPS) or EPS of the year up to and including 5 April 2020 must include an indicator that you are making the final submission so HMRC knows you have sent them everything and they can finalise their records for you and your employees.
- If your commercial payroll software will not let you put the indicator on an FPS, or you forget, send your last FPS and then send an EPS with the indicator ticked.
- You also need to give your employees a P60 by 31 May 2020 if they were in your employment on 5 April 2020.
- If you are not going to pay anyone again this tax year, send an EPS with the indicator ticked by 19 April 2020 to show you didn’t pay anyone in the final pay period and it’s the final submission.
Parental Bereavement Leave and Pay
The Government is introducing a new entitlement to Parental Bereavement Leave (PBL) and Statutory Parental Bereavement Pay (SPBP) from April 2020 to provide parents who lose a child or suffer a stillbirth with a day-one employment right to take two weeks paid leave.
- Eligible parents will be entitled to two weeks of statutory pay.
- A ‘bereaved parent’ will include adoptive parents, parents of a child born to a surrogate, parents fostering to adopt, certain others who have cared for the child for a defined period.
- Full guidance is expected shortly.
Preparing for changes to Employment Allowance
- A new claim for Employment Allowance (EA) needs to be submitted each tax year; claims will not automatically renew each year.
Employers’ (secondary) Class 1 National Insurance Contributions threshold check:
- EA can only be claimed if total qualifying employers’ Class 1 NICs liability in the previous tax year was less than £100,000.
- If you have multiple PAYE schemes or are part of a connected group of companies, the Employers’ Class 1 NICs liabilities of all companies and PAYE schemes, must be added together to assess eligibility for EA.
- The allowance can only be claimed once across all your PAYE schemes and connected companies. You will need to decide which PAYE scheme to set the claim against.
P9 Notice of Coding
- P9 Notice of Coding email notifications will be sent from the week commencing 10 February 2020 to 10 March 2020 advising that the coding for the tax year starting 6 April 2020 can be viewed online.
- HMRC expect P9 coding notices to arrive with employers on or around 21 March 2020.
- As income tax thresholds and rates will not be finalised until March, tax codes will be calculated using 2019-2020 rates.
- After the Budget, HMRC may need to carry out a recoding exercise to include changes to rates or thresholds. Any changes will be issued to employers on a P6b. The revised codes should only be operated on or after the date shown on the P6b.
Basic PAYE Tools – New Release
An update to the Basic PAYE Tools (BPT) will be released at the end of March to support the 2020/21 tax year. It is important that you update it and are using version 20.0 from 6 April 2020.
- From the March 2020 release, employers using BPT for payroll purposes will be able to print off employee payslips.
A reminder on Benefits in Kind with cash allowances, flexible benefit packages and salary sacrifice
A reminder if you offer your employees cash allowances, flexible benefit packages or salary sacrifice for a Benefit in Kind (BiK), the rules changed on 6 April 2017.
- All BiKs are valued at the higher rate of the cash given up or the value under the traditional rules.
- All previously non-taxable BiKs are now taxable, valued on the cash given up.
- Cars with emissions of 75g CO2 /km or less, pensions, pension advice, childcare and Cycle to Work are unaffected.
- Pre 6 April 2017 cars, school fees and accommodation move into the new rules on the earlier renewal or variation or April 2021.
- See Salary sacrifice & optional remuneration schemes
Reporting expenses and benefits
- If you have paid any benefits in kind to any employees, you must send P11Ds and a P11D(b) to HMRC by 6 July 2020 to avoid penalties, which are charged on a monthly basis.
- You can file 2019/20 P11D and P11D(b) employer Class 1A NIC returns from 6 April 2020.
- If you receive a P11D(b) Class 1A NIC return, an electronic notice to file a P11D(b) or a reminder to file a P11D(b) return and you have not made any expenses and benefits payments to employees, you may need to tell HMRC you have no return to make.
Payrolling benefits in kind
If you registered online on or before 5 April 2019, and are using the Payrolling Benefits in Kind process, you need to send:
- A P11D for any benefits you have not payrolled.
- A P11D(b) to tell HMRC about the employer Class 1A NICs due on all benefits.
- A letter to your employees telling them which benefits were payrolled and the amounts.
If you did not register online on or before 5 April 2019 to payroll benefits in kind, you need to send:
- A P11D for all benefits in kind you have given to any employees and
- A P11D(b) to tell us about the employer Class 1A NICs due on all benefits.
If you have payrolled without registering online you must put a note on each P11D showing which benefits have been payrolled.
- You can register on or before 5 April 2020 to payroll benefits for 2020/21 and you will not need to file a P11D for 2020/21 unless you have excluded from payrolling any employees you have given benefits to or chosen not to payroll all benefits given to employees.
Small business survey – tell ABAB
Small businesses are being invited to share their views on the tax system by completing a short survey.
The survey by the Administrative Burdens Advisory Board (ABAB) takes 5 to 10 minutes to complete and can be found here and is open until Friday 21 February.
Short-Term Business Visitors
Reminder: changes to the Short-Term Business Visitors (STBVs) special arrangement under Regulation 141
HMRC confirm that changes to PAYE81950 will be published on 6 April 2020. This will include an application form to join Appendix 8 for the first time. HMRC will not accept earlier applications.
- HMRC have written to employers who had a current special arrangement inviting them to apply to join Appendix 8 from April 2020. If HMRC have written to you you should reply now. If you haven’t received the letter, contact HMRC urgently.
- To join Appendix 8, tick the box 'apply for a new Appendix 8 arrangement'. If you don’t want to join tick the box 'cease current PAYE special arrangement'. Only tick one box or your application will be delayed.
- The 2020 filing and payment dates for the current arrangements are 19 April and 22 April.
- The extended filing and payment date of 31 May for Appendix 8 will take effect from 2021.
Employers: make sure that you and your employees benefit by applying the rules correctly.
When looking at the trivial benefit conditions, each case should be viewed on its own merits. This includes looking at the intention behind giving the benefit to an employee.
- HMRC generally accepts that birthday, Christmas or other seasonal gifts are isolated instances in a tax year. They may be provided for staff welfare or in respect to a non-work related event. They are unlikely to be contractual. If all the conditions of the exemption are met, the benefit will not be liable to tax. There are examples at EIM21865 and EIM21866.
- If lunch is provided for employees working through their lunch hour, the exemption does not apply. The lunch is provided in recognition of the work being carried out by the employees. Other exemptions or deductions may apply such as the workplace meal exemption at S.317 ITEPA if free or subsidised meals are provided to all employees and other conditions are met.
Providing employees with an isolated gift each year, to mark a non-work related event e.g. a birthday, Christmas or another occasion does not necessarily give the employee a contractual entitlement to it.
If an employer repeatedly provides the same benefit during a tax year, to the point where an employee can reasonably expect to receive it at periodic intervals, there may be a legitimate expectation. The benefit must be considered in its entirety, not as a series of isolated instances. This might take the benefit outside the scope of the trivial benefit exemption.
See Trivial Benefits
Ultra-Low emission vehicles and diesel supplement company car tax exemption changes
Employer Bulletin 81 included details of the proposed changes impacting Ultra-Low Emission Vehicles from 6 April 2020.
How this affects you:
- There will be no change to the way you report your company car tax data but you may need to provide additional information.
Reporting a new company car or one made available to an individual for the first time in the 2020-2021 tax year 1.
From 6 April 2020:
- A new zero-emission mileage field will be shown on form P46 (car). If a hybrid car has a CO2 emission figure of 1-50g/km you need to provide the car’s zero-emission mileage. This is the maximum distance in miles that the car can be driven in the electric mode without recharging. This also applies if you are payrolling the car and fuel benefits through FPS 1.
- For paper P46 (car) submissions make sure you complete the latest version. Historic copies may not include the new zero-emission mileage field. These are available from 6 April 2020.
Where to find the additional zero-emission mileage information:
- If you are leasing the vehicle, you can obtain this data in the same way you currently receive your company car tax data from the car leasing firm or fleet provider.
- If you own the vehicle, the figure can be found on your vehicle’s Certificate of Conformity; the zero-emission mileage may be displayed as ‘electric range’.
Failure to obtain the data via the correct source could lead to incorrect company car benefit in kind being calculated.
Diesel Supplement Company Car Tax Exemption changes
When completing Section F Car and Car Fuel of the 2019/20 P11D complete the question ‘type of fuel or power used’ with the correct key letter:
- Cars that meet the Euro 6D standard will use fuel letter F.
- Cars that don’t meet the Euro 6D standard will use the fuel letter D.
Changes to the income tax and NICs treatment of emergency vehicles: end of transitional arrangements from 6 April 2020
- Following changes to the use of assets legislation in April 2017, transitional arrangements were introduced for calculating the amount chargeable to income tax on the benefit of an emergency vehicle made available for private use for 6 April 2017 to 5 April 2020.
- This allowed the cash equivalent of the benefit to be calculated on the proportion of the ratio of total to non-business miles travelled in the relevant tax year.
Those arrangements end on 6 April 2020. The normal rules for calculating the use of an asset must be used from that point.
- This will not affect the separate income tax exemption available for emergency vehicles which allow private use if limited to ordinary commuting and on-call commuting.
Issues regarding payroll identification of secondees to the UK in error
HMRC are highlighting a common payroll error that occurs when UK individuals are identified incorrectly as secondees to the UK.
In payroll, there are five options which should only be selected if the individual has been seconded to work in the UK by an overseas company:
- Intend to stay over 183 days
- Intend to stay less than 183 days
- Intend to work both in and out of UK
- European Economic Area
Common errors are:
- That the options above are selected as they appear to relate to any individual, but they only apply if the employee is a secondee to the UK from an overseas employer.
- Entering a tick in the EEA box for migrant workers, e.g. seasonal staff in hotels, fruit pickers, etc.
Employers should only select these options when the employee is a secondee to the UK from an overseas employer.
Independent review of the loan charge: what it means for you
- The government has published its response to the independent review of the loan charge.
- HMRC have sent out letters to outline how the new rules may apply to employers.
- If you are in settlement talks with HMRC, and you did not receive this letter, you should speak to your usual HMRC contact or email
Business Tax Account: 2013-2014 data to be removed
The Business Tax Account (BTA) currently shows employers’ liabilities and payments data for 2013-2014 onwards.
In line with HMRC’s other online services, this will be limited to:
- Current tax year plus the previous six years.
- Open charges for earlier years.
Data for 2013-2014 may be removed in July 2020 so you should take a copy now if you will need one.
Register as an employer
- You need to register as an employer with HMRC when you start employing staff or using subcontractors for construction work before the first payday.
- Once HMRC has processed your request, it takes five working days to get your new Employer PAYE reference.
- You cannot register more than two months before you start paying people.
- If you want to register a business that will start on or after 6 April and you tell HMRC in the previous tax year they will not be able to start processing your request until 6 April or after.
To pay an employee before you get your employer PAYE reference number, you should:
1. Run payroll
2. Store your Full Payment Submission (FPS)
3. Send a late FPS to HMRC.
A reminder for employees to update their Personal Tax Account
Please remind your employees to log in to their Personal Tax Account (PTA) and update their expected income to include any bonuses, overtime or potential additional income within the current tax year to ensure that HMRC holds the most up to date estimated account information.
Sporting testimonials & termination payments
A new Class 1A NICs charge comes into effect on 6 April 2020 for Termination Awards over £30,000 and payments from sporting testimonials above £100,000.
- The new Class 1A NICs liability applies to non-contractual 'cash' or cash equivalent) taxable termination awards over £30,000 which have not already incurred a Class 1 NICs liability as earnings.
- It will be chargeable on the employer and payable at the same Class 1A NICs rate of 13.8% that applies to Class 1A NICs liabilities on Benefits in Kind (BiKs).
- Unlike Class 1A NICs liabilities on BiKs, the liability will not be payable and reported via the P11D(b) payment/reporting process and will be paid and reported through RTI.
- The new liability will not apply to any termination awards paid after 5 April 2020 for employment terminated before 6 April 2020.
From 6 April 2020
- Any non-contractual and non-customary sporting testimonial payments exceeding £100,000 which are paid to a sportsperson by an independent testimonial committee, will incur a Class 1A NICs liability.
- The liability will be chargeable on the sporting testimonial committee. It will be the responsibility of the committee controller to report and pay the Class 1A NICs to HMRC.
- The liabilities will be paid and reported through the RTI process.
- The charge will not apply to sport testimonials announced publicly before 6 April 2020.
Update on termination payments: EIM12965 Guidance Update
The guidance at EIM12965 has been updated to clarify that compensation payments may be taxable under provisions other than s.401 ITEPA 2003 in certain circumstances.
- The previous wording of the guidance incorrectly stated that compensation payments for discrimination can only be taxable under s.401 ITEPA 2003.
- HMRC has always held that some forms of compensation payment may be taxable under other parts of ITEPA such as compensation paid in relation to unequal pay claims which may be taxable as earnings under s.62 ITEPA 2003.
- The previous version of the guidance is at EIM12966 but cannot be relied on for payments made after 5 April 2021.
Upcoming changes to Employment Law
Holiday Pay Reference Period
From 6 April 2020, the holiday pay reference period is being extended.
- Instead of looking back 12 weeks, employers must calculate the average over a 52 week period. As unpaid weeks are excluded, this can require employers to count back over a year into the past.
- To avoid this look back being indefinite, a limit of 104 weeks worth or 2 years of data is being introduced. If after that, there is still not 52 weeks' worth of data, the employer uses an average of what they do have.
For new workers who haven’t worked 52 weeks, the employer should use the pay data available back to the employee start date.