HMRC have published their Employer Bulletin for February 2021. We summarise the key content for you, with links to our detailed guidance on the topics covered.
Coronavirus Job Retention Scheme (CJRS)
- The UK Government will pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, until the end of April 2021.
- Claims can be made before, during or after you process your payroll. If you can, it is best to make a claim once you are sure of the exact number of hours your employees will work. This will mean you will not have to amend your claim at a later date.
- Key deadlines to be aware of:
- January claims must be submitted no later than Monday 15 February 2021.
- February claims must be submitted no later than Monday 15 March 2021.
- If you have already submitted your claims for January 2021 but find you need to make a change because you did not claim enough, you can do this until 1 March 2021.
Furloughing employees due to caring responsibilities
- If an employee asks to be furloughed because they have caring responsibilities resulting from Coronavirus, such as caring for children who are at home as a result of school or childcare facilities closing, you can place them on furlough and claim for them under the CJRS.
How to access HMRC online services
- To make a CJRS claim, employers will need to be registered and have the required access, password or activation code for HMRC online services.
- Activation codes may take up to 10 days to arrive. You should take this time into account if you plan to make a claim.
Publishing information on claims
- In January 2021 HMRC published a list of employers’ names who have claimed CJRS for periods from December 2020 onwards.
- From 25 February 2021 HMRC will publish the names, an indication of the value of claims and company registration numbers (for those who have one) of employers who make CJRS claims for periods starting on or after 1 December 2020. The published value of your claim will be shown within a banded range.
- HMRC will not publish details of employers claiming through the scheme if they can show that publicising these would result in a serious risk violence or intimidation to individuals, or those living with them. There is an online application form to request that your details not to be published.
- If you need to do this, HMRC will not publish your details until a decision has been made and you have been told. You will only need to apply once, as the decision will cover all CJRS claim periods starting from 1 December 2020. Employers must make the application themself, it cannot be made by an agent on their behalf.
- From 25 February 2021, employees will also be able to check if a CJRS claim on their behalf through their online Personal Tax Account.
- Details of CJRS claims will now be published monthly as part of HMRC’s commitment to transparency and to deter fraudulent claims.
- You can sign up to receive regular email updates from HMRC, to keep up to date with the latest information on our COVID-19 schemes. You can simply register and add the subscription topics you’re interested in.
- Thousands of people have also joined and benefited from HMRC's live webinars which offer more support on changes to CJRS and how they affect employers.
VAT deferral new payment scheme: opt-in from the end of February 2021
- If you deferred VAT due from 20 March 2020 to 30 June 2020 and still have payments to make, you can opt into the VAT deferral new payment scheme to pay your deferred VAT over a longer period.
- The VAT deferral new payment scheme is expected to open 23 February 2021 and close at the end of June 2021. If you opt-in you can make up to 11 smaller monthly instalments, interest-free.
- You can opt into the scheme online without the need to call.
- Businesses that need more help to pay their deferred VAT should contact HMRC.
- If you can pay your deferred VAT by 31 March 2021 you should do so.
VAT reverse charge for construction and building services
- VAT registered construction businesses should note that this reverse charge measure is coming in on 1 March 2021. A Revenue and Customs Brief was issued in June 2020, giving more information.
- Every VAT registered construction business will have received an individual letter in January (further to letters sent in February and September 2020), advising them to check if they might be liable for the reverse charge. If they are liable, they should start to prepare now.
- The key aspects are:
- It will apply to standard and reduced-rate supplies of building and construction services made to VAT registered businesses, who in turn also make onward supplies of those building and construction services.
- The contractor will be responsible for paying the output VAT due rather than the sub-contractor and can continue to reclaim this amount as input tax.
- The scope of supplies affected is closely aligned to the supplies required to be reported under the Construction Industry Scheme but does not include supplies of staff or workers for use by the customer.
- The legislation introduces the concept of ‘end-users’ and ‘intermediary suppliers’. This covers businesses or groups of associated businesses that do not make supplies of building and construction services to third parties and as such are excluded from the scope of the reverse charge if they receive such supplies, examples include landlords, tenants and property developers
Disguised remuneration & IR35
Employers who have not reported and paid the loan charge
- HMRC are aware of a number of employers who have not reported and paid the loan charge on relevant disguised remuneration loans.
- They are sending letters to these employers to remind them of their responsibilities. This lets them know what will happen next if they do not report and pay the loan charge.
- If you receive this letter, read it carefully and take action by the date HMRC give. If you have any questions about the letter or the loan charge, contact HMRC using the details on the letter.
Spotlight 57. Disguised Remuneration: Tax avoidance by selling future business revenues to a revenue service trust
- HMRC is aware of an arrangement where a business may enter into an agreement with a trust and claim to have sold the rights to its future revenue to the trust. HMRC views this as tax avoidance.
- HMRC have published Spotlight 57 to explain why this type of arrangement should not be used. If you are thinking of using this type of arrangement, HMRC strongly advise that you steer clear. If you are using this type of scheme already, HMRC want to help you to get out of tax avoidance.
More help and support
- If you have an outstanding disguised remuneration scheme use that you want to settle but are concerned about paying, you should contact HMRC.
- HMRC want to help you to pay what you owe and recognise that some people may have difficulty doing this.
- Anyone who wants to discuss settlement with us should speak to their usual HMRC contact or email:
Prepare for tax changes if you engage or supply contractors: Off-Payroll Working rules (IR35)
Actions you may need to take to prepare
- If you are a medium or large-sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the Off-Payroll Working rules (IR35) coming into effect on 6 April 2021. For all contractors working through their own limited company, you need to:
- Identify contractors who work in this way.
- Decide if they are inside or outside the rules.
- Inform your contractors of their status determination, and any agencies you engage with.
- Be ready to add them to payroll if needed.
- Be ready to deal with any disputes.
- Maintain a robust audit trail, and test your processes, systems and controls.
- If you are an employment agency which supplies contractors who work through their own limited company or another intermediary, you need to understand the changes and may also need to take action. You need to:
- Identify contractors who work in this way.
- Be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto the payroll.
- Maintain a robust audit trail, and test your processes, systems and controls.
- HMRC are providing education and support to help you do this.
- HMRC will be publishing details over the next few weeks of how they intend to make sure customers comply with the rules, expanding and updating their previous statement about their intended compliance approach.
- HMRC have committed that they will take a supportive approach and help customers who are trying to do the right thing.
- HMRC are also committed that customers will not have to pay penalties for inaccuracies relating to the Off-Payroll Working rules in the first 12 months unless there is evidence of deliberate non-compliance. This intent has not changed.
- If you are a small business, the changes to the Off-Payroll Working rules do not apply to you, or the contractors you may engage.
- This is because the contractor’s limited company or other intermediary will remain responsible for determining if the contract is inside the Off-Payroll Working rules and accounting for and paying the relevant Income Tax and National Insurance Contributions.
- If the rules do not apply to you because you are a small business, tell your contractors.
Helping contractors to get ready
- You can help the contractors you engage to understand the rules ahead of any changes by sharing HMRC’s contractor flowchart and contractor factsheet.
- HMRC know organisations may be looking to engage some contractors in different ways and are highlighting guidance and support for contractors who may be changing the way they work, to make sure they are not caught out by tax avoidance schemes.
Changes to the Construction Industry Scheme
Legislative changes to tackle Construction Industry Scheme (CIS) abuse are planned for April 2021.
- These changes will clarify:
- The definition of deemed contractors.
- That materials can only be claimed by the sub-contractor incurring the cost.
- That the scope of the false registration penalty is being extended.
- HMRC will also have the power to amend the CIS deduction amounts claimed by sub-contractors on their Real-Time Information (RTI) Employer Payment Summary (EPS) returns.
Employer-provided cycles exemption
- In December 2020 the government announced that employees who joined an employer-provided cycles scheme, on or before 20 December 2020, can now benefit from a time-limited easement because they could not have reasonably foreseen the changes to their working pattern as a result of the Coronavirus restrictions.
- Employees joining a scheme from 21 December 2020, who are currently cycling to work and can meet the qualifying journeys condition, will still be eligible for the tax exemption on the provision of a cycle.
- New scheme entrants who are working from home still have the option to join a scheme.
- They may be liable to a tax charge if they do not meet the qualifying journeys condition (mainly travelling to or from work or in the course of work).
- They also have the option to wait until they have more certainty about their working arrangements and can choose to join the scheme when it may be more appropriate.
- Employers can keep their Cycle to Work scheme open for existing users, even if there are no new users to the scheme for the time being.
- The government continues to encourage employees of all sectors to take up this scheme where cycling to work is currently an option for them and they meet the qualifying journeys condition.
- Should an employer want to close their Cycle to Work scheme for any reason, the cycles which have been provided will become taxable as a Benefit In Kind.
- For more information read the Employment Income Manual: EIM21667A.
- The conditions of the employer-provided cycles exemption have not changed, including the availability condition where employers must offer the scheme to all employees on similar terms.
- The exemption is still very much available for use and employers can continue to offer the scheme to all employees.
Student and postgraduate loans
Student and postgraduate loans thresholds and rates
From 6 April 2021:
- Plan 1: £19,895, earnings above this threshold will continue to be calculated at 9%.
- Plan 2: £27,295, earnings above this threshold will continue to be calculated at 9%.
- Plan 4: new plan type, Scottish Student Loans (SSL) £25,000, earnings above this threshold will be calculated at 9%.
- Postgraduate loan (PGL): £21,000, earnings above this threshold will continue to be calculated at 6%.
Student and postgraduate loan start notice (SL1/PGL1)
- It is important that you:
- Check your online account for either student loan or postgraduate loan, or both, start and stop notices: if your email or correspondence address has changed let HMRC know as soon as possible.
- Take the correct action to start student and or postgraduate loan deductions as soon as possible.
- Record the deductions correctly on your Full Payment Submission (FPS).
- This will make sure that your employee does not pay any more or less than necessary.
- If you receive an SL1 and or PGL1 from HMRC, it is important that you:
- Use the correct loan or plan type.
- Check the start date shown on the notice and take deductions from the next available payday.
- If the earnings are below either the student loan or postgraduate loan or both thresholds, update the employee’s payroll record to show they have either a student loan or postgraduate loan, or both, and file the start notice.
- Deductions should continue until HMRC tells you to stop.
Student and postgraduate loans and Off-Payroll Working rules
- Organisations are not responsible for deducting either student loan or postgraduate loans, or both, for workers engaged through their own companies.
- The worker will account for either student loan or postgraduate loan obligations or both in their own tax return.
- More information can be found in Employer Bulletin 87.
Scottish student loans
- As mentioned in Employer Bulletin 87, the Scottish Government is introducing a new plan type for Scottish student loan borrowers known as Plan 4 from 6 April 2021.
- This change will impact employers across the UK, not only those located in Scotland.
- It will apply to employers who have employees paying back their loan from Student Award Agency for Scotland (SAAS).
- You will be notified by a student loan start notice, SL1, for all affected employees.
- The introduction of Scottish student loans will result in SL1s being issued to employers for existing borrowers impacted by the change and will be in addition to the usual bulk issue of SL1s at the start of each tax year.
- You should apply this change to your payroll software and action on your first FPS submission after 6 April 2021.
- If your employee is not moved to Plan 4, they will over-repay their student loan.
- There will be no action required for Plan 1 borrowers who did not draw down their loan from SAAS.
- A separate stop notice, SL2, will not be issued for this change.
- The new plan will be operated by you in the same way as plan types 1 and 2.
- If you need to make either student or postgraduate loan, or both, deductions from 6 April 2021, you will need to know which plan or loan type to use. This could be Plan 1, Plan 2, Plan 4 and or PGL.
- An employee may repay Plan 1 or Plan 2 or Plan 4 and PGL at the same time.
- The starter checklist has been updated to reflect this new plan type and will be available on GOV.UK before the start of the new tax year. Guidance will be updated to reflect the changes.
Basic PAYE Tools: new release
- An update to the Basic PAYE Tools (BPT) will be released at the end of March 2021 to support the 2021 to 2022 tax year. It is important that you update to and are using version 21.0 from 6 April 2021.
- To update or check for updates you should select ‘check now’ in the update section of settings in the top right-hand corner of the tool. It is also recommended that you should set the automatic update to ‘yes’.
- New customers can download BPT and you will also find comprehensive help on installing this software.
- From April 2022, BPT will no longer operate in a 32-bit environment.
- You will need to ensure your computer and operating system software can run 64-bit applications in order to use BPT.
- For more detail, you should refer to the ‘useful information’ section within BPT, available from April 2021.
End of year reporting
It’s time to prepare for making your last Full Payment Submission (FPS) or Employer Payment Summary (EPS) of the year
- Your last FPS or EPS of the year (up to and including 5 April 2021) needs to include an indicator that you are making the final submission.
- This tells HMRC you have sent everything you expected to send, and they can finalise their records for you and your employees.
- Some commercial payroll software will not let you put the indicator on an FPS.
- If that’s the case, send your last FPS and then send an EPS with the indicator ticked. You can also send an EPS with the indicator ticked if you forgot to put the indicator on your last FPS submission for the tax year.
- You also need to prepare to give your employees a P60 if they are in your employment on 5 April 2021.
- You have got until 31 May 2021 to do this.
- If you are not going to pay anyone again this tax year, remember to send an EPS with the indicator ticked to show you did not pay anyone in the final pay period and it is the final submission.
- You have until 19 April 2021 to do this, but you will get a message from the Generic Notification Service if you file it after 11 April 2021.
Earlier Year Update process change
- From April 2021, the Earlier Year Update (EYU) will no longer be a valid submission type to make amendments to the tax year ending 5 April 2021.
- Any amendments to this and future tax years will need to be made using a further Year to date (YTD) Full Payment Submission (FPS).
- Amendments to tax years ending:
- 5 April 2018 and earlier: will be made by the submission of an EYU only.
- 5 April 2019: EYU or FPS will be accepted.
- 5 April 2020: EYU or FPS will be accepted.
- If you are correcting employees’ National Insurance Contributions for either 2018 to 2019 or 2019 to 2020, which involves an amount of negative employee National Insurance contributions, an FPS can be used where either:
- No refund is due.
- Where a refund is due and you are able to refund your employee.
- If a refund is due and you are not able to refund your employee, you should submit an EYU and make sure the National Insurance Contributions refund indicator is set to ‘No’.
- Amendments to the Tax Year ending 5 April 2021 (and future years) will be made by the submission of an FPS only from 20 April 2021.
- The Basic PAYE Tools (BPT) update in March 2021 will include the change and will no longer support an EYU for 2020 to 2021 and future years. BPT will continue to be available for the 2019 to 2020 tax year and earlier in-date years.
Reporting expenses and benefits
- From 6 April 2021, you must tell HMRC about any expenses and benefits your employees received during 2020 to 2021.
- You should now use commercial payroll software, HMRC’s PAYE Online service or HMRC’s Online end-of-year expenses and benefits service to submit your P11D and P11D(b) online. It is faster and more secure than sending paper returns.
- If you registered to payroll your benefits for the 2020 to 2021 years, remember you still need to submit a P11D(b) to tell HMRC about the Employer Class 1A National Insurance contributions due. You only need to submit a P11D for any benefits you did not payroll.
Payrolling expenses and benefits for 2021 to 2022
- Register now to payroll your benefits for 2021 to 2022 and report benefits at the same time as your employees’ PAYE on the FPS. You can deduct and pay tax on most employee expenses if you have formally registered before the start of the 2021 to 2022 tax year.
- You do not need to submit any P11D for an employee if you are payrolling all their benefits.
- You would still need to submit a P11D(b) so you can pay any Class 1A National Insurance you owe.
- The small number of employers who informally payroll benefits must now also formally register for payrolling before the start of 2021 to 2022.
- HMRC will no longer accept informal arrangements.
New National Minimum Wage rates and changes to the National Living Wage qualifying age
- From 1 April 2021, the National Minimum Wage rates are increasing. A press release with details about the new National Living Wage is available.
- The age from which workers become eligible for the higher National Living Wage will be lowered.
- This means that from 1 April 2021 workers aged 23 and over will now also be entitled to be paid at least the National Living Wage.
- Employers should make sure they are ready by:
- Taking appropriate payroll action for all workers who are eligible.
- Continuing to pay their workers what they are entitled to.
- For more information on paying the National Minimum Wage correctly, employers can register for one of the live webinars in March 2021.
P9 Notice of Coding
- P9 Notice of Coding email notifications will be sent from week commencing 8 February 2021 to 7 March 2021.
- The notice advises that the coding for the tax year starting 6 April 2021 can be viewed online.
- To get these emails make sure your email address is up to date.
- When signing in to the online account to view the P9 notices, make sure the correct tax year is selected from the dropdown, 2021 to 2022.
- If the P9 notices are still not showing, sign out and sign back into the account the following day. This should allow the P9s to be viewed online.
- HMRC expect paper P9 coding notices to arrive with employers on or around 19 March 2021.
- If you do not receive your paper P9 notices in time for the first pay period on or after 6 April 2021, you can request a duplicate from the Employer Helpline on 0300 200 3200.
- A request for a duplicate can only be made in respect of a full employer scheme and is not available for individual tax codes.
- HMRC will deal with your request as soon as possible but allow 14 working days before contacting the Employer Helpline again. If your request involves a change of media type, (for example from paper to internet), allow an extra five working days to allow HMRC's systems to update.
- You can view the rates and threshold changes announced by UK, Wales and Scotland. Tax codes calculated for 6 April 2021 will include these changes.
- Income Tax rates and thresholds are subject to parliamentary approval.
- Once all rates and thresholds have been approved by the respective administrations, HMRC may need to carry out a later re-coding exercise to include any relevant changes. More information will be provided in due course.
- If you have any employees who live in Scotland or Wales for most of the year, they need to make sure HMRC has their correct address on record.
- This is so they pay the correct amount of Income Tax.
- You should ask them to make sure their address is up to date by accessing either their Personal Tax Account or tell HMRC about the change online.
- Your payroll software provider may need you to apply an update in order to operate the ‘S’ or ‘C’ code. If you are having any problems with your software, contact your software provider for guidance.
Register as an employer
- You normally need to register as an employer with HMRC when you start employing staff or using subcontractors for construction work.
- You must register 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, HMRC will not be able to start processing your request until after 6 April.
- This may mean a delay before you receive your registration details.
- Most new employers can register online. Information is available on whether you need to register and how to do it.
- If HMRC does not receive any submissions or information within 120 days following the issue of your new PAYE reference, then your PAYE scheme may be cancelled. If this happens HMRC will write to you to let you know.
- If you do not pay anyone for a period longer than one month, but still require your PAYE scheme to remain open, you can tell HMRC by completing the ‘Period of Inactivity’ fields on your Employer Payment Summary.
- Failure to do this may result in your PAYE scheme being incorrectly stopped. You will not always receive written notification from HMRC when this happens.
National Insurance number delays: update
- In Employer Bulletin 86 HMRC advised that the Department for Work and Pensions (DWP) was offering a limited National Insurance number service and reminded you that you can employ someone before they have their National Insurance number, provided you can confirm they are legally entitled to work.
- When applying for a National Insurance number all applicants need to have their identity verified. DWP continues to work on developing a digital service.
- The latest version is currently being tested and will enable applicants, whose identity has been verified by another UK Government Department, to make an application for a National Insurance number.
- For updates about when this service will be available, see the guidance about how to apply for a National Insurance number.
Business Tax Account: 2013 to 2014 and 2014 to 2015 data to be removed
- The Business Tax Account currently shows employers’ liabilities and payments data for 2013 to 2014 onwards.
- In line with HMRC’s other online services, this will be limited to the current tax year plus the previous six years.
- The change means that data for 2013 to 2014 and 2014 to 2015 will not be shown on the Business Tax Account.
- You should take the opportunity now to get a copy of either the 2013 to 2014 or 2014 to 2015, or both, records if you want to keep a copy. Data for:
- 2013 to 2014 will be removed in February 2021.
- 2014 to 2015 will be removed in April 2021.
National Insurance holiday for employers of veterans
- At Spring Budget 2020, the Chancellor announced the introduction of a National Insurance holiday for employers that hire former members of the UK regular armed forces.
- The holiday will exempt employers from any National Insurance contributions liability on a veteran’s salary up to the Upper Secondary Threshold (UST) in their first year of civilian employment.
- This relief will be available from April 2021. Employers will be able to claim this relief for 12 months starting from the first day of the veterans first civilian employment after leaving Her Majesty’s armed forces. Subsequent employers will be able to claim this relief during this 12-month period.
- A full digital service will be available to employers from April 2022. Transitional arrangements will be in place in the 2021 to 2022 tax year which will effectively enable employers of veterans to record details of veterans’ employments to then claim the holiday relief from April 2022.
- Information is available about what employers need to do if they hire a veteran from April 2021.
Van benefit and car and van fuel benefit uprating for 2021
- The government has announced that the van benefit charge and fuel benefit charges for cars and vans will be uprated by the Consumer Price Index from 6 April 2021.
- The uprate will take effect as follows:
- Van benefit charge will uprate from £3,490 to £3,500.
- Car fuel benefit charge multiplier will uprate from £24,500 to £24,600.
- Van fuel benefit charge will uprate from £666 to £669.
- The Government will lay the statutory instrument to uprate these charges before the House on 9 March 2021. A tax information and impact note (TIIN) will be published at Budget 2021.
Company car changes for P11D: Ultra-Low Emission Vehicles and Worldwide Harmonised Light Vehicle Test Procedure
Ultra-Low Emission Vehicles (ULEV)
- To support the government’s commitment to improving air quality in towns and cities, HMRC are changing the car and car fuel benefit calculation.
- On 6 April 2020, HMRC introduced 11 new bands for ULEVs including a separate zero-emissions band.
- If a car has a CO2 emission figure of 1-50g/km you will now need to provide the car’s zero-emission mileage. This is the distance that the car can travel in miles on a single electric charge.
Worldwide Harmonised Light Vehicle Test Procedure (WLTP)
- In 2017, the Government announced that it will replace the system for measuring car emissions for the purposes of calculating company car tax and vehicle excise duty with the implementation of the new testing regime, the WLTP.
- WLTP aims to be more representative of real-world driving conditions.
- Following a review which reported in July 2019, the government confirmed that new cars first registered from 6 April 2020 will use CO2 emission figures based on WLTP. Cars registered prior to 6 April 2020 will use CO2 emission figures based on the current testing regime, New European Driving Cycle (NEDC).
- There will be no change to the way you currently report your company car tax data. However, you may need to provide additional information on the P11D.
See Company cars
Completing section F on a P11D for the 2020 to 2021 tax year
- From 6 April 2021, a new zero-emission mileage field will be shown on the P11D form. If a car has a CO2 emission figure of 1-50g/km you will now need to provide the car’s zero-emission mileage. This is the maximum distance in miles that the hybrid car can be driven in electric-mode without recharging the battery.
- The online P11D will be updated with the changes. For paper P11D submissions you will need to make sure you complete the latest version as historic copies may not include the new zero-emission mileage field. These will be available through your established method from 6 April 2021.
- From 6 April 2021, it will be mandatory to provide the date a car is first registered. A new field will be available to enter this information.
Where to find the additional information
- If you are leasing the vehicle, you should get this new data item in the same way you currently receive your Company Car Tax reporting data from the car leasing firm or fleet provider.
- If this information is not available, you can get the zero-emission mileage figure via the car’s manufacturer.
- If you own the vehicle, the zero-emission mileage figure can be found on your vehicle’s Certificate of Conformity (CoC).
- The zero-emission mileage may be displayed as ‘electric range’ on the CoC, for hybrid cars registered:
- Before 6 April 2020 (NEDC) the ‘electric range’ within section 49.2 on the CoC should be used.
- From 6 April 2020 (WLTP) the ‘electric range (EAER)’ within section 49.5.2 on the CoC should be used.
- This may also be referred to as combined or equivalent Annual Equivalent Rate (AER) (EAER) combined.
- If the zero-emission mileage figure is displayed on the CoC in kilometres, you will need to convert the figure into miles and round up to the nearest mile before updating this field on the P11D.
- Failure to get the data from the correct source could lead to incorrect company car benefit in kind being calculated.
Date first registered
- The car’s date first registered can be obtained through the car leasing firm or fleet provider. The information is also available on the car’s logbook (V5C).
- For car averaging purposes in tax year 2020 to 2021 onwards, any notional CO2 between 1-50g/km will need a zero-emission mileage figure. If this scenario applies a default figure of 50 should be entered in the zero-emission mileage field when submitting the company car details to HMRC.
Making sure you meet all PAYE Settlement Agreement criteria
- HMRC want to remind businesses that the PAYE Settlement Agreement (PSA) is a voluntary agreement and cannot always be used to report expenses or benefits.
- You must make sure that the conditions outlined in the guidance about what is included on PAYE PSA agreement are satisfied. The expense should be minor, irregular or impracticable.
- You should consider whether an item meets these conditions before using the PSA. For example, whilst relocation costs are given as an example of an irregular expense, an ongoing monthly rent payment related to the relocation would not meet the PSA criteria.
- Both P11D and PSA reporting are submitted after the end of the tax year so that expenses and benefits can be reviewed and reported in the appropriate manner.
Changes to the treatment of termination payments and post-employment notice pay for Income Tax
- In July, HMRC published draft legislation affecting Post-Employment Notice Pay (PENP). These changes are expected to take effect from 6 April 2021, pending Parliamentary approval.
- The changes give an alternative PENP calculation where an employee’s pay period is defined in months but their contractual notice period or post-employment notice period is not a whole number of months.
- From 6 April 2021, employers will need to use the alternative calculation for all employees who meet these criteria.
- Employers have had the option of using this calculation since October 2019, on an extra-statutory basis, but from April 2021 it will be required.
- These changes also align the tax treatment of PENP for individuals who are non-resident in the year of termination of their UK employment with the treatment for all UK residents.
- From 6 April 2021 earnings that arise pursuant to PENP will be subject to Income Tax, Class 1 National Insurance contributions and PAYE for non-residents to the extent that they would have worked in the UK during the notice period.
Withdrawal of P45 and P60 bulk stationery
- In March 2020 HMRC advised that they were going to withdraw the facility for employers to order blank P45s and P60s.
- This change came into effect on 1 August 2020.
- You must give all employees a P60 at the end of each tax year, and a P45 when they stop working for you.
- The vast majority of employers already produce their own P45s and P60s, using free or commercial software.
- A full list of approved payroll software can be found in the payroll software guide.
- These include free software for businesses with fewer than 10 employees.
- Employers who are exempt from operating their payroll online are not affected by the change and can continue to order by phone.
Social Security Coordination: update on the Trade Cooperation Agreement
- The government has agreed on social security coordination provisions with the EU in the Trade and Cooperation Agreement. These make sure workers who move between the UK and the EU only have to pay into one country’s social security scheme at a time.
Working temporarily in the UK or EU
- If you are sending an employee to work temporarily in the EU, you or your employee can apply for a certificate or document from HMRC, so that for up to 24 months, you can both continue to only pay National Insurance contributions in the UK.
- If you are bringing an EU-based employee to work in the UK temporarily, they can also apply for a certificate from the EU Member State in which they are based. This will make sure you and your employee will only pay social security contributions in their home country for up to 24 months.
Working temporarily in the UK or Norway, Iceland, Liechtenstein or Switzerland
- For information on going to work in Norway, Iceland, Liechtenstein or Switzerland, or coming from those countries to work in the UK, see the guidance about going to work in the EU and coming to work in the UK. This will also cover how to apply for a certificate or document from HMRC.
Business Visitors Appendix 8: formerly special arrangement made under Regulation 141
- Pay-As-You-Earn (PAYE) special arrangements for Short Term Business Visitors (STBVs) were amended on 6 April 2020 to allow for a simplified PAYE procedure to be operated for STBVs.
- These arrangements eased the PAYE requirements for employers with STBVs from overseas branches or territories with which the UK does not have a Double Taxation Agreement (DTA).
- Changes to Appendix 8 included:
- An increase in the UK workday limit from 30 to 60 days.
- The deadline for filing and to make payments will change from the 19 April and 22 April (respectively) to 31 May.
- This is to remind you of the new filing and payment deadline of 31 May following the end of the relevant tax year.
- Example: for the tax year 2020 to 2021 (6 April 2020 to 5 April 2021) both the return and payment are due to reach HMRC by 31 May 2021.
- Find out more information about the special arrangement for Appendix 8.