HMRC have published their Employer Bulletin for December 2021. We have summarised the key content for you, with links to our detailed guidance on the topics covered.
Health and Social Care: National Insurance Contribution increase
- A new Health and Social Care Levy will be introduced from April 2022. National Insurance Contributions (NICs) for working-age employees, the self-employed and employers will increase by 1.25% for one year.
- From April 2023, the Levy will be formally separated from NICs and NICs rates will return to 2021-22 levels.
- To ensure taxpayers understand what their increased contribution is for, HMRC are asking employers to include a message on all payslips between 6 April 2022 and 5 April 2023 which should read ‘1.25% uplift in NICs funds NHS, health & social care’.
- HMRC have asked payroll software providers to include this messaging in their software. Some employers will need to make the change directly. HMRC will email employers in early 2022 repeating the message.
National Insurance holiday for employers of veterans
- From 6 April 2021 employers hiring former members of the UK regular armed forces during their first year of civilian employment will be eligible for a zero rate of secondary NICs for up to 12 months.
- Employers should pay NICs as normal until April 2022 when they will be able to claim back any NICs qualifying for relief through a revised Full Payment Submission (FPS) using a new National Insurance category letter, ‘V’.
- Employers whose software does not support this can write to HMRC to request the relief.
- For 2022-23 onwards, employers will be able to apply the relief through Real-Time Information (RTI) as normal using National Insurance category letter ‘V’.
- Employers must keep records showing that they have hired a qualifying veteran.
Reporting benefits and expenses in real-time
- If you sign up for payrolling, your employees can pay the tax due on their benefits and expenses when they receive their pay in the tax year 2022-23.
- Once you start payrolling you don’t need to submit P11D returns for most Benefits In Kind.
- You must Register for payrolling before 6 April 2022 to be ready for the 2022-23 tax year.
Employers using Category M National Insurance and incorrect designatory data
HMRC would like to raise awareness of when Category M should be used.
- Category M no longer applies after an employee reaches the age of 21.
- It is the employee’s age at the time of payment that determines which NICs category should be used e.g. if an employee turns 21 during a tax month but is not paid until later in the month then Category M should not be used for that month’s pay.
- Employers must ensure they are using actual and not ‘nominal’ dates of birth as this can affect whether their payroll system recognises the correct age of the employee. Employers should review their payroll systems and ensure the correct date of birth is recorded.
Preventing and correcting payroll errors
The following are common mistakes that may result in an incorrect employer PAYE charge:
- Re-using of payroll IDs.
- Not including all employee personal data in each submission in the same format.
- Not setting the ‘Payroll ID changed’ indicator when changing software products.
- Not setting the ‘NIC Refund’ flag correctly on an Earlier Year Update. For tax years up to and including 2019-20, where you are amending the Employee NICs, if the difference is negative you need to set the ‘NIC refund’ indicator to:
- ‘Yes’ if you’ve refunded your employee or no refund was due.
- ‘No’ if you still owe your employee a refund e.g. they have left your employment.
Correcting payroll errors: 2020 to 2021 and future years
The following payroll issues can be corrected by submitting a further Full Payment Submission (FPS):
- Forgetting to include Payrolled Benefits In Kind.
- No leaving date included on an FPS.
- Including an employee who has left your employment.
- Forgetting to send an FPS or not including all employees on an FPS.
Notifying HMRC when you stop employing people
You must notify HMRC straightaway when your company stops employing people to will prevent the unnecessary issue of specified charges and penalty notifications from HMRC.
Electronic payment deadline falls on a weekend
- In January 2022, the electronic payment deadline of the 22nd falls on a Saturday. To make sure your payment reaches HMRC on time, you need to have cleared funds in HMRC’s account by 21 January 2022 unless you are able to arrange a Faster Payment.
Reporting PAYE information in real time when payments are made early at Christmas
If you pay early over the Christmas period, please report your normal (or contractual) payday as the payment date on your FPS and ensure that the FPS is submitted on or before this date.
Coronavirus (COVID-19) updates and information
HMRC has published and updated guidance, and introduced legislation, to assist customers who may have been affected by the pandemic.
HMRC has published the following guidance:
- Tax on your UK income if you live abroad
- New employee coming to work from abroad
- Residence, remittance basis etc (Self Assessment SA109)
- Annexe D: International tax clarifications due to COVID-19 - Q&A
- RDR4 overseas workday relief
- Appendix 5: COVID-19 considerations for non-residents and non-domiciled employees
Legislation and residency issues
Declaring coronavirus grants on tax returns
Tax updates and changes to guidance
Measures announced as part of the government’s Tax Administration and Maintenance Day
On 30 November 2021 the government published a Tax Administration and Maintenance command paper outlining the progress towards building a trusted modern tax administration system.
The key announcements for employers were:
- Consultation outcome: Raising standards in the tax advice market
- Response to the MTD for Corporation Tax (CT) consultation
- Response to the Tax Administration Framework Review
- Call for evidence: Umbrella company
VAT Reverse Charge on construction and building services
A reminder that the VAT Reverse Charge on construction and building services came in on 1 March 2021
Tax avoidance, don’t get caught out (update)
HMRC’s refreshed ‘Tax avoidance – don’t get caught out’ campaign helps contractors employed through an umbrella company or agency, or are self-employed, to understand their pay arrangements,
- HMRC are asking employers to share the campaign page with contractors to help them recognise and understand the financial risks of tax avoidance.
- Contractors can check they are caught up in tax avoidance by understanding how they’re being paid and making sure they are paying the right amount of tax and NICs.
- HMRC’s new Payslip guide explains what their payslip should look like. The new interactive risk checker helps contractors see if their current contract could involve tax avoidance.
Employment status guidance for Associate Dentists to be withdrawn with effect from 6 April 2023
- From 6 April 2023, HMRC will be updating the Employment Status Manual (ESM) to remove specific occupational guidance for Associate Dentists (ESM4030).
- Where a contract runs from or over 6 April 2023, Associate Dentists and their engagers will not be able to rely on ESM4030 to determine its employment status for tax and NICs.
- There has been no change in the rules, in future Associate Dentists, or their engagers.
To make an assessment of employment status in the same way as other taxpayers using the Check Employment Status Tool (CEST).
Online service for managing child maintenance deductions
- The Department for Work and Pensions (DWP) have designed an online service to help employers and payroll partners manage deductions.
- The DWP require employers to simply record each employee’s national insurance number in the Bacs (Bankers Automated Clearing System) field 10 when making a payment. This will ensure the payment reaches the right family.
- Employers and payroll partners can register for the online service here.