HMRC have published their Employer Bulletin for February 2022. We have summarised the key content for you, with links to our detailed guidance on the topics covered. This bulletin covers essential information for 2021-22 end of year payroll, Benefit In Kind reporting and moving into the 2022-23 tax year.
End of year: 2021-22
Last Full Payment Submission or Employer Payment Summary of 2021-22
- Every employer's last Full Payment Submission (FPS) or Employer Payment Summary (EPS) of 2021-22 needs to include an indicator that it is the final submission.
- Some commercial payroll software will not let the user put the indicator on an FPS.
- In these cases, employers should send their last FPS and then send an EPS with the indicator ticked.
- Employers can also send an EPS with the indicator ticked if they forgot to put the indicator on their last FPS submission for the tax year.
- Employers need to prepare to give their employees a P60 if they are in their employment on 5 April 2022.
- The deadline is 31 May 2022.
- If employers are not going to pay anyone again in 2021-22, they should send an EPS with the indicator ticked to show they did not pay anyone in the final pay period and it is the final submission.
- Employers have until 19 April 2022 to do this but will get a message from the Generic Notification Service if they file it after 11 April 2022.
Reporting expenses and benefits for tax year ending 5 April 2022
Payrolling Benefits In Kind 2021-22
- If employers registered online on or before 5 April 2021 and are using the payrolling Benefits In Kind process, they will need to send:
- A P11D for any benefits they have not payrolled.
- A P11D(b) to tell HMRC about the employer Class 1A National Insurance Contributions (NICs) due on all benefits (including the payrolled ones).
- Employers also need to give their employees a notification telling them which benefits were payrolled and the amount of the benefit.
- Employers will need to pay any Class 1A NIC due on the benefits provided by 22 July 2022.
Reporting expenses and benefits 2021-22
- If employers have paid any Benefits In Kind to employees, they must send P11Ds and P11D(b)s to HMRC no later than 6 July 2022 or they may get a penalty.
- HMRC charges penalties on a monthly basis and issues penalty notices each quarter until employers file their return.
- From 6 April 2022 employers will be able to start filing their 2021-22 P11D and P11D(b).
Payrolling Benefits in kind for 2022-23
- If employers want 2021-22 to be their last year of using legacy paper P11D forms, they should register online before 5 April 2022 to payroll benefits for 2022-23 tax year.
- Most benefits can be payrolled and there are a number of advantages.
- If employers are not in a position to move to payrolling, they can still move away from legacy paper P11D forms by submitting them online.
Decommissioning of HMRC’s Online End of Year Expenses and Benefits Service April 2022
- The interactive PDF known as HMRC’s Online End of Year Expenses and Benefits service will no longer be available to use to submit P11D and P11D(b) returns for the 2021-22 tax year.
- HMRC advise using the PAYE Online service.
- This allows submissions for up to 500 employees.
Grossing up benefits and expenses through payroll
- In February 2021, HMRC published guidance on how to gross up benefits and expenses through payroll.
- This explains how to calculate the tax and National Insurance Contributions (NICs) due where employers choose to meet the tax and employees’ Class 1 NICs on behalf of employees.
- Where employers reimburse taxable expenses to an employee who has met the initial cost themselves, the payment made is treated as earnings and is subject to tax and Class 1 NICs.
- The PAYE and NICs should be deducted through the payroll and reported on the Full Payment Submission on a Real-Time Information return.
- If employers intend to voluntarily meet the tax and employee’s NICs payable on the amount reimbursed, an additional payment can be made to the employee. This amount is also treated as earnings and is subject to tax and NICs.
Direct Provision of Expenses and Benefits
- Where employers pay taxable expenses directly to the provider, for example to a hotel or through a booking agency, the position is different.
- This is because the employee has been provided with a Benefit In Kind.
- Unlike reimbursed expenses, it is the employee who is responsible for paying the tax on the value of the benefit provided.
- If employers are intending to meet the tax and employee’s Class 1 NICs on benefits that have been payrolled, how this is calculated will depend on whether the benefit is liable to Class 1A or Class 1 NI.
- To gross up a benefit correctly, it is first necessary to identify which class of National Insurance (NI) applies.
- Most benefits are liable to Class 1A NI and the amount of Class 1A NI due should be reported on form P11D(b).
- There are some exceptions to this, such as train tickets which are treated as travel vouchers and are liable to Class 1 NI.
- If the benefit is reported on a P11D form, employers can include an additional payment of earnings calculated on the grossed-up basis to cover the tax liability met by the employee.
- This additional payment is treated as earnings and is subject to tax and Class 1 NI and should be reported on the Full Payment Submission on a Real-Time Information return.
New tax year: 2022-23
Basic PAYE Tools: new release
- An update to the Basic PAYE Tools (BPT) will be released at the end of March to support the 2022-23 tax year.
- Version 22.0 must be used from 6 April 2022.
- The new version of BPT will not operate in a 32-bit environment.
- Users must ensure their computer and operating system software can run 64-bit applications to use BPT.
P9 Notice of Coding
- P9 Notice of Coding email notifications will be sent from 7 February 2022 until 6 March 2022.
- Notices indicate that tax codings for 2022-23 can be viewed within the employer's PAYE Online Account.
- It is important employers make sure email addresses are up to date.
- If the P9 notice is not showing with the tax year 2022-23 selected, sign back into the account the following day.
- Paper P9 coding notices should arrive with employers on or around 21 March 2022. Duplicates can be requested by contacting the Employer Helpline.
Health and Social Care: National Insurance Contribution increase
- A new Health and Social Care Levy will be introduced from April 2022. 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 shortly repeating the message.
Student and postgraduate loans: updated thresholds and rates from April 2022
- From 6 April 2022, repayment thresholds will be:
- Plan 1: £20,195
- Plan 2: £27,295
- Plan 4: £25,375
- Postgraduate loan: £21,000
- Deductions for plans 1, 2 and 4 remain at 9% for earnings above the respective thresholds.
- Deductions for postgraduate loans remain at 6% for earnings above the respective thresholds
New National Minimum Wage and National Living Wage rates
- National Minimum Wage and National Living Wage rates increase from 1 April 2022.
- Employers should start paying the new rates on the first pay reference period on or after 1 April 2022.
Impact of the change to National Minimum Wage on Statutory Maternity Pay
- Since 6 April 2005, it has been necessary for employers to re-calculate a woman’s entitlement to Statutory Maternity Pay (SMP) if a woman is awarded a pay rise (or would have been awarded a pay rise had she not been on maternity leave) which takes effect at any time between the start of the period used to calculate her SMP and the end of her maternity leave.
- The earnings-related part must go up to take account of that pay rise.
- SMP must also be re-calculated to reflect pay rises taking effect before the start of the relevant period but where the earnings used in the calculation had not at the time of the calculation been adjusted to reflect that pay rise.
- If such a recalculation results in SMP entitlement for the first time, then the employer will only be liable to pay SMP to the extent that any sum exceeds Maternity Allowance paid by the Department for Work and Pensions.
Freeports Employer National Insurance contributions relief
- From 6 April 2022, employers with business premises within a Freeport tax site will be able to apply a zero rate of secondary Class 1 NICs on the earnings of new employees who spend 60% or more of their working time within the tax site.
- This rate can be applied to the earnings of all new hires up to £25,000 per annum for 36 months per employee.
- Guidance will be available for employers to self-assess eligibility to claim relief.
- The relief will be available until at least 5 April 2026.
Changes to claiming subcontractor Construction Industry Scheme (CIS) deductions
- Limited companies operating within the construction industry can claim CIS deductions as a subcontractor on their Employer Payment Summary (EPS).
- From April 2022, HMRC is introducing an additional field on the EPS. Limited companies must enter their Corporation Tax Unique Taxpayer Reference (CT UTR) or COTAX reference number in that field to claim credit for these deductions.
- Any EPS submissions which include a claim for CIS deductions, but do not include the CT UTR will be rejected.
- If a taxpayer can not satisfy the new CT UTR validation but needs to report anything else, they must remove the claim for CIS deductions and resubmit the EPS.
- If a company has lost or cannot find its CT UTR, it can Request its Corporation Tax UTR online. HMRC will send it to the business address registered with Companies House.
Updates to Employer Helpline (EHL) processes
- When calling HMRC's Employer Helpline, users must be able to confirm their PAYE or Accounts Office reference.
- Where these details are not given, HMRC will only provide general advice.
- If a taxpayer asks HMRC to tell them their references, HMRC will post these to the address held on their records.
- HMRC are unable to provide the PAYE or Accounts Office reference over the phone following a request for a PAYE registration. Details of the references will be sent by post within seven days.
National Insurance holiday for employers of veterans
- Employers who hire veterans within their first 12 consecutive months of civilian employment are eligible for a zero rate of secondary NICs for up to 12 months, after 6 April 2021.
- Guidance has recently been published on the qualifying rules and claims process for employers of veterans wishing to claim relief from NI.
Claiming back Statutory Sick Pay due to Coronavirus
- Businesses with fewer than 250 employees on 30 November 2021 can reclaim Statutory Sick Pay (SSP) for Coronavirus-related sickness absences.
- Up to two weeks’ SSP paid to employees can be reclaimed at the standard weekly rate of £96.35 for any eligible periods of Coronavirus-related sickness from 21 December 2021. This is a new claims period.
- It is not necessary to have claimed for the employee under the previous scheme.
Student and postgraduate loan start notice (SL1/PGL1)
- Employers should check their PAYE account for student loans (SL) or postgraduate loans (PGL) for start and stop notices.
- If you receive an SL1 and or PGL1 start notice from HMRC you should:
- Use the correct loan and or plan type to calculate record the deductions on the employee’s full payment submission.
- Check the start date shown on the notice and take deductions from the next available payday.
- If an employee’s earnings are below the SL and or PGL thresholds, update the employee’s payroll record to show that they have an SL and or PGL loan and then file the start notice.
- Deductions should continue until HMRC tells you to stop.
Student loans: Off-Payroll Working rules
- Where employment is subject to Off-Payroll Working rules, student loan deductions should not be made. The worker will account for student loan obligations in their own tax return.
Parental Bereavement Leave and Pay in Northern Ireland: new employment right from 6 April 2022
- Employed parents in Northern Ireland who lose a child under the age of 18, or those who suffer a stillbirth from 24 weeks, will be entitled to two weeks of Parental Bereavement Leave as a 'day one right'.
- Those with at least 26 weeks of continuous service at the date of their child’s death and earnings above the Lower Earnings Limit will also be entitled to Parental Bereavement Pay, paid at the statutory flat weekly rate of £156.66 (or 90% of average earnings, where this is lower).
- This new employment right in Northern Ireland will mirror the parental bereavement provisions that have been in place in Great Britain since April 2020.
- See here for further information.
Making Tax Digital for VAT is coming: are you ready?
- HMRC urges VAT-registered businesses to sign up for Making Tax Digital for VAT before 1 April 2022, when its scope is extended.
Help to Grow: Management course
- Businesses can develop a tailored growth plan and access leadership and management training through the Help to Grow management course.
- Delivered over twelve weeks, and 90% funded by the government, the course costs £750.
- To check eligibility and sign up visit the Small Business Charter website: Help to Grow.
UK Transition: Trader Support Service
- The free Trader Support Service can help businesses moving goods between Great Britain and Northern Ireland with education, training and advice on the Northern Ireland Protocol and completing customs, safety and security declarations.
Umbrella Companies: call for evidence due to close on 22 February 2022
- The Call for Evidence on umbrella companies launched in November 2021 is due to close on 22 February 2022.
- The government wants to hear a wide range of perspectives on the role umbrella companies play in the labour market and is encouraging anyone with interest in the sector to contribute their views.
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