Our rolling PAYE news for advisers.
Planning for 2011/12
FREEview: Budget highlights (for SMEs and their owners)
Paid up subscribers: Finance Act 2011: tax planner
End of year
Employers and agents can now notify HMRC online if they have no Employer Annual Return (P35 and P14s) due for 2010-11.
New codes from April 2011
New PAYE codes need to be applied from 6 April 2011. Payrolls require updating - see P9X(2011) - tax codes to use from 6 April.
From 6 April 2011, a new D1 50 per cent flat rate tax code will be issued to employers for all relevant employees.
Rates and thresholds
The threshold for PAYE is:
£144 per week
£623 per month
£7,475 per year
The NICs lower earnings limit (LEL) is:
£102 per week
£442 per month
£5,304 per year
The secondry threshold for Employers NICs is:
£136 per week
£589 per month
£7,072 per year
If you are a company owner/director and have adopted a low salary/balance in dividends policy you will need to pay a salary between the LEL and secondary threshold. See Do I pay a salary or dividend?
Changing incorrect codings
The PAYE Regulations are changing to:
- allow confirmation of an amended tax code to be given to an individual, with their approval, over the phone instead of sending out a paper notice
- correct an error with the definition of ‘specified date’ in PAYE Regulation 198A
- change the tax code employers operate in certain circumstances
Company cars from 6 April 2011
- The £80,000 cap is removed when calculating the car benefit for an expensive car.
- The appropriate percentages for calculating benefits change and the discount for certain low emissions cars are removed.
- Zero emission cars and vans remain tax-free.
- The car fuel benefit multiplier rises to £18,800.
HMRC have announced new advisory fuel rates will apply for company car drivers from 1 March 2011.
Own car drivers
- Approved mileage allowances increased from 40p to 45p per mile, volunteer drivers may claim actual expenses.
Key changes affecting employer provided childcare/vouchers
Two new measures proposed in the 2011 Finance Bill for employer childcare schemes:
- A reduction in childcare relief for higher earners.
- Childcare vouchers and other childcare: salary sacrifice and national minimum wage.
Small employers
Simplified PAYE schemes for small employers
This is not for companies: it is designed for domestic workers, nannies etc. Employing someone for less than £160 per week? HMRC simplified PAYE scheme is there to help.
Shares issued in 2010/11 and share schemes
Complete form 42 by 7 July where shares have been issued after incorporation.
Don't forget to complete form EMI 40 (nil return) where new options were granted in year.
See Adviser's Tax Penalty Planner for details of late filing penalties.
EBTs and employee trusts
Of specialist interest: HMRC has superceded its 2009 briefing on the IHT aspects of EBTs with new guidance covering also transfers in and out of sub-trusts.
New spotlight: anti-avoidance of anti-avoidance
Schemes designed to avoid an income tax on charge under the new rules designed to tackle disguised remuneration for EBTS are singled out by HMRC.
HMRC has posted some FAQs on its site to deal with various queries relating to the draft legislation for the 2011 Finance Bill on disguised remuneration. The new measures should not affect share incentive plans and groups, after all. HMRC says that it will amend the draft legislation as necessary.
Leavers and starters
From 6 April 2011
Small employers are required to file P45s and P46s online or face a penalty (large employers have been facing penalties for periods starting in January 2011).
OT and additional rate PAYE codes (new regulations)
- Starters with no P45, employers should not apply code BR, use OT instead.
- Leavers: employer should not apply code BR to any payments made after a P45 has been issued. A code of OT should be used.
- Pensionable leavers: the week 1/month 1 code routine is replaced by an OT code.
- The new emergency code is 747Lm with the new PAYE threshold at £144 per week (£623 per month).
Penalties and compliance
A new PAYE inspection checklist
We have created a new interactive PAYE/NICs "health checker"for you to use (with willing clients) before HMRC notify of a real-time records check. Why not use it as part of a books and records review with your pre-year end planning?
Penalty checking service
Cases are emerging where penalties for errors are being calculated incorrectly by HMRC and some advisers do not seem to realise the differences between the new and old systems. We offer a penalty checking service, via our Virtual Tax Partner support service.
PAYE Penalty Planner
Click on the PAYE or CIS tab of our Adviser's Tax Penalty Planner to see what penalty to expect in respect of each type of employer return in 2011/12.
The PAYE computer saga
PAYE underpayments earlier years
HMRC is not going to collect any underpayments for years up to and including 2006/07. this is because collection is timed out.
PAYE overpayments earlier years
HMRC confirms that it will work all cases were there is a repayment due to a taxpayer in earlier years. In cases of official error the ususal statutory timelimits may be ignored.
NICs Tool kit
If you want a refesher on the basics you might want to wade through HMRC's latest toolkit on NICs. As usual with these documents there is a lot of waffle and repetition on risk. We can summarise the risk part by saying that "it is expensive not to apply NICs correctly".
It will take you several days to read all the links mentioned at the begining. Easiest to start at page 9.
NEW PAYE tools
HMRC’s Employer CD-ROM is being replaced with a download version. It includes all the CD-ROM’s interactive features plus an automatic update facility, to ensure it is up-to-date with the latest information and figures.
Employers who have used the CD-ROM can download the new software for the remainder of the 2010-11 tax year and for future tax years.
The PAYE download contains:
- an employer database
- a P11 Calculator – that will work out and record your employees' tax, National Insurance contributions and student loan deductions
- the ability to file forms such as P45, P46, P14 and P35 online direct to HM Revenue & Customs (HMRC)
- a P32 Employer Payment Record – linked to the P11 Calculator, this works out what you need to pay to HMRC
- a range of other calculators – including Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay (both Ordinary and Additional) and Statutory Adoption Pay
- interactive forms – such as P11D working sheets
- a Learning Zone – to help you use the calculators and understand how the calculations are made
This is designed for employers with up to nine employees, but anyone can try it. HMRC suggests that s an alternative, you may wish to consider using commercial payroll software, some of which is free.
New guides and updates for employers from www.rossmartin.co.uk
Do I pay a salary or dividend?
This guide crunches the numbers for 2011-12 in order to optimise tax relief.
Illegal working: employer checks
A handy link if you are taking on new staff.
Cycles: valuation
As P11D time approaches this is how you value employer provided cycles.
Company cars
Updated for proposed 2011-12changes.
Pool cars
Updated: more failed schemes hit the Tribunals.
Salary sacrifice schemes
Update: changes to employer child care schemes proposed for FA 2011, restriction on subsidised meals from 2011/12.
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