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Are you ready for the changes to employee expenses?

 

Pay for woman.

From April 2016 all employee expense Dispensations agreed with HMRC will cease to apply!

You will need new systems for checking expenses, HMRC will be supply examples.

Expenses which are not covered by benchmark scale rates are likely to paid and taxed via the payroll with the employee claiming relief through P87 and Self Assessment SA100.

Expenses

Are you ready for the new regime?

steve@bicknells.net

Will I get £30,000 tax free? Termination Payments

Dejected just fired an office worker with personal belongings in a box

Basically the current situation is that the first £30,000 of a payment which is paid in connection with the termination of employment is tax free, as long as it is not otherwise taxable as earnings. It sounds simple but can be complicated, here is a government example

 

Termination Example

The Office of Tax Simplication are currently consulting (until 16th October 2015) on changing the rules one solution is to make it more like redundancy payments, take a look at these examples

Termination 2

There will also be some anti avoidance rules that if you are re-engaged within 12 months in similar job with the same company the payments previously made would become subject to tax and NI.

It looks like we are in for some major changes, its not too late for you to have your say, click on this link

steve@bicknells.net

New Childcare Vouchers from Autumn 2015

Childcare vouchers to be withdrawn for new employees

The existing benefits available in the form of childcare vouchers to employees will be withdrawn to new entrants in the Autumn of 2015.  The current scheme  saves National Insurance contributions for both employers and employees.  Employees also save income tax.

English: British National Insurance stamp.

English: British National Insurance stamp. (Photo credit: Wikipedia)

New scheme to start in Autumn 2015

The new scheme for childcare vouchers will not be as good for many employees who currently benefit from the current scheme, but where both parents work and are self employed, they can get the government to pay £2,000 towards registered childcare.

How do I set up childcare vouchers?

Childcare vouchers are set up through your payroll scheme and must be available to all eligible employees to receive the tax benefit.

Alterledger can help

For more information on saving employer’s national insurance and preparing for changes to childcare vouchers, contact Alterledger or visit the website alterledger.com.

Letters for under 21s

Changes for employees under 21

From 6th April 2015 employer national insurance contributions will be abolished for under 21s.  If you employ anyone over 16 and under 21 years old you will need to use one of the new letters for under 21s in the national insurance category setting of your payroll software.

English: British National Insurance stamp.

English: British National Insurance stamp. (Photo credit: Wikipedia)

Secondary contribution rates

This table shows how much employers pay towards employees’ National Insurance for tax year 2014 to 2015.  The contribution rate calculated by your payroll software is set by the category letter.

Category letter £111 to £153

a week

£153.01 to £770

a week

£770.01 to £805

a week

From £805.01

a week

A 0% 13.8% 13.8% 13.8%
B 0% 13.8% 13.8% 13.8%
C 0% 13.8% 13.8% 13.8%
D 3.4% rebate 10.4% 13.8% 13.8%
E 3.4% rebate 10.4% 13.8% 13.8%
J 0% 13.8% 13.8% 13.8%
L 3.4% rebate 10.4% 13.8% 13.8%

National insurance categories

Most employees will have a category letter of A or D depending on whether or not they are in a contracted-out workplace pension scheme.  There are categories for mariners and deep-sea fisherman; the more common categories are shown below:

Employees in a contracted-out workplace pension scheme

Category letter Employee group
D All employees apart from those in groups E, C and L in this table
E Married women and widows entitled to pay reduced National Insurance
C Employees over the State Pension age
L Employees who can defer National Insurance because they’re already paying it in another job

Employees not in contracted-out pension schemes

Category letter Employee group
A All employees apart from those in groups B, C and J in this table
B Married women and widows entitled to pay reduced National Insurance
C Employees over the State Pension age
J Employees who can defer National Insurance because they’re already paying it in another job

Employees in a money-purchase contracted-out scheme

This kind of scheme ended in April 2012 but some employees might still be part of one.

Category letter Employee group
F Tax years before 2012 to 2013 only: all employees apart from the ones in groups G, C and S in this table
G Tax years before 2012 to 2013 only: married women and widows entitled to pay reduced National Insurance
C Employees over the State Pension age
S Tax years before 2012 to 2013 only: employees who can defer National Insurance because they’re already paying it in another job

How to claim zero rate of employer contributions

You should already have proof of age for all your employees.  A copy of a passport, driving licence or birth certificate will be required to show that your employee qualifies for the new zero rate of employer’s contribution.  The seven new categories are valid from 6th April and must be applied from the first salary payment after 5th April 2015 to benefit from the new zero contribution rate for employers.

What does this have to do with Auto Enrolment?

You need to have proof of age for all your employees aged under 21 to claim the zero contribution rate for employer’s National Insurance.  By the time of your staging date you must assess all your workers, based on their earnings and age.  To help you prepare for Pension Auto Enrolment you can make sure that all your employee records are up to date and that your payroll software has the full details for all workers including their date of birth.  This is a good opportunity to clean up all your employee data.

Alterledger can help

For more information on saving employer’s national insurance and preparing for Pension Auto Enrolment, contact Alterledger or visit the website alterledger.com.

 

What a difference a day makes

How about three extra days?

HMRC has relaxed the rules on “Real Time Information” for payroll reporting.  UK employers are required to send electronic reports to HMRC with each payment of wages to employees.  HMRC are now saying that you can submit your RTI report up to three days after the payment date without incurring a penalty.

Any employer who has received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015 and filed within three days, should appeal online by completing the “Other” box and add “Return filed within 3 days”.

Outsource your payroll

Despite the relaxation provided by three extra days, the burden on employers is only likely to increase over the coming months.  Auto enrolment is being rolled out to all UK employers over the next couple of years.  With the new payroll year about to start on 6th April, now is a good time to consider using a payroll bureau – or at least checking that your current systems will deal effectively with auto enrolment pensions.  For more information please and see how Alterledger can help please click here.

How do you create a Tronc?

Pay Packet And Banknotes

Typically, an employee is appointed to administer the tronc and is usually referred to as the troncmaster. HMRC does not prescribe who the troncmaster should be.

Frank owns a pub and restaurant. Tips paid by cheque, debit and credit card are all passed to Sharon, the troncmaster, who has been appointed by Frank. Sharon operates PAYE on the tips that she distributes. A staff committee decides on the allocation and Frank has nothing to do with this.

Even though Frank has appointed Sharon as troncmaster he has played no part, directly or indirectly, in the allocation of the tips because he is not involved in determining who should receive tips and how much each employee should receive. In these circumstances, no NICs will be due on the tips received by the tronc members. Example from NIM02942

Y0u may also find my blog helpful

How Troncmasters can keep your tips NI and VAT Free

The Income Tax (Pay As You Earn) Regulations 2003 require an employer to

  • Notify HMRC of the existence of a tronc created on or after 6 April 2004

And

  • Give the troncmaster’s name (if known)

When you are notified of a tronc you should

  • Confirm that there is an organised arrangement for sharing tips and determine
    • How the tronc receives monies (for example employees paying in cash tips or an employer paying in credit card tips)
    • Who holds the tronc monies and how (for example, is there a tronc bank account and if so who operates it?)
    • On what basis are distributions made from the tronc and who decides that basis
    • Which employees are tronc members
    • Whether the person said to be the troncmaster accepts and understands the role (including the obligation to operate PAYE)

If you are satisfied that there is a tronc for PAYE purposes (bear in mind that a business could have more than one tronc, for example a hotel could have separate troncs for restaurant staff and housekeeping staff and each should be dealt with separately)

  • Arrange for a PAYE scheme to be set up in the name of the troncmaster. Further information can be found in PAYE20160

steve@bicknells.net

Are Cruise Ship Entertainers Employees?

afro american jazz pianist

If they weren’t on cruise ships HMRC would probably argue that they were employees but in the case of cruise ships they argue the opposite.

Pete Matthews (1) Keith Sidwick (2) v Revenue & Customs [2011] UKFTT 24 (TC)

Mr Sidwick was a musician and played piano on a series of cruise ships. Mr Matthews was a juggler, similarly entertaining passengers on cruise ships. Both were subject to a close degree of control by the ships officers but the First-tier Tribunal found that this degree of control was required by the context of a cruise ship.

The First-tier Tribunal concluded that the entertainers were not employees ‘…but earn their living by entering into a series of separate engagements with a number of different cruise lines in a similar way to actors…’

The reason why HMRC argued against employment was to stop a claim for Seafarers Earnings Deductions.

To get the deduction you must:

  • work on a ship. Oil rigs and other offshore installations aren’t ships for the purposes of Seafarers’ Earnings Deduction – but cargo vessels, tankers, cruise liners and passenger vessels are
  • work all or part of the time outside the UK. This means that for each employment you must carry out duties on at least one voyage per year that begins or ends at a foreign port
  • be resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK) – find out more by following the link ‘Check your residence status’ in the section below

You get the deduction from your earnings as a seafarer if you have an ‘eligible period’ of at least 365 days that consists mainly of days when you are absent from the UK.

From 6 April 2013 the rules that determine if someone is resident in the UK for tax purposes have been put on a statutory basis. These rules are known as the Statutory Residence Test (SRT).

steve@bicknells.net

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