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Category Archives: RTI PAYE
A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.
Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.
HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm
If a worker should be an employee HMRC will seek to recover the employment taxes from the employer not the worker, so there are considerable risks for the employer if the status of its workers is wrongly assessed.
Some employers might decide to insist that sub-contractors must be limited companies, as companies can’t not be reclassified as employees.
The sub-contractor would then need to assess whether IR35 applies to their contract. If IR35 does apply then please read this blog on Deemed Payments
Many employers who submit mainly nil returns (ie small owner managed businesses) for RTI are likely to get a letter from HMRC with Specified Charges on them, this is because under RTI if you don’t pay any employees in a pay period you need to submit a return to HMRC, if you forget or mis a period, which with HMRC RTI Basic PAYE Tools is easily done, HMRC will create a charge.
HMRC define a Specified Charge as
These are amounts we have estimated to be due when we have not received the necessary RTI PAYE submissions. We base these on you previous filing and payment history. We do this under Regulation 75A Income Tax (Pay As You Earn) Regulations 2003.
But as its an estimate is unlikely to be correct and on top of that HMRC will probably charge interest based on their Specified Charge.
If you get a Specified Charge check your RTI Submissions to makesure that you haven’t missed any, if you have missed one, post it now and then contact HMRC on Tel. 0300 200 3813.
It’s P11D time, but have you considered giving your employees benefits in kind that are tax free, here are some to choose from:
- Pensions – Up to £40k can be paid in to you pension schemem by your employer (2014/15) and you can use carry forward to pay in even more
- Childcare – Up to £55 per week but check the rules to makesure your childcare complies (HMRC Leaflet IR115)
- Mobile Phone – One per employee
- Lunch – Tax Free Lunch Blog
- Cycle Schemes – Cycle to Work Blog
- Fitness – Fitness Blog
- Parties and Gifts – Christmas Blog
- Parking – Parking Blog
- Business Mileage Allowance – 45p for the first 10,000 miles then 25p
- Long Service Award – A bit restrictive as you need 20 years service, the tax free amount is £50 x the number of years
- Eye Tests and Spectacles – The Eye Test must be needed under the Health & Safety at Work Act
- Suggestion Schemes – Suggestion Scheme Blog
- Insurance such and Death in Service and Income Protection – Medical Insurance Blog
- Travel Expenses – Travel Blog
- Working From Home – Working from Home Blog
On the 3rd April, to coincide with the 15th anniversary of the introduction of National Minimum Wage, HMRC issued a list of the worst and most elborate excuses given to their officers in the last 12 months.
- An employer said a woman on the premises was not entitled to NMW as she was his wife. When asked what his wife’s name was the employer said “err.. her name, err what’s your name love?..”
- An employer told HMRC: “I don’t think my workers know anything about the NMW because they don’t speak English.”
- Another employer told HMRC: “When the NMW goes up I do increase the amount I pay a little, even if the total pay is still below the NMW. I don’t think its right to ignore the rises in NMW.”
- A number of employers were paying rates below NMW, suggesting that accommodation they provided workers made up for their shortfall in wages.
- Upon inspection an employer told HMRC: “I know I am paying them too little, but they are happy to work for this amount because they are getting experience.”
- An employee claimed to be just working for a few days with a view to buying the business. When HMRC checked food safety records, the employee’s name was found on historic food temperature records.
- An employer claimed they realised they were not paying employees NMW and had just this week increased their wages… to an hourly rate which was still below the minimum wage.
- An employer told HMRC: “It wasn’t a conscious decision to say ‘I’m not going to pay this’, but I’ve never really considered doing it because I’ve not had people come to me and say, ‘I’m not getting paid enough’ or ‘Is this the minimum wage?’”
- An employee ran out of the premises when HMRC officers arrived to check for NMW infringements. The same employee then returned – minus the work pinafore – pretending to be a customer.
- Another employee claimed to be a friend of the owner and only in the restaurant as they were in the area. HMRC officers returned another day to find the person in the kitchen preparing food.
Jennie Granger, Director General of Enforcement and Compliance, HMRC, said:
Most employers are honest and pay their staff the correct rate. But this research shows that some still view the National Minimum Wage as a choice and will even try these crazy excuses to avoid paying workers what they are due.
Last year, HMRC’s investigations resulted in over 26,000 people getting a share of £4 million in back pay. HMRC investigate all complaints of employers failing to pay minimum wage. We will take action to recover back pay for employees and fine employers who are not playing by the rules.
HMRC officers work hard across the UK to ensure that everyone is paid at least the National Minimum Wage, and anyone who isn’t should call us.
It’s true, from April 2014, you can tell HMRC what you think your code should be by explaining why you think its wrong, here is a link to the HMRC structured E Mail
This form can only be used for queries relating to your PAYE Coding Notice. Any other queries will not be answered.
HMRC aim to respond within 15 days of receiving your E Mail.
Checking your tax code
You’ll find your tax code on:
- your pay slip
- your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
- form P60 – you get this at the end of each tax year
- form P45 – you get this when you leave a job
Your tax code can be wrong for lots of reasons so being able to sent a structured E Mail to HMRC should help to get things corrected faster.
Basically you will need to:
- Prepare P60′s (but no P14 and P35) by 31st May
- Submit your final FPS or EPS
- Update your Payroll Software for the New Tax Year
You can order your P60′s for free from HMRC http://www.hmrc.gov.uk/payerti/forms-updates/forms-publications/onlineorder.htm
Here is a great video from HMRC
HM Revenue & Customs (HMRC) plans to make its Basic PAYE Tools product for the 2014-15 tax year available on 3 April 2014.
The 2014-15 version of Basic PAYE Tools will be provided as an update to the existing version rather than a separate download, so existing users do not need to go to the HMRC website to get the update.
The Tax Payer’s Alliance have been campaigning and it looks like the Chancellor, George Osborne, has agreed that the first step is to re-name National Insurance as “Earnings Tax”. The change is to be proposed in legislation this week.
You pay National Insurance contributions to build up your entitlement to certain state benefits, including the State Pension.
You pay National Insurance if you’re:
- 16 or over
- an employee earning above £149 a week
- self employed and making a profit over £7,755 a year (Class 4) plus £2.70 per week Class 2 NI (you may not have to pay any Class 2 NI if your profits are below £5,725)
If you’re employed, you stop paying Class 1 National Insurance when you reach the State Pension age.
If you’re self-employed you stop paying:
- Class 2 National Insurance when you reach State Pension age (or up to 4 months after this to pay off any contributions you owe)
- Class 4 National Insurance from the start of the tax year after the one in which you reach State Pension age
Income Tax is whole different ball game. Whilst I can see its simpler to have one tax the changes that would be required to achieve it would be huge!
Is it worthwhile?