RTI early verdict & other PAYE related news

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RTI early verdict & other PAYE related news

April 16, 2013 2013

 

Real Time Information

It is early days for RTI given that we are only 11 days in to the new tax year but how are things going with this new system for reporting payroll payments and deductions so far ?

If you listen to HMRC, or believe everything you read, things are wonderful. The new Employer Bulletin just published by HMRC proclaims:

"79% of the first employers to try RTI thought it was easy". "The first employers to try RTI felt as confident or more confident than they did using the existing PAYE system". "66% of the first employers to try RTI said the PAYE burden will be less in the future because of RTI"

Feedback from clients so far is maybe not as enthusiastic as this but still, on the whole, more positive than expected. Yes, there have been a number of teething problems in making the first FPS (Full Payment Submission) for some clients but it seems to us that most of the issues have come about through a lack of understanding of what is needed for the FPS or in how the payroll software functions. There have been reports of issues from the HMRC side as well which mostly seem to be caused by delays in acknowledging receipt of the FPS.

Overall verdict has to be that it is too early to consider whether RTI is going to work or not. Maybe once everyone is more in tune with the new software being used we can get a clearer picture of how RTI is going and what needs to be addressed for the longer term.

In the meantime, HMRC has issued some additional guidance to clarify a few points on RTI  National Insurance Number Verification Requests and  Submitting forms P45 and P46 for 2012/13

 

Employee shareholding status

Unsurprisingly, the proposal reaffirmed in the Budget to give some tax incentives to employees receiving "free" shares for giving up some employment rights has been rejected by the House of Lords. We always believed such a scheme was madness as any employee with any sense would steer well clear of such an arrangement. It is clear that the Government is very keen on this scheme, however, and so they may try to push this through again possibly after making a few tweaks to the proposals.

Reporting Benefits and Expenses

HMRC has introduced a new, online, method for employers to report expenses and benefits each year.

Before everyone celebrates the demise of the dreaded P11D this new method of reporting is extremely limited and only applies when an employer is reporting a nil P11D and P11D(b) return or to give HMRC advance notice that all benefits and expenses have been taxed through payroll and therefore no taxable values will ultimately be declared on forms P11D (which strictly still need to be done).

HMRC has suggested that this functionality may be expanded in due course but we won't hold our breath in this completely removing the P11D burden for employers.

Employment Income Manual update

For the first time in a while, HMRC has updated its EIM, the summary of changes is here.

As ever, it is hard to see exactly what has changed, probably just a few words here or there. We haven't reviewed the amended pages in any great detail yet though so we must put that on our "to-do" list for later (oh joy).

 

Any questions or concerns about any of the above just let us know.

 

 

PAYE related bits n bobs 26 June 2012

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PAYE related bits n bobs 26 June 2012

June 26, 2012 2012

In the absence of any groundbreaking news or Tribunal judgements recently, we finish off this month's blogs with a very brief overview of some things that have maybe not been newsworthy on their own but are useful things to know collectively.

Salary sacrifice guidance

HMRC has recently amended their FAQs on salary sacrifice to accommodate the relaxation of the rules around the opting in/out of pensions salary sacrifice so that salary sacrifice can happily co-exist with the pensions auto enrolment rules.

Whilst we would never recommend that HMRC's guidance is taken as "gospel", these FAQs are worth a read if you're unfamiliar with HMRC requirements around salary sacrifice.

Changes to the NI Manual

A number of pages were withdrawn from the NI Manual last week, all of which related to the NI exemptions around "qualifying childcare" for employees receiving employer supported childcare.

There is nothing sinister about these changes though, HMRC are just revising the guidance so that it is up to date and accurately reflects the revised legislation which came into place on 6 April 2011 around the reliefs that are due for new childcare arrangements.

Share based payments guidance

Yet more revised guidance from HMRC, this time what employers need to do when share based payments are made to departing employees after the P45 has been completed.

This has came about following some confusion from both employers and HMRC on the treatment of payments involving a mixture of cash and shares.

By the time some employers (and HMRC) get to grips with this, it will be time to worry about the situation under RTI where some real fun and games will be happening !

P11D and PSA filing

As Sir Alex Ferguson once infamously said, it's getting to "squeaky bum time" for getting the P11Ds and PAYE Settlement Agreements off to HMRC by the deadline of 6 July. He didn't exactly say this in relation to P11Ds and whatever but you get our drift !!

If you are one of those employers that didn't realise the deadline is next week, or has never seen a reminder from HMRC that the time is nigh, you really need to get moving, and fast, otherwise the 'squeak' could develop into something much worse !

Medical professionals

Reports are coming out, e.g. this Guardian article from a few days ago, that HMRC are currently investigating more than a 1,000 medical professions who are suspected of under declaring tax on income following the tax 'amnesty' that was offered to the sector a while back.

Whether these reports are valid, or whether HMRC has the evidence and gumption, to follow through successfully in some of these cases remains to be seen. There is usually no smoke without fire though so any medical person who thinks they may be "in trouble" needs to pick up the phone to an advisor ASAP.

Okay, next stop July. Hopefully the summer weather will eventually come out next month, before it's time for Autumn. Cool

 

Tax year-end and the GIGO Principle: Garbage In, Garbage Out

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Tax year-end and the GIGO Principle: Garbage In, Garbage Out

June 13, 2012 2012

Accountants have LIFO, FIFO, IFRS, etc etc. Acronyms we mean. But, here in the tax world, the only acronym employers need to know about for year-end "stuff" is what we call GIGO - Garbage In, Garbage Out.

Unusually for tax, this is a very straight forward principle to understand - if the data you start with is poor/inaccurate then there is every likelihood that what you get out of your system at the other end is going to be equally as poor/inaccurate no matter how good or sophisticated your systems are. The result of which will possibly, or even probably, mean that end of year returns filed with HMRC will be wrong which could ultimately lead to additional costs and penalties for the employer if and when these are uncovered by HMRC.

It's not just about the year-end returns either. HMRC are (supposed to be) following a risk based approach to compliance which involves looking at systems and processes rather than individual mistakes. If the data sources are riddled with holes, or the methods in which data is recorded are not up to scratch then there is no doubt that this will pull the employer's risk rating down heavily. There is also the Senior Accounting Officer rules to consider for the largest companies. How can the SAO properly and confidently sign off his report when the business hasn't even got some of the basics right around the reporting of employee payments ?

We guess it would be useful to provide some examples of what we are talking about here.

Staff expenses

Individual P11Ds, the employer's Class 1A NI liability and the PAYE Settlement Agreement will all be affected if the expenses data is not recorded and captured properly. The most common areas where the "GIGO principle" come into play include:

1) Expense claims being incorrectly completed by employees

2) Errors not being rectified when finance post the costs to accounting codes in the system

3) Claims being made and approved that are not within company policy or tax legislation

4) Finance staff posting costs to the wrong accounting codes either by default, in error or through ignorance or a combination of all three

5) Inadequate analysis and checking of accounting codes at year-end                                                                                        .

 

Company cars/vans

Poor fleet administration can lead to inaccurate data being held for company vehicles, e.g. around vehicle changes, list prices, employee contributions, private fuel use, etc all of which can impact on the P11D reporting. Bearing in mind that company car and van benefits are often chunky figures, errors in this area often result in significant additional liabilities being due by the employer.

Termination payments

HR may think it is necessary to keep senior terminations confidential and only provide Payroll with the bare minimum information on the settlements made during the year. However, this makes it virtually impossible for Payroll to identify which settlements attract a charge to tax and NI when making the payments and then which settlements need to be reported to HMRC at year-end, even if they are experienced enough to properly understand all the tax and NI implications in what is often a very complex area.

Share based payments

The Form 42 is one of the most problematic returns for employers to get fully correct, usually because of a lack of, or extremely poor, data.

Very often, the person responsible for pulling together the Form 42 may have information coming from various sources in connection with any share schemes in place, the format and quality of which may vary hugely. This can especially be the case in larger organisations or those operating overseas with employees moving about a lot. If the Form 42 person doesn't have full and accurate information around the types of scheme(s) in place, which employees have received share options, whether any options have been exercised during the year, etc etc then they may as well not file the Form 42 as it is unlikely to be correct.

 

We could go on here with other examples but the message should be simple - Garbage In, Garbage Out. If you learn anything about tax, learn this phrase, We have been using it for years and no matter what legislation changes or new guidance that comes out of HMRC, the GIGO principle will ALWAYS apply.

To help "recycle" your Garbage (i.e. source data) into usable material give Optimum PAYE a call !

Internet searches for PAYE information April 2011

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Internet searches for PAYE information April 2011

April 28, 2011 2011

Away from the normal tedium of tax technical updates, we take a look at what searches have landed on the Optimum PAYE website of late.

Of the more sensible searches, certain subjects come up almost on a daily basis, the current flavours of the month including:

Total People Ltd v HMRC - there is a huge amount of interest in this case involving the potential opportunity to reclaim NI contributions on car allowances. As we reported earlier this month, this case will be back at the Tax Tribunal in October so there will be nothing further to report until at least then.

Per Diems - Probably due to our recent article on per diems there has been many searches on this subject over the last few weeks ranging from trying to establish the tax-free rates in various locations to how to agree these with HMRC.

P11D Penalties - again lots of searches around this, e.g. "P11D penalties 2011", "mistake on P11D benefits employer liability" and "penalties for late submission of P11Ds" amongst many others. Clearly, many employers out there are making mistakes or not doing things properly around P11Ds. These employers should be picking up the phone (to us preferably) not Googling !

Salary sacrifice- always a popular search term and this month is no different. What is surprising is the amount of searches that come up relating to MBAs ! In our experience, salary sacrifice involving work related training is one of those opportunities that employers usually dismiss almost straight away so we are not sure why this comes near the top of the tree when employers are looking for salary sacrifice information on our site.

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Although there are some unusual searches in the midst, it is fair to say that these are not as mad or as plentiful as most months - maybe finance people are too swamped with year-end stuff to be doing mad internet searches at the moment ?! Here is a small sample of some mad/interesting/worrying ones we have noted:

"getting around IR35" - hmmm, we wonder if this is in relation to arrangements that would definitely fall foul of IR35 and the searcher is looking for 'dodgy' ways to avoid this or whether this is more genuine consultancy arrangements and searcher is just wanting to check that IR35 isn't inadvertently in play. Either way, advice is needed we think. 

"pensions salary sacrifice implementation process" - we cannot believe that the searcher genuinely thought that either the answer would be contained anywhere on the internet or that implementation is that easy. In truth, implementation varies from employer to employer and depends on things such as type(s) of pension scheme, type of employee, shift patterns, internal policies/procedures, resources, locations, etc etc etc.

"how to introduce a salary sacrifice scheme"  see above. Madness !

"cancelled holiday payments" - this came up 3 separate times. The answer is such a payment is almost always taxable even if there is a business reason for the cancellation.

"how much is a company car worth" - answer: "how long is a piece of string". Clearly this is an employee who has never had a company car before. Did they really expect an answer to this ???

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Enough for now anyway. The moral of the story to take away is - for "easy" PAYE related stuff, e.g. filing dates, forms, straight forward rules, etc then yes, search away, the internet is great for that type of information. But if you have a more complex PAYE issue that needs to be looked at, speak to someone don't go online, a penny (well, a few pounds really) spent now could be worth thousands later on.

Applying for a P11D Dispensation - Form P11D(X), Yes or No ?

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Applying for a P11D Dispensation - Form P11D(X), Yes or No ?

January 21, 2011 2011

We would suggest a No in most cases ! 

 Why ?

Because using the form to apply for a P11D Dispensation can often make life harder for employers which is the exact opposite of why the form was introduced by HMRC in the first place. What do we mean by this ?

The biggest problem is that any form which involves box ticking encourages laziness - on both sides. We often find that employers using P11D(x) don't explain their specific details enough, or at all, e.g. types of expenses being reimbursed to employees where these are slightly different to HMRC's 'norm', the procedures involved (which, in our experience often vary from company to company), reporting systems, etc etc. At HMRC's end, the form is received, someone checks all the right boxes have been ticked and then before you know it a standard letter is issued granting the P11D Dispensation without any further questions being asked.

The consequence of this laziness often rears its ugly head when HMRC come to do a PAYE audit. The employer's (over) reliance on the (vague and basic) Dispensation coupled with HMRC's lack of awareness of some of the things the employer is doing / not doing on employee expenses is usually when the gloves come off and things start to get messy. Where HMRC become aware of slack or inappropriate expense processes, which contravene the rules for receiving a Dispensation, they are well within their rights to revoke the Dispensation and to look at employee expenses as if the Dispensation never existed - which can be hugely problematic for the employer.

Which, coming back to our original comment, is why we normally recommend to clients that they do NOT use form P11D(x) in applying for a Dispensation. Our advice is to do it the traditional "proper" way, i.e. a detailed letter enclosing all relevant policies etc. This way there can be no ambiguity and less chance of HMRC disregarding any agreements they have previously given when undertaking a PAYE audit in the future.

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