Issue 65 of the Employer Bulletin was published on 11 April. The Bulletin is the main conduit of information for employers, even though it’s only published six times a year. If you don’t normally receive it direct to your inbox, sign up here). Since the last Bulletin in February we’ve had a Budget and the start of a new tax year, so there was plenty for HMRC to cover.
We’re now approaching the first P11D deadline on the 6 July since the start of the statutory approach to payrolling benefits was introduced on 6 April 2016. Employers who registered before the 2016/17 tax year started no longer need to complete a P11D for any benefits that have already been taxed through the payroll. If all benefits have been payrolled, the employee will not receive a P11D at all; if only some benefits have been payrolled, then the remainder are still reported on the P11D and will be coded out. With the introduction of ‘dynamic coding’ (also referred to in the Bulletin), employees will see more significant and earlier tax code changes in response to a P11D, as well as when other information is reported, to recover as much tax as possible subject to the 50% regulatory limit, by the end of the 2017/18 tax year.
As the P11D(b) now needs to be a return combining Class 1A from benefits that have been payrolled, as well as from any remaining P11Ds, employers need to ensure that the total reported is a combination of the two, i.e. the P11D(b) will not necessarily balance just to the Class 1A on the forms submitted. For this reason, HMRC no longer pre-populate the form with the total if the P11Ds have been compiled via the online P11D service.
However, this sentence in the Bulletin is incorrect: ‘Instead of giving your employees a P11D, you need to give them a letter explaining what you’ve payrolled’. The legislative requirement is to inform employees by 31 May annually of the value and type of benefits that have been payrolled. This can be done by a letter, but many employers (for ease) print this on every payslip, so negating the need for a ‘benefits-only additional P60’.
Tax relief on unreimbursed expenses
There is a short piece on sending Section 336 claims with P11Ds. Many employers won’t know what these are; it’s the section of the Income Tax Earnings and Pensions Act 2003 that allows employees to claim tax relief on business expenses that have not been reimbursed by their employer, such as mileage paid at less than 45p per mile or for professional subscriptions.
It’s surprising that this section talks about claims being sent along with P11Ds and on form P87. Later in the Bulletin is an entirely separate section that details, as we know, that it’s far easier for the employee to send claims direct from their Personal Tax Account (PTA), as they can then track its progress and chase for a reply.
What a pity that HMRC are not able to display the apprenticeship levy paid on the Liabilities and Payments Viewer. I must confess that I thought everyone had now been migrated to the Business Tax Account (BTA) but what is the ‘EPAYE viewer’ referenced in the Bulletin? Something new or just an updated page within the BTA? If there are still employers who only have the Liabilities and Payments Viewer available to them, then surely it’s beholden on HMRC to update it to show this new tax liability - otherwise the complete service is rendered useless as it cannot possibly balance to the remittance paid.
It’s a missed opportunity as well to make it clear that as skills training is devolved, the provision of funding to support training differs in each part of the UK. Funding via the digital account for apprenticeship training is only allocated based on the percentage of the workforce who have English addresses. The Scottish government have said that there will be a workforce development fund that employers can bid for, the Welsh Assembly have not announced any training plans and we still don’t even have a functioning government in Northern Ireland!
HMRC estimate that 6 million of last year’s 8 million cohort who received a P800 reconciliation after year end (their under- or overpayment notice) will pay less tax in-year because of dynamic coding (also called ‘PAYE refresh’), as their code is adjusted more frequently to reflect their total income. That’s good news if HMRC can improve data quality in their systems and start to leverage the benefits of RTI after four years of receiving employer data.
As employers, we’re much more likely to hear from the employees who see more draconian tax code reductions in-year, for example to recover underpayments from 2016/17 at the same time as those for 2015/16 are being recovered. We’re promised a mechanism to query codes and also hardship mitigation, but there’s still little detail about this and yet dynamic coding starts in May 2017.
It’s vital to spread the word that activating your PTA means you can see, and challenge, incorrect tax codes as employers will still, understandably, not have any granular breakdown of the employee’s tax code. There is more information about dynamic coding here and we’re promised some You Tube videos too (oddly, the link in the Bulletin is not to any guidance; just .Gov guidance on code make-up).
Basic Earnings Assessment (BEA)
At last, a public announcement that employers are to ignore the Scottish tax thresholds for the Basic Earnings Assessment for childcare vouchers for Scottish employees and use the rUK thresholds so that no parents are disadvantaged. This is way too late, as many employers will have completed BEAs before the Bulletin was published and some have even unnecessarily compensated employees for the lost relief.
Another example of not really being in the real world is the instruction to ignore student loan start notices for off-payroll workers in the public sector. This is because:
- a) start notices are uploaded automatically so can’t be ignored,
- b) this is Ni’able pay so the law requires deductions to be made, and
- c) if only a deemed worker marker had been designed-in to the process by HMRC, this would all have been so much easier.
There is also a mysterious paragraph about variable interest rates for Plan 2 repayers. This all stems from the Education (Student Loans) (Repayment) (Amendment) (No.2) Regulations 2012. They allow the government to start charging variable rates of interest dependent on income, with income over £41,000 p.a. attracting higher rates of interest. Data on income will, of course, be obtained from the Full Payment Submission (FPS). I’ve no idea why HMRC think ‘some employees may ask you to check and confirm the information you have sent to HMRC’. The data we send to HMRC is as on the employee’s payslip. Of course it may well not be the data that HMRC is holding – need I say more!
And finally, can anyone tell me what the Alcohol Wholesale Retailer Scheme has to do with being an employer? Answers on a postcard or perhaps via your PTA…..
Kate Upcraft is a payroll consultant and lecturer and is a contributor to Bloomsbury Professional’s Payroll Management loose-leaf. Find out more at: http://www.bloomsburyprofessional.com/uk/payroll-management-9781847660626/