New link for downloading handbook on Attachment Orders

The Chartered Institute of Payroll Professionals (CIPP) has made its members aware of a new online web address* for employers wishing to refer to, or download, the handbook Attachment Orders – A guide for employers, published by HM Courts Services.

Dealing with the various types of attachment of orders (‘arrestments’ in Scotland) and deduction from earnings orders is not a straightforward task. It’s not a matter that all employers regularly have to deal with. So it’s useful to know there’s an official source of guidance if you get faced with dealing with an Order for the first time.

*Link modified 25 July 2012.

Expensive company cars which are security enhanced

HMRC have decided that, from 6 April 2011 onwards, certain security enhancements fitted to cars made available for private use will not be treated as accessories bumping up the car’s list price for taxation purposes.

Why are HMRC making this change? Because this new measure “supports the Government’s objective of a fair tax system by ensuring that individuals who are provided with security enhanced cars due to the nature of their employment are not unfairly impacted by the abolition [since 6 April 2011] of the £80,000 cap on the cash equivalent of the benefit.” Gives you a nice, warm, fuzzy feeling inside to think HMRC is so caring of the wealthy and their company cars. Although, they admit that this new measure will only affect up to 100 company car drivers in the UK.

Anyway pushing all jealous thoughts to one side, what will the change mean for those chosen few?

The cash equivalent value of a car made available for private use is based on the car’s list price which includes all the car’s qualifying accessories. So, not only might the list price be high to begin with, but by the time you load it with the value of the accessories fitted to the car, it bumps up the value even more. Before the change announced above, a car’s security enhancements increased its list price.

From 6 April 2011, where an individual can demonstrate that the nature of their employment creates a threat to their personal security, then the following security enhancements will not be treated as part of the car’s list price:

  • armour designed to protect the car’s occupants from explosions or gunfire;
  • bullet-resistant glass;
  • any modifications to the car’s fuel tank designed to protect the tank’s contents from explosions or gunfire (including by making the tank self-sealing); and,
  • any modification made to the car in consequence of anything which is a relevant security feature by virtue of the proceeding three examples.



Change in SSP rules affecting ‘linking letters’

From 1 May 2012, there is a change in the period during which a new employee, or a returning employee, cannot get SSP from their employer if they’ve been a recent recipient of the Employment and Support Allowance (ESA).

Pre 1 May 2012, where an employee started a new job, or returned to work, after getting the ESA from Jobcentre Plus or the Social Security Agency, and who went sick within 104 weeks of their starting/returning they could not get SSP from their employer. They would be given a form SSP1 and the employee would go back on to the ESA during their incapacity. From 1 May 2012, this period on non-entitlement has been cut from 104 to 12 weeks, as per the latest online version of Helpbook E14, and will affect any employee starting/returning on or after this date.

An employer should have a policy of always asking new or returning employees as to whether they have a linking letter (ESA220 or similar) detailing the last payment of the ESA. Or, the employer should check with the Jobcentre Plus, or in Northern Ireland with the Jobs and Benefits Office, to see if the employee has any ESA entitlement.

HMRC publish list of RTI compliant software

HMRC have updated its online listing of payroll software products that have been found by them as being able to:

  • file a valid RTI form – Full Payment Submission (FPS), Employer Payment Summary (EPS), Employer Alignment Submission (EAS); and NINO (National Insurance number) Verification Request (NVR);
  • retrieve National Insurance number verifications online.

The HMRC listing of products is qualified by the statement: “Employers who want to buy software which has RTI Recognition indicated by ‘payroll values checked’, should note that HMRC basic payroll tests do not include every possible payroll function and that contact would have to be made by the employer with the Software Developer to ensure that the software product contained all the payroll functionality that the business required. Employers would have to establish how easy a product or service would         be to use or what it costs.”

Note: HMRC does not recommend or endorse any one product or service over another.

RTI pilot gets off to a good start

HMRC have confirmed that a further 310 employer schemes will join the Real Time Information (RTI) pilot following its launch in April.

In a press release dated 9 May, HMRC announced that over 100,000 employee records have been successfully received by HMRC since 10 volunteer employers (including HMRC as an employer) joined the RTI pilot on 11 April. The additional 310 employers will join the pilot between 8 May and the end of June.

Stephen Banyard, Acting Director General for Personal Tax, said:
“It’s early days, but all the signs are good. RTI is on track – all expected PAYE submissions have been received from the 10 pilot employers and processed.

“The whole point of the pilot is to identify any implementation issues. So far, these have been very few and they have been quickly resolved.

“We are working closely with the employers in the pilot who have helped us identify and solve any issues. We have improved our guidance and support for employers and software vendors as a result of the insight and feedback gained. We are very grateful for the valuable contribution the pilot employers and software developers have made”.

New ‘Employment-Related Shares & Securities Bulletin’

HMRC have published the first issue of ‘The Employment-Related Shares & Securities   Bulletin’. Issue No. 1 is dated May 2012. The Bulletin will provide information and updates on developments relating to employment-related securities, including the tax-advantaged employee share schemes.

 Further issues of the Bulletin will be published as and when sufficient articles or updates are available, or when HMRC have an item they want to alert taxpayers to quickly. HMRC welcome any suggestions for future articles although they cannot guarantee publication.

Go ahead for a Scottish rate of income tax

From 1 May 2012, the Scotland Act 2012 gives the Scottish Parliament the powers to introduce, from 6 April 2016, a Scottish rate of income tax to affect all Scottish taxpayers.

It’s proposed that for Scottish taxpayers, the rate of UK income tax will be cut by 10%. The Scottish Parliament will then have the powers to set their own rate of income tax. This could result in rates of income tax for Scottish taxpayers ending up equal to, lower, or higher than rates paid by taxpayers in England, Wales, or Northern Ireland.

For example, if the Scottish Parliament were to keep the Scottish rate of income tax at 10% it means that Scottish taxpayers will overall pay income tax at the same rates as everyone else in England, Wales, and Northern Ireland. However, if the Scottish Parliament chose to set their rate of tax at 8%, then Scottish taxpayers would pay tax at 18%, 38%, and 43% (if the additional rate of income tax is still cut to 45% from 6 April 2013). If they set a rate of 12%, Scottish taxpayers would pay income tax at 22%, 42%, and 47%.

How is a “Scottish taxpayer” defined? Section 80D of the Scotland Act 2012 defines a “Scottish taxpayer” as someone who has a “close connection with Scotland” (very much dependant on where your main residence is and how much time you spend there and in Scotland each year). If you’re a member of Parliament for a constituency in Scotland and/or a member of the Scottish Parliament, you’re automatically a “Scottish taxpayer” wherever you actually live.

HMRC states: “Broadly, if you live in Scotland you are a Scottish taxpayer. Scottish people living outside of Scotland are not Scottish taxpayers. Non-Scottish UK residents living in Scotland are.”

The above definition and comment doesn’t go far enough in answering the obvious questions about have a “close connection” with Scotland. You can imagine how “Scottish taxpayers” will seek to drop their “Scottishness” if Scottish tax rates end up higher than in the rest of the UK! HMRC state: “We shall be issuing more guidance about [defining Scottish taxpayers] nearer the time. We shall also be writing to those on our computer systems who appear to be Scottish taxpayers. If you pay tax through PAYE, HMRC will tell your employer whether to treat you as a Scottish taxpayer.”

Employees who are identified as “Scottish taxpayers” will be issued with special PAYE tax codes – all “Scottish” tax codes will be prefixed with the letter “S”. For example, 810L would become S810L, K190 would become SK190. Scottish tax codes will start being issued by HMRC to employers during January/February 2016.

These changes could affect employers way south of the Scottish border. This is because, if you employ Scottish taxpayers you’ll have to apply Scottish tax rates even if you’re an employer who isn’t resident in Scotland. “All employers will have to operate the Scottish tax codes, so where your employer is based won’t affect the tax you pay.”

HMRC have published some frequently asked questions on the Scottish rate of income tax. They’re well worth having a look at.



When is a car a van?

Over the years, there have always been claims that particular cars should be treated as ‘vans’ for taxation purposes. There used to be a big difference between the cash equivalent value of a car made available for private use and a van made available for similar private use. Although the differences in cash equivalent values are not so great now, some employers/employees still think it’s worth trying to get a car treated as a van to save on income tax. This was illustrated in the First Tier Tax Tribunal case of Jones v Revenue & Customs [2012] UKFTT 265.

In this case, Mr Jones is a mobile technician for Jaguar Land Rover who, by reason of his employment, was supplied with a new Land Rover Discovery 4 2.7 TDV6 GS Auto. He objected to his Notice of Coding for the tax year 2011/12 which was determined by HMRC on the basis of information provided by his employer that, despite the Land Rover having been specially modified to carry engine components and tools for his job, the vehicle, which is available for his private use, was a car.

The entire boot area of the Land Rover was filled with racking and tool boxes which were bolted to the structure of the vehicle. In addition, although the rear seats and seat belt fittings were in place the seats were impossible to use as extra tool boxes had been securely fixed over them. Although it was technically possible for the tool boxes to be removed, he was not permitted to do so by his employer. There had also been modifications carried out to the vehicle including additional lighting, electrics, and special control systems.

You can see why Mr Jones was desirous of the vehicle being treated as a van from the fact that having the vehicle deemed a car was costing him nearly £2,600 more in income tax (as 20%) than he’d have paid on the unrestricted private use of a van. There was nearly a £6,000 difference if Mr Jones paid tax at the marginal rate of 40% of the benefit.

So, what does the law state is the difference between a car and a van?

According to section 115 of the Income Tax (Earnings and Pensions) Act 2003, a car “is not a goods vehicle”, whilst a van “is a goods vehicle”, i.e. “a vehicle of a construction [emphasis added] primarily suited for the conveyance of goods or burden of any description”.

As far as HMRC were concerned, the vehicle should still continue to be treated as a car as the modifications made to it were not sufficiently permanent and substantial in scale to have altered its original manufactured construction.

Although the Land Rover Discovery supplied to Mr Jones may have become primarily suited for the conveyance of goods or burden, whilst he was carrying out his duties using it, this was as a result of modifications, which were made to the vehicle that did not fundamentally alter its structure, and not because it was “of a construction” for such a purpose. This was borne out by the fact that when Mr Jone’s vehicle was replaced by a new one after a year, it had been returned to Jaguar Land Rover whence it was converted back to its normal specification for re-sale.

In the circumstances, the Tax Tribunal agreed with HMRC that nothing could be found that the Land Rover Discovery in question was a “goods vehicle” within the definition of section 115.

The HMRC Employment Income Manual, from page EIM23110 , provides guidance on the differences between a car and a van.


Can you dismiss a short-service employee on any grounds?

For all effective dates of termination of employment falling on or after 6 April 2012, the service period has been increased from one to two years’ continuous service before an employee can bring a claim of unfair dismissal against their employer. But does this mean that the employer can use any pretext to sack a worker they no longer want to employ?

The Court of Appeal (in Community Law Clinic Solicitors Ltd & Ors v Methuen [2012] EWCA Civ 571) reminds us that an employer cannot just use any excuse to fire an employee.

In this case, Mr Methuen was a 52-year-old solicitor who lost his job with the Community Law Clinic Solicitors Limited. Her couldn’t bring a claim for unfair dismissal because he hadn’t worked for the firm for long enough. Mr Methuen said that he was allegedly dismissed because he was not getting in enough work at the Family Department but claimed the accusations were wrong and false. But in the absence of being able to bring a claim for unfair dismissal, he brought claims for race, gender, and age discrimination. His claims for race and gender discrimination were struck out, but the EAT and Court of Appeal did not rule out a possible claim for age discrimination.

Mr Methuen’s claim of age discrimination was based based on the fact that the person hired to replace him was younger and not as well-experienced and the firm could afford to pay them less than they they had to pay him.

The Community Law Clinic Solicitors Limited, however, contended that the reason for their firing Mr Methuen had nothing to do with their desire to appoint a younger replacement who would cost them less to employ. Mr Methuen had failed to develop the Family Department which as a result was running at a loss and they could not afford to go on employing him on his current salary. Mr Methuen they claimed did not, therefore, suffer less favourable treatment for a reason connected to his age.

It remains to be seen which side will eventually win the argument.

But this case does remind employers that in dismissing an under-performing employee, although the employee may not be able to bring a claim of unfair dismissal due to their short service, they may still have grounds for bringing a claim of discrimination. Compensation in discrimination cases is not capped as it is in successful cases of unfair dismissal.

Therefore, to show the employer acted without discrimination it is necessary to give evidence that the employer engaged in a fair disciplinary process that resulted in the reasonable decision to dismiss the employee for some other substantial reason which was not tainted by any discrimination.

When is age discrimination justified?

Two recent Supreme Court judgements have helped clarify the circumstances under which age discrimination may be objectively justified.

Direct discrimination may apply where an employer seeks to retire an employee just because they have reached a particular age. This is particularly relevant now that UK law no longer allows employers to apply a default retirement age of 65.

Indirect discrimination may apply where, for example, an older employee is disadvantaged from progressing or being promoted by reason of their age. The employer doesn’t stop an older employee from progressing or being promoted, but the fact of their age puts an older employee at a particular disadvantage when it come to opportunities for progress or promotion.

The legislation that now deals with age discrimination is the Equality Act 2010. Section 13(2) allows that direct age discrimination may be justified if it can be shown that the discrimination in question is a “proportionate means of achieving a legitimate aim.” Section 19(2)(d) provides for the same objective justification in cases of indirect discrimination.

How did the two Supreme Court judgements deal with the necessity for an employer to objective justify their discriminatory acts as a “proportionate means of achieving a legitimate aim”?

In Seldon v Clarkson Wright and Jakes [2012] UKSC16, Mr Seldon was a partner in a firm that had an agreed policy of requiring partners to retire once they reached age 65. Mr Seldon applied to work past his normal retirement, but his request was refused.

The Supreme Court accepted that the original employment tribunal made the right decision that “compulsory retirement was an appropriate means of achieving the firm’s legitimate aims of staff retention, workforce planning, and allowing an older and less capable partner to leave without the need to justify his departure and damage his dignity. The first two could not be achieved in any other way and introducing performance management would be difficult, uncertain and demeaning, so there was no non-discriminatory alternative to the third. Having balanced the needs of the firm against the impact of the rule upon the partners, it was a proportionate means of achieving a congenial and supportive culture and encouraging professional staff to remain with the firm .”

However, the Supreme Court was not prepared to accept that the partnership’s general retirement age of 65 could be justified. A younger or older retirement age could possibly be just as objectively justified. As the lead judge put it: “It is one thing to say that the aim is to achieve a balanced and diverse workforce. It is another thing to say that a mandatory retirement age of 65 is both appropriate and necessary to achieving this end. It is one thing to say that the aim is to avoid the need for performance management procedures. It is another to say that a mandatory retirement age of 65 is appropriate and necessary to achieving this end.”

Therefore, the Supreme Court remitted the case back to the Employment Tribunal to decide whether the partnership’s mandatory retirement age of 65 was a proportionate means of achieving the partnership’s legitimate aim. In conclusion, the lead judge stated: “There is a difference between justifying a retirement age and justifying this retirement age.”

In Homer v Chief Constable of West Yorkshire Police [2012] UKSC15, the police authority introduced a new grading structure. Mr Homer could not progress to the top pay scale without his now obtaining a law degree, which had not originally been required when he took up his present job.

At the time of the introduction of the new grading structure, Mr Homer was aged 62. His normal retirement age was age 65, three years later, although he could extend his retirement for up to a year (when such was allowed pre the Equality Act 2010). Mr Homer realised that his undertaking the necessary part-time studying for a law degree meant he had no opportunity of obtaining such a degree until he was past retiring. Therefore, Mr Homer considered that his age put him at a disadvantage in comparison with younger employees who would already held a law degree or were in a better situation to study for one. Mr Homer claimed that the police authority’s new policy of requiring a law degree in order to benefit from the top pay scale was indirectly discriminatory against him by reason of his age and that this could not be objectively justified.

Commenting on whether the police authority’s actions could be objectively justified, the Supreme Court stated: “The range of aims which can justify indirect discrimination on any ground is wider than the aims which can, in the case of age discrimination, justify direct discrimination… It is not limited to the social policy or other objectives, but can encompass a real need on the part of the employer’s business.”

Therefore, “part of the assessment of whether the criterion can be justified entails a comparison of the impact of that criterion upon the affected group as against the importance of the aim to the employer… Mr Homer (and anyone else in his position, had there been someone) was not being sacked or downgraded for not having a law degree. He was merely being denied the additional benefits associated with being at the highest grade. The most important benefit in practice is likely to have been the impact upon his final salary and thus upon the retirement pension to which he became entitled. So it has to be asked whether it was reasonably necessary in order to achieve the legitimate aims of the scheme to deny those benefits to people in his position?”

In other words, should an exception have been made in the case of Mr Homer (provided of course that it could be done without discriminating against someone else on a prohibited ground)? After all, at the time he was recruited into his present position a law degree was not required. Was it fair, therefore, to expect him to now obtain a degree at his age in order to benefit from a higher pay scale? Or, should the new policy have been better structured so that it took into account the relevant experience Mr Homer had already achieved during his time with the Police?

Therefore, the Supreme Court remitted the case back to the Employment Tribunal to more accurately assess whether the actions of the police authority could be really objectively justified?