Withdrawal of manual National Insurance Number Tracing Service

HMRC is withdrawing the CA6855 clerical tracing service on 31 March 2014, following the introduction of reporting PAYE in real time and the NINO (National Insurance number) Verification Request service (NVR).

If you have an employee’s National Insurance number you must use it when you make Full Payment Submissions (FPS) to report an employee’s payroll information to HMRC. If you use the wrong National Insurance number, use a ‘default’ number, or make one up your employee’s entitlement to benefits may be adversely affected.

NINO’s and new employees

New employees are supposed to give you notification of their NINO (e.g. on a form P45), or they may be able to produce another document that shows their NINO (e.g. old payslip or P60).

If you can’t get a NINO from a new employee, you must still send their details on the first FPS that includes a payment to them – but you must leave the National Insurance number field blank for that employee. You must not use an incorrect or ‘dummy’ National Insurance number. In the absence of a NINO the inclusion of the employee’s full name, postal address, date of birth, and current gender on the first FPS is of the utmost importance.

When you submit the first FPS covering the first payment of employment income to your new employee, HMRC will try to match the employee’s details to their National Insurance number.

If HMRC are able to match the employee’s National Insurance number with the details you provided:

  • you will get a message through the FPS submission route telling you the correct National Insurance number;
  • the employee will get a form P217 in the post telling them what their National Insurance number is.

If you do not receive a message from HMRC telling you the correct National Insurance number continue to leave the National Insurance number field blank for that employee until notified.

Never been issued with a NINO

If your employee is aged under 16 they will not have a National Insurance number and there is no employer or employee National Insurance contributions liability for employees under 16.

If your employee is between 16 and 20 years old and hasn’t received a National Insurance number, they should contact the HMRC National Insurance Helpline.

Any other employees who don’t have a National Insurance number (e.g. someone newly coming to the UK to live and work) should contact their Jobcentre Plus office (Social Security or Job Benefits office in Northern Ireland) and apply for a NINO.

Whenever a new employee doesn’t have a NINO, you must still send their details on the first FPS that includes a payment to them (as above) – but you must leave the National Insurance number field blank for that employee. You must not use an incorrect or ‘dummy’ National Insurance number.

Reminder to submit Fixed Protection 2014 applications by 5 April 2014

Did you build up a large pension pot before 6 April 2006 of £1.5 million or more and want to protect the tax relief available against contributions you and/or your employer made to that pension scheme? This is for you!

You can save as much as you like towards your pension but there is a limit on the amount of tax relief you can get. The lifetime allowance is the maximum amount of pension saving you can build up over your life that benefit from tax relief. If you build up pension savings worth more than the lifetime allowance you’ll pay a tax charge on the excess.

From 6 April 2014 the standard lifetime allowance will be reduced from £1.5 million to £1.25 million. You can protect your pension savings by applying for Fixed Protection 2014 (FP2014) but you must apply by 5 April 2014.

You can use the lifetime allowance checking tool to help you decide whether you should apply for FP2014.

If you want to apply for FP2014 you should notify HM Revenue & Customs (HMRC) using the online form. It’s secure, quick and easy to do and, unlike with postal applications, you’ll get immediate confirmation of receipt along with a reference to assist with any future enquiries. The email will tell you when you can expect to hear from HMRC regarding your application and should be stored safely as proof of submission.

If your application for FP2014 is accepted, HMRC will send you a certificate which should be shown to your pension scheme administrator every time you take any benefits from your pension scheme. Where you have successfully applied for FP2014, to keep this protection there are restrictions on any tax relieved pension savings that you can make from 6 April 2014.

Apparent Un-notified Terminations (pension payrolls)

On 28th February 2014, HMRC issued the following statement which will have relevance for occupational pension payroll schemes.

The HMRC statement is included verbatim, below.

Apparent Un-notified Terminations (AUTs) are produced by the National Insurance and Pay As You Earn Service (NPS) when it identifies a break in service where no notification has been received from the scheme.

To assist Single Tier Pension activities HMRC have re-prioritised the AUT workload. In order to minimise contact for scheme administrators HMRC will analyse the identified accounts and, where the period of contracted-out employment starts before 6 April 1997, use the main Scheme Contracting Out Number (SCON) to enforce a Guaranteed Minimum Pension (GMP) where possible.

Where a GMP has been enforced schemes will receive a GMP Statement (CA1625) with a reference of “enforced”. Where the period of membership starts after 5 April 1997 and where it has not been possible to enforce a GMP an AUT enquiry letter will be issued.

HMRC requests affected schemes give priority to this workload by responding to AUT enquiry letters and by contacting them immediately with the correct details if the incorrect SCON is shown on an enforced CA1625.

SAYE monthly savings limit doubles to £500 from 6th April 2014

With effect from 6th April 2014, the maximum aggregate amount of a person’s monthly contributions under a tax and NICs efficient SAYE share save scheme increases from £250 to £500.

The legislation to effect this change is the Income Tax (Earnings and Pensions) Act 2003 (Amendment to SAYE Option Schemes Contributions Limit) Order 2014.

An approved Save As You Earn scheme is a savings-related share option scheme. It must be available to all employees who’ve been with the company for a certain time. The scheme gives a participating employee a right – known as an ‘option’ – to buy shares with their Save As You Earn savings for a price that’s fixed at the start.

From April 2014, a saver can save up to £500 a month under the scheme out of their take-home pay. At the end of the savings contract (three, five – or sometimes seven – years) the employee can use the savings to buy the shares.

The interest and any bonus received at the end of a SAYE savings scheme is tax free. Also, an employee will not pay any PAYE income tax or Class 1 NICs on the difference between what they pay for the shares when they exercise their option and what the shares are actually worth.

A SAYE saver may have to pay Capital Gains Tax when they sell the shares. But the employee won’t pay any if they put the shares into an ISA or a pension as soon as  they buy them.

HMRC updates its advisory fuel rates from 1 March 2014

On 27 February, HMRC published updated advisory fuel rates that can be paid tax-free to employees driving employer provided vehicles to cover just their business mileage. The same rates can also be used to charge employees for private mileage costs paid by their employer.

The new rates apply to all business journeys on or after 1 March 2014, although until the end of March employers can continue to use the previous advisory fuel rates, applicable from 1 December 2013.

The new rates per mile are as follows; the figure in parenthesis is the amount between 1 December 2013 and 28 February 2014):

  • Petrol engine cars: 1400cc or less – 14p (14p); 1401-2000cc – 16p (16p); over 2000cc – 24p (24p); based on 129.2p/litre (129.9p/litre).
  • Diesel fuelled cars: 1600cc or less – 12p (12p); 1601-2000cc – 14p (14p); over 2000cc – 17p (17p); based on 136.8p/litre (137.5p/litre).
  • LPG fuelled cars: 1400cc or less – 9p (9p); 1401-2000cc – 11p (11p); over 2000cc – 17p (16p); based on 71.5p/litre (70.0p/litre).

The above rates are part of HMRC’s quarterly review of their advisory fuel rates.

Increase in statutory employment rights limits 2014

The Government has published its Employment Rights (Increase of Limits) Order 2014 which applies from 6th April 2014, and will see the maximum weekly amount of statutory redundancy pay rise from £450 to £464.

The 2014 Order announces the following increases with application to all effective dates of termination occurring on or after 6 April 2014:

  • Statutory redundancy pay: from £450 to £464 a week (maximum statutory payment – based on 20 years’ service over the age of 21 multiplied by 1.5 weeks – from £13,500 to £13,920).
  • Minimum amount of compensation in cases of unfair dismissal: from £5,500 to £5,676.
  • Maximum amount of compensation in cases of unfair dismissal: from £74,200 to £76,574.

The amount of a day’s guarantee payment increases from £24.20 to £25.00.

The increases made by this Order reflect the increase in the retail prices index of 3.2% from September 2012 to September 2013.

New online portal for employers applying DEOs issued by the Child Maintenance Service

Do you operate a Deduction from Earnings from one or more of your employees under the direction of the Child Maintenance Service (CMS)? This affects you, and will also affect any employer who receives a new Order issued by CMS.

Currently, in the UK employers can be required to operate a Deduction from Earnings Order (DEO) issued by the Child Support Agency, as well as one of the newer DEOs issued under the CMS. The newer CMS orders were introduced gradually since 2012 and are now open to all separated parents. The CMS will totally will replace the Child Support Agency by 2017/18, when all current CSA cases have closed.

A new service, the Child Maintenance Service Employer Self Service, is gradually being introduced from February 2014 to replace the old paper-based system with a new free online portal. It is part of the government’s long-term economic plan to abolish or improve outdated, burdensome, or over-complicated processes which waste businesses’ time and money.

The new online service is available for all employers who administer Deduction from Earnings Orders with the Child Maintenance Service.

The new Service works like online banking, helping employers manage their account whenever it is convenient for them to do so. They can check their monthly Deduction from Earnings Order schedules, make safe and secure payments, send enquiries, and give feedback.

Businesses will also be able to report when any employee for whom they deduct maintenance stops working for them in one easy click through to the Child Maintenance Service Employer Self Service website.



HMRC seeks change in PAYE Regulations to make life easier for all concerned

Where large numbers of workers are re-categorised by HMRC as being direct employees and not self-employed, HMRC is seeking an administrative easement that should ensure employers are not overcharged for the income tax the workers have already paid.

It seems that following PAYE compliance reviews, a number of large employers have had numbers of their workers re-categorised. Strictly, HMRC could charge the employer the underpaid employment tax in full. However, HMRC do accept that it is perhaps unfair to charge employers income tax that has already been paid by individual workers under Self-Assessment.

Presently, the PAYE Regulations allow HMRC to off-set the income tax already paid. HMRC can “Direct” that payment of the PAYE tax liability in respect of an employee is transferred from the employer to the employee. The practical effect of this is that the employer no longer becomes liable to pay an amount of PAYE tax due equivalent to the amount of tax declared (or paid on account) by the individual.

The PAYE Regulations currently require that where HMRC makes such a Direction, they must, amongst other things, serve a notice on each individual concerned setting out each affected tax year and the tax paid in each year. Where large numbers of re-categorised employee are involved, this involves a substantial administrative burden on HMRC and often the employer, with no material advantage to the individuals.

Therefore, HMRC are seeking a change in the Regulations in those cases where large numbers of workers are involved. The change will allow HMRC to confirm that income tax has been paid under Self-Assessment and then sample a statistically valid selection of employees to extrapolate an amount of tax that may be offset against the employer’s liability. HMRC is also to be allowed an option when it issues a notice to the employee of whether to include details of the amounts offset and the tax years they refer to or merely to state the employment to which the notice applies.

Do you think this would be a fair way of dealing with the employment income tax liabilities in situations where an employer has large numbers of workers re-categorised as direct employees?

HMRC have published for external comment a draft Statutory Instrument making amendments to the Income Tax (PAYE) Regulations 2003 together with an accompanying Explanatory Memoranda and Tax Information and Impact Note in respect of changes to the Regulations.

February 2014 issue of Employers Bulletin available to download

HMRC have published their Employer Bulletin, February 2014, Number 46, and it’s full of “must read” information for employers.

Among the contents of the latest Employer Bulletin [go to http://www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/bulletin46.pdf] are the following important topics:

  • Chancellor’s Autumn Statement – the changes that affect payroll from 6th April 2014
  • Employment Allowance (a reduction of up to £2,000 per year in your employer Class 1 National Insurance Contributions from April 2014)
  • Operating PAYE in real time (RTI) and ending tax year 2013/14 and starting tax year 2014/15
  • Mandating the Scheme Contracted-Out Number (SCON) via Real Time Information (RTI) Submissions from 6 April 2014
  • ‘Extra’ paydays (week 53, 54 or 56) and underpayments of tax
  • Starter checklists to replace P46 forms from April 2014
  • Percentage Threshold Scheme ends  for all SSP due on or after 6th April 2014
  • Operating the correct Tax Code
  • Timetable for paying HMRC during 2014/15
  • Reconciling PAYE payments
  • Notification of a threshold change for student loan borrowers in the current Income Contingent Repayment (ICR) scheme
  • Child Maintenance – what’s new?
  • Payroll Giving
  • End of work restrictions on Bulgarian and Romanian nationals
  • Withdrawal of Helpbooks

Ending tax year under RTI and starting new tax year

On 18th February, HMRC published updated guidance for employers on completing the year end for the tax year 2013/14.

After carefully going through the guidance, the following are the key Real Time Information points to look out for as we end the tax year 2013/14 and start the new tax year 2014/15.

Ending the tax year 2013/14

  • Forms P14, P35, and P38A should not be sent to HMRC.
  • Instead…
    • When you submit your last Full Payment Submission for the tax year 2013/14 (i.e. covering the last payment of employment income on or before 5th April 2014), all that is required is to set the “final” Indicator to “Yes” (showing this is the final submission for the tax year) and complete the year-end declarations on the FPS (similar to those that used to be found on a P35). Once the “final” Indicator is set on the FPS, the payroll software should automatically bring up the declaration questions.
    • Once having submitted a “final” FPS, if an Employer Payment Summary is needed to return details of, for example, recovery of statutory payments for the year to date, there is no need to reset the “final” Indicator on the EPS or resend the declaration questions. The “final” FPS will suffice.
    • Of course, if the “final” Indicator was NOT set or the declaration questions answered on the last FPS sent to HMRC for the tax year 2013/14, then the last EPS an employer sends should be submitted with the “final” Indicator set and the declaration questions answered.
    • Where an employer doesn’t pay any employees at all in tax month 12 for 2013/14, they should submit an EPS to HMRC with the “final” Indicator set and the declaration questions answered.
    • HMRC also indicate that where the employer submits a number of FPS returns during tax month 12 and they are not sure which one of these returns is their final one, they can submit an EPS instead with the “final” Indicator set and the end of tax year declarations answered.
    • In the event that an employer fails to notify HMRC about their “final” FPS and/or fails to do this on the “final” EPS they submit, they will need to send HMRC another EPS with the “final” Indicator set and the end of tax year declarations answered. However, they do not have to repeat the year to date figures.
    • Where an employer has submitted a “final” FPS and then finds they need to correct the year to date figures, they should submit a supplementary FPS. They should not reset the “final” Indicator, nor should they resend the declaration questions again. The supplementary FPS should be received by HMRC by midnight of the 19th April.
    • In any event, a “final” FPS or EPS for the tax year 2013/14 must be received online by HMRC by midnight of the 19th April 2014.
  • Any payroll information for the tax year 2013/14 that cannot be notified HMRC on a “final” FPS or EPS by midnight of 19th April 2014 can only be submitted to HMRC (by 19th May 2014) using an Earlier Year Update.
  • If your payroll system doesn’t offer the facility to send EPS and/or EYU returns online to HMRC, you can use the HMRC’s free Basic PAYE Tools software to submit the returns.
  • An employer must still produce a form P60 for all employees employed by them at 5th April 2014 and ensure that employees receive this form by no later than 31st May 2014.
  • Forms P11D, P9D, and P11D(b) for the tax year 2013/14 must also still be submitted to HMRC, if applicable, by midnight of 6th July 2014.

Starting the tax year 2014/15

  • If an employer needs to run their payroll before 6th April 2014, for payments made on or after 6th April 2014, they can send HMRC their FPS submission from 6th March 2014. Submissions will be processed after 5th April 2014.
  • From 6th April 2014 onwards, a Scheme Contracted Out Number (SCON) must be entered against each relevant payment where the employee and employer pay Class 1 NICs under NI category ‘D’, ‘E’, and ‘L’ (any FPS received online by HMRC without a valid SCON when required will be rejected). Where a SCON is not known, HMRC allow an employer to enter ‘S2769999P’. This number is only valid on a temporary basis; therefore, employers should urgently contact their pension scheme administrator to obtain the correct SCON.
  • From 6th April 2014 onwards, there are changes to the working hours’ bandings that must be shown on an FPS. It must now be one of the following:
    • (a) Up to 15.99 hours
    • (b) 16 – 23.99 hours
    • (c) 24 – 29.99 hours
    • (d) 30 hours or more, or
    • (e) Other
  • From 6th April, if an employer is late submitting an FPS and/or EPS for the tax month in question (i.e. it is not received by HMRC by the 19th following the end of the tax month), the employer must give a “Late PAYE reporting reason”, which will be one of the following:
    • A – Notional payment: Payment to Expat by third party or overseas employer
    • B – Notional payment: Employment related security
    • C – Notional payment: Other
    • D – Payment subject to Class 1 NICs but P11D/P9D for tax
    • E – Micro Employer using temporary “on or before” relaxation
    • F – No requirement to maintain a Deductions Working Sheet or Impractical to report work done on the day
    • G – Reasonable excuse
    • H – Correction to earlier submission
    • Employers wanting to claim the Employment Allowance [http://www.hobbspayrollservices.com/blog/?p=2571] (up to £2,000 a year off an employer’s secondary Class 1 NICs) for the tax year 2014/15 onwards will do this by completing and submitting an EPS online to HMRC.