Guidance on the amended TUPE regulations coming into force 31st January 2014

The Department for Business, Innovation and Skills has published guidance, Employment Rights on a Transfer of Undertakings, on the changes to the 2006 TUPE regulations that have recently become law.

The amending Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 2014 come into force on 31st January 2014. These amendments will not apply in respect of any transfers which take place on or before 30 January 2014.

The BIS guidance contains comprehensive guidance on the changes.

The BIS guidance also usefully provides the following summary of the changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006.

The 2014 Regulations amend the 2006 Regulations in their application in Great Britain (Northern Ireland have their own separate legislation). The 2014 Regulations introduce:

  • A clarification on the face of the Regulations regarding the test for service provision changes, the activities carried out after the change in provider must be fundamentally the same as those carried out by the person who has ceased to carry them out before it.
  • Amendments to the provisions which give protection against dismissal and restrict changes to contracts: these protections will apply where the sole or principal reason for the dismissal or variation of employment contract is the transfer. Those protections will not apply in certain circumstances where the sole or principal reason for the dismissal or variation is a economic, technical or organisational reason entailing changes in the workforce.
  • Amendments so that a change to the place where employees are employed can be within ‘changes in the workforce’. This is relevant to the dismissal protection and the protection against variations of contracts.
  • Exceptions to the general restriction on varying contracts of employment
    • so that terms incorporated from collective agreements can be varied when more than a year has passed since the transfer, provided that overall, the contract is no less favourable to the employee and
    • so that employers can make changes permitted by the terms of the contract,
    • but in both cases, this is subject to the rules as to when a contract is effectively varied.
  • A provision so that in some circumstances, rights to terms and conditions provided for in collective agreements entered into after the date of the transfer are not transferred.
  • A provision allowing micro businesses to inform and consult employees directly when there are existing appropriate representatives.
  • The usual deadline by which the old employer must supply the employee liability information to the new employer, is increased from not less than 14 days before the transfer to not less than 28 days before the transfer.
  •  An amendment to the Trade Union and Labour Relations (Consolidation) Act 1992 so that a transferee may elect to consult (or start to consult) representatives of transferring staff about proposed collective redundancies prior to the transfer (to meet the requirements for such consultation under that Act). The transferor must agree to such consultation.

Government consults further on use of zero hours contracts

On 19 December 2013, the Department for Business, Innovation and Skills issued a consultation concerning Zero hours employment contracts.

There is no legal definition of a ‘zero hours contract’. It is a term that is used to cover a wide range of employment contracts.  Usually it means a contract where the employer does not offer a set number of hours’ work but can offer work at any time, although the employee is not obliged to accept the offered work.

The government is aware that “zero hours contracts have been used responsibly in some sectors for many years. They can support business flexibility, making it easier to hire new staff and providing pathways to employment for young people. These contracts and other flexible arrangements give individuals more choice and the ability to combine their work with their other commitments.”

The consultation refers to figures published by the Office for National Statistics that show the use of zero hours contracts has increased in the past five years, and that there are around 250,000 such contracts in use in the UK today.

So what is the government consulting about?

The Government is seeking ways to prevent any abuse and to maximise opportunities both for employers seeking to create jobs and for individuals to get work that suits them. The consultation highlights two concerns about the use of zero hours contracts.

Exclusivity – while exclusivity clauses may be justified in certain particular cases, in some circumstances zero hours contracts included an ‘exclusivity clause’ preventing an individual from working for another employer, even if the current employer is offering no work.

Transparency – individuals are not always clear on the terms, conditions and consequences of a zero hours contract, and employers do not always fulfil or understand their responsibilities.

The government is also concerned by the experience of some workers “who were, or had been, engaged on [zero hours] contracts who felt they were penalised by their employer if they were not available for work when required. For example, individuals had been offered work and turned it down and subsequently the employer had not offered the individual any further work.

Views are sought from interested parties, by 13 March 2014, as to how the above problems might be overcome.

Requiring SCONs to be shown on Full Payment Submissions

HMRC have provided some further information about the mandatory requirement to show Scheme Contracted-out Numbers (SCON) on FPS returns from the beginning of the tax year 2014/15.

Up until the end of the tax year 2013/14, all employers are required to include their Employer Contracting–out Number (ECON) on their FPS returns, if any employee has been in a contracted-out occupational pension scheme at any time during the tax year. Inclusion of the ECON is mandatory and failure to provide this information results in the FPS being rejected by HMRC’s validation checks.

Since 6 April 2012, it’s only been possible to contract-out of the State Second pension through a Contracted-out Salary Related (COSR) occupational pension scheme. From 6 April 2016, it will no longer be possible to contract-out via any occupational pension scheme, when the single-tier pension is introduced.

Changes are required in RTI enabled payroll software from 6 April 2014 onwards* so that a SCON  is entered against each relevant payment where the employee and employer pay Class 1 NICs under NI category ‘D’ (Contracted-out Salary Related standard rate contributions), ‘E’ (Contracted-out Salary Related women’s reduced rate contributions), ‘L’ (Contracted-out Salary Related contributions where employee has deferment), and for foreign-going mariners and deep-sea fishermen, ‘N’ (Contracted-out Salary Related standard rate contributions), or ‘O’ (Contracted-out Salary Related women’s reduced rate contributions).

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 6 April 2014 onwards, where any FPS is received online by HMRC without a valid SCON where National Insurance category letters D, E, L, N or O are present will be rejected.

Although the ECON is in most cases unique to the employer, an employer can have several SCONs if they have a number of different contracted-out pension schemes. In an email to software developers of 7th January, HMRC state that “with regard to the reporting of multiple SCONs where one payroll ID is used, [HMRC] need the employer to report the main SCON on the FPS from 6 April 2014.  [HMRC] will let [the employer] know if [they] need [the employer] to do anything different for 2015/16.”

Mandating the SCON from 6 April 2014 will enable HMRC to validate the quality of the SCON data before using it to automatically close down the estimated 6.65 million open contracted-out scheme memberships (when contracting-out no longer applies from 6 April 2016). This proactive approach will help to reduce any exceptions which will require clerical intervention and resolution by employers/pension schemes at 6 April 2016.

*Information on The end of Contracting-out and the Mandating of the SCON was included in the HMRC Employer Bulletin, Number 45, September 2013.

Reasons for submitting a late RTI return

From the start of the tax year 2014/15, HMRC is changing its RTI specifications to enable employers to insert a reason code as to why a particular Full Payment Summary return is ‘late’ being submitted online to HMRC.

In the HMRC Real Time Information specification from 2014/15, the ‘Late PAYE reporting reason’ is Field 154. Where an employer is late submitting a FPS return, one of the following alpha characters should be given:

  • Value A: Notional payment: Payment to Expat by third party or overseas employer
  • Value B: Notional payment: Employment related security
  • Value C: Notional payment: Other
  • Value D: Payment subject to Class 1 NICs but P11D/P9D for tax
  • Value E: Micro Employer using temporary “on or before” relaxation
  • Value F: No working sheet required; Impractical to report
  • Value G:  Reasonable excuse
  • Value H: Correction to earlier submission

Your RTI-enabled payroll software should be set up to allow for Field 154 to be populated with one of the above values from the beginning of the tax year 2014/15, i.e. for the first PAYE payment due on or after 6 April 2014.

The above information was included in an HMRC email to software developers on 7th January 2014.

What’s your excuse?

Penalties exist where taxpayers (both individuals and employers) fail to file returns on time with HMRC and they have no reasonable excuse for the delay.

With the 31 January 2014 tax return deadline (for self-assessment taxpayers) looming, HMRC revealed their ‘Top 10 oddest excuses’ for sending in a late return.

The following bizarre, exotic and flimsy excuses have all been used by tardy taxpayers:

  1. My pet goldfish died (self-employed builder)
  2. I had a run-in with a cow (Midlands farmer)
  3. After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else (London woman)
  4. My wife won’t give me my mail (self-employed trader)
  5. My husband told me the deadline was 31 March, and I believed him (Leicester hairdresser)
  6. I’ve been far too busy touring the country with my one-man play (Coventry writer)
  7. My bad back means I can’t go upstairs. That’s where my tax return is (a working taxi driver)
  8. I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land (South East man)
  9. Our business doesn’t really do anything (Kent financial services firm)
  10. I’ve been too busy submitting my clients’ tax returns (London accountant)

All of these people and businesses received a £100 penalty from HMRC for filing late. They appealed against the decision using these excuses, but were unsuccessful.

From April 2014, HMRC is to start issuing late filing penalties where, in HMRC’s view, an employer should have submitted at least one Full Payment Summary return under Real Time Information for the tax month in question.

Unless an employer can successfully appeal a penalty it becomes final and payable. Better make sure you have a watertight excuse for being late with your RTI returns from April 2014 onwards!

Statutory payment rates from 6 April 2014

The Department for Work and Pensions has published the statutory payment rates for the tax year 2014/15.

The DWP announcement makes the following changes:

  • Statutory Sick Pay – increases from £86.70 to £87.55 a week, as long as average weekly earnings at least reach £111. The new rate applies to all SSP due payable from 6 April 2014.
  • Statutory Maternity Pay – increase in the flat rate from £136.78 to £138.18 a week. This same increase applies to the weekly flat rate of Statutory Adoption Pay, Ordinary Statutory Paternity Pay, and Additional Statutory Paternity Pay. This is as long as average weekly earnings for the relevant period reach of exceed the lower earnings limit for Class 1 NICs. Changes to statutory rates apply from the first Sunday in the new tax year, which for 2014 is 6th April 2014.
  • The optional daily rate of SMP, SAP, OSPP, and ASPP increases from £19.54 to £19.74. The recovery percentage for all employers remains at 92%. Employers who qualify for Small Employers Relief can recover 103% (included 3% NICs compensation).

Increase in student loan repayment threshold for tax year 2014/15

According to A Guide to Financial Support for Students Continuing in Full-Time Higher Education in 2014/15, the annual student loan threshold is £16,910 a year during 2014/15.

At section 3, the Guide states: “If you started your course before 1 September 2012, you don’t start repaying your loan until you’ve left your course and your income is over £1,409 a month, £325 a week, or £16,910 a year.”

The corresponding figures for the tax year 2013/14 are £1,363.75 a month, £314.71 a week, and £16,365 per annum.

Section 3 of the Guide also reminds students that “If you started your course on or after 1 September 2012, you don’t start repaying your loan until you’ve left your course and your income is over £1,750 a month, £404 a week, or £21,000 a year.” This will affect all those who complete their higher education course and enter the workplace from 1 September 2016 onwards.

Increases announced to fuel and van benefits from April 2014

The private use of fuel multiplier, and the unrestricted private use of a van benefit, are both increasing from the start of the tax year 2014/15.

A Parliamentary Order has been laid that makes the following changes from 6 April 2014 onwards:

  • The private use of fuel multiplier* is being increased from £21,000 to £21,700;
  • The benefit of being provided with the unrestricted private use of a van is increasing from £3,000 to £3,090.

*The multiplier is used against the appropriate CO2 percentage used to calculate the private use availability of a car. For example, if the list price of a car is £20,000 during the tax year 2014/15 and it has an official CO2 value of 156g/km, the appropriate percentage is 24 per cent (to the nearest lowest 5g/km). Therefore, the taxable cash equivalent value is 24% of £20,000. If free fuel is also provided for private use, the cash equivalent value is 24% of £21,700 = £5,208.

HMRC’s List 3 updated up to 31 December 2013

HMRC’s ‘List 3’ of professional bodies and learned societies has been updated and now includes all bodies approved by HMRC for the purposes of Section 344 of the Income Tax (Earnings and Pensions) Act 2003, up to 31 December 2013. The List is periodically updated.

Section 344 allows a deduction from earnings where an employee pays an annual subscription to a professional body that is on List 3 and the following apply:

  • The employee pays for the subscription out of their earnings from an employment, and
  • The activities of the body are directly relevant to the employment.

The activities of a body are ‘directly relevant’ to an employment where the performance of the duties of that employment:

  • Is directly affected by the knowledge concerned, or
  • It involves the exercise of the profession concerned.

For example, a payroll manager is a Member of the Chartered Institute of Payroll Professionals (included by HMRC on List 3). As part of their annual subscription they receive Payroll Professional each month. This keeps them up to date in payroll practice. Also, their membership of the CIPP is directly related to their job.

Where the payroll manager meets the costs of their CIPP membership themselves, they are able to claim a deduction from earnings, via self-assessment, against the annual subscription costs.

If the employer meets the subscription costs, they should either report the expense on the payroll manger’s P11D (leaving them to make the deduction claim), or agree a dispensation with HMRC covering the professional membership. Where a dispensation is agreed, nothing need be reported on a P11D and the payroll manager doesn’t have to bother making a business deduction claim.

Do you have on-going concerns about the operation of Real Time Information?

The employer’s payroll representation organisation, Payroll Alliance, has issued a survey to gather information from employers about their experiences with submitting Real Time Information returns online to HMRC.

According to HMRC statistics, the vast majority of employers have now joined RTI and are successfully submitting their data to HMRC each payday.

However, some employers have highlighted issues surrounding RTI submissions and the purpose of this survey is to gain further information.

In particular, some employers have found it difficult to deal with additional payments and corrections as part of RTI once the payroll has been run. This is because their payroll software does not allow them to submit more than one Full Payment Submission (FPS).

Furthermore, a number of employers have been unable to reconcile their PAYE payments with HMRC’s Debt Management and Banking and this may be due to mistiming of their Employer Payment Summary (EPS) or because their software does not automatically provide this facility.

The results of this survey will be used to highlight any restrictions that employers are facing to help HMRC review and improve their processes. The survey is open until 24 January 2014.