Chancellor’s Budget Statement, March 2014

On 19th March 2014, Chancellor George Osborne delivered his fifth Budget. Perhaps the biggest announcement for employees is the proposal to make Defined Contribution (money purchase) occupational pension schemes much more flexible.

Personal taxation

The Chancellor confirmed that from 6th April 2014, the income tax personal allowance will rise to £10,000. From April 2015, it was announced that the level of the personal allowance will rise to £10,500. So that higher rate taxpayers benefit from this increase in allowances, the basic rate limit will be reduced to £31,785 (£31,865 for 2014/15).

The government states that the changes they have made to personal allowances since they came into power mean over 3.2 million people will have been lifted out of income tax by April 2015. Further, the government’s increases to the personal allowance between 2010 and 2015 are worth £646 to a typical higher rate taxpayer in cash terms, and £805 to a typical basic rate taxpayer.

Budget 2014 also announced that the transferable tax allowance for married couples and civil partners announced at Autumn Statement 2013 will be set at 10% of the personal allowance from 2015/16. This means it will be £1,050 in 2015/16.

Defined Contribution Pensions

According to Budget 2014 documentation, the government intends to “introduce the most fundamental reform to the way people access their pensions in almost a century by abolishing the effective requirement to buy an annuity, giving people much greater freedom over how they access their pension savings.”

From April 2015, the government will change the tax rules to allow people to access their defined contribution pension savings as they wish from the point of retirement.

Drawdown of pension income under the new, more flexible arrangements will be taxed at marginal income tax rates rather than the current rate of 55% for full withdrawals.

The tax-free pension lump sum will continue to be available. Those who continue to want the security of an annuity will be able to purchase one. Equally, those who want greater control over their finances in the short term will be able to extract all their pension savings in a lump sum.

And those who do not want to purchase an annuity or withdraw their money in one go will be able to keep their pension invested and access it over time.

To help a retiree decide on their best options, the government will introduce a new guarantee that everyone who retires with a defined contribution pension will be offered free and impartial face-to-face guidance on their choices at the point of retirement. This will take effect from April 2015.

From 27 March 2014 the government will:

  • Reduce the amount of guaranteed pension income people need in retirement to access their savings flexibly, from £20,000 to £12,000;
  • Increase the capped drawdown limit from 120% to 150% to allow more flexibility to those who would otherwise buy an annuity;
  • Increase the size of a single pension pot that can be taken as a lump sum, from £2,000 to £10,000;
  • Increase the number of pension pots of below £10,000 that can be taken as a lump sum, from two to three;
  • Increase the overall size of pension savings that can be taken as a lump sum, from £18,000 to £30,000.

New type of Voluntary NICs

Budget 2014 announced further details of a new scheme of Voluntary National Insurance contributions (VNICs) to allow pensioners to top up their Additional State Pension.

The scheme will be open for 18 months from October 2015 and available to everyone reaching State Pension age before 6 April 2016. This will help pensioners with savings who want to boost their State Pension income in a way that protects them from price inflation and provides them with an income for life. It could particularly benefit those with gaps in their Additional State Pension record, such as the self-employed and women who have taken time out from work to raise children.

Simplifying expenses and benefits

For a while now, the Office for Tax Simplification has been examining the UK tax system and looking for ways to simplify it. One of the areas they examined was expenses and benefits.

As highlighted by the OTS review of employee benefits and expenses, working practices have changed. The current rules for benefits and expenses are complex and can lead to unfair outcomes.

Budget 2014 goes no further other than to state the government does intend to “implement OTS recommendations to simplify the taxation of employee benefits and expenses.” To this end they also announced they “will undertake a call for evidence on remuneration practices in the 21st century to inform future changes.”

Some of the changes it is known that government are examining include abolishing the £8,500 threshold, voluntary payrolling of benefits, a trivial benefits exemption, and a general exemption for non-taxable expenses. The government also intends to review the rules underlying the tax treatment of travel and subsistence expenses.

Tax exemption for employer-funded occupational health treatments

As announced at Budget 2013, the government will introduce a tax exemption for amounts up to £500 paid by employers for medical treatments for employees. The tax exemption is expected to become available with the rollout of the Health and Work Service in October 2014.

Employer provided benefits in kind: beneficial loans

As announced at Budget 2013, the threshold for the small loans exemption limit will be increased from £5,000 to £10,000 from April 2014.

Company Car Tax (CCT) rates for 2016/17

Budget 2012 and Budget 2013 set out CCT rates and bands for 2016/17, including the removal of the diesel supplement. The appropriate percentage of the list price subject to tax will be 7% for the 0-50 grams of carbon dioxide per kilometre (gCO2/km) band and 11% for the 51-75 gCO2 /km band in 2016/17.

CCT rates for 2017/18 and 2018/19

The appropriate percentage of a car’s list price subject to tax will increase by two percentage points for cars emitting more than 75 gCO2/km, to a maximum of 37%, in both 2017/18 and 2018/19.

In 2017/18 there will be a four percentage point differential between the 0-50 and 51-75 gCO2/km bands and between the 51-75 and 76-94 gCO2/km bands. In 2018/19 this differential will reduce to three percentage points. The differential will reduce further to two percentage points in 2019/20 in line with the Budget 2013 announcement.

Fuel Benefit Charge (FBC)

From 6 April 2015, the FBC multiplier for both cars and vans will increase by RPI.

Van Benefit Charge (VBC)

From 6 April 2015, the main VBC rate will increase by the increase in the Retail Prices Index (RPI).

The government will extend VBC support for zero emission vans to 5 April 2020 on a tapered basis. In 2015/16 the VBC rate paid by zero emission vans will be 20% of the rate paid by conventionally fuelled vans, followed by 40% in 2016/17, 60% in 2017/18, 80% in 2018/19 and 90% in 2019/20, with the rates equalised in 2020/21.

The government will review VBC support for zero emission vans in light of market developments at Budget 2016.

Company Car Tax

As announced at Autumn Statement 2013, to protect tax revenues, and taking effect from 6 April 2014, the government will introduce legislation to:

  • Ensure individuals make payments for private use of a company car or van in the relevant tax year;
  • Ensure that where an employer leases a car to an employee, the benefit is taxed as a car benefit rather than as employment earnings.

Working parents to be given more choice over what childcare support to choose

On 18 March, the Government outlined the new childcare support scheme – Tax-Free Childcare – it’s offering working parents.

Tax-Free Childcare will be introduced far more quickly than previously announced so that all working parents with children under 12 will be covered within the first year from autumn 2015. This is significantly faster than initially proposed, where children under 12 would have gradually qualified for the scheme over a seven-year period.

Under the new Tax-Free Childcare scheme, the government will provide 20% support on childcare costs up to £10,000 per year for each child via a new simple online system. The limit had previously been set at £6,000. This now means support of up to £2,000 per child per year.

The idea behind the new scheme is that, for example, a working parent will open a simple online savings type account. For every 80p an individual pays in to their childcare account, the government will top up an extra 20p. This is the equivalent of the basic rate of tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year.

Where a working parent no longer needs childcare support, etc., they will be able to close their account and withdraw the unspent funds they contributed. In this case, the government will withdraw its corresponding contribution.

Tax-Free Childcare will be open to more than twice as many families as currently use Employer Supported Childcare (ESC) vouchers* and, unlike ESC, will not depend on employers offering it.

In addition to giving support to the self-employed, the scheme has been adjusted to ensure those working part-time, earning £50 per week and above, those on maternity, paternity or adoption leave, and those starting their own business, who may not meet the minimum earning requirement will be included, giving them government help with childcare costs for the first time.

All working families where the parents earn at least £50 per week will have access to government support with childcare costs, unless one of the parents earns over £150,000 or receives support from tax credits, Universal Credit, or ESC.

Parents currently receiving childcare vouchers through ESC can continue to benefit from the scheme with their current employer should they wish to do so, but it will be closed to new entrants from autumn 2015. Parents will not be able to receive ESC vouchers and take part in the new support scheme. They will have to choose which scheme best suits their needs.

*The ESC voucher scheme enables a basic rate taxpayer to receive up to £243 in qualifying childcare vouchers per qualifying tax week from their employer without incurring any income tax or NICs liabilities.

The tax exemption covering workplace nurseries will be unaffected by the above changes.

New Act lays basis for changes in work/life balance for many more employees

On 13 March, the new Children and Families Act 2014 was given royal assent. The Act lays the basis for changes in the law to help people better balance their work and home life.

The Children and Families Act 2014 introduces the following measures.

Shared parental leave

From April 2015, mothers, fathers, and adopters can opt to share parental leave around their child’s birth or placement (the time a child starts living with its adoptive parents). This gives families more choice over taking leave in the first year.

Under the new legislation, all employed women continue to be eligible for maternity leave and statutory maternity pay or allowance in the same way as previously. If they choose to bring their leave and pay or allowance to an early end, eligible working parents can share the balance of the remaining leave and pay as shared parental leave and pay up to a total of 50 weeks of leave and 37 weeks of pay.

Eligible adopters can use the new system for shared parental leave and pay. The new shared adoption leave measures will also apply to prospective parents in the ‘fostering for adoption’ system, and intended parents in a surrogacy arrangement who are eligible, and intend to apply for, a parental order.

Antenatal appointments

From 1 October 2014, the father or parent of the pregnant woman’s child (and intended parents in a surrogacy situation who meet specified conditions), or a mother’s partner (i.e. a pregnant woman’s husband, civil partner, or partner (including same sex partners)), can take time off to attend up to two antenatal appointments (there is no statutory right to be paid during working hours).

The Act also contains provision for paid and unpaid time off work for adopters to attend meetings in advance of a child being placed with them for adoption.

Adoption pay and leave

From April 2015, statutory adoption leave and pay will reflect entitlements available to birth parents. This means there will be no qualifying period for leave; enhanced pay to 90% of average weekly earnings will be paid for the first six weeks. Intended parents in surrogacy and ‘foster to adopt’ arrangements will also qualify for adoption leave and pay

Flexible working requests

From 30 June 2014, the right to request flexible working is extended from employees who are parents or carers to include all employees.

The Act also lays the basis for replacing the current statutory procedure through which employers consider flexible working requests (i.e. a statutory formula for making requests, meeting with the employee, rendering decisions, and dealing with appeals), with a duty on employers to consider requests in a ‘reasonable’ manner.

Increase in National Minimum Wage from 1 October 2014

On 12 March, the Government announced its approval of a rise in the National Minimum Wage to £6.50 per hour from 1 October 2014.

The Government press release states that more than 1 million people are set to see their pay rise by as much as £355 a year.

The National Minimum Wage rates from 1 October 2014, as recommended by the Low Pay Commission, will be:

  • a 19p (3%) increase in the adult rate (from £6.31 to £6.50 per hour)
  • a 10p (2%) increase in the rate for 18 to 20 year olds (from £5.03 to £5.13 per hour)
  • a 7p (2%) increase in the rate for 16 to 17 year olds (from £3.72 to £3.79 per hour)
  • a 5p (2%) increase in the rate for apprentices (from £2.68 to £2.73 per hour)

The increase in the adult rate from 1 October this year will increase the real value of the minimum wage for the first time in six years through the biggest percentage increase since 2008.

Reconciling payments due HMRC as per the Business Tax Dashboard

Anecdotal evidence records the frustration many Real Time Information employers and their agents have in trying to reconcile what HMRC says is due on the Business Tax Dashboard with what the employer considers is due.

HMRC have published updated guidance on some of the points an employer or agent should check when attempting a reconciliation of what the employer owes HMRC.

Business Tax Dashboard

RTI returns an employer has made, and payments they have made, are not updated on the HMRC’s Business Tax Dashboard in ‘real time’.

HMRC publish a Timeline showing when the receipt of Full Payment Submissions and Employer Payment Summaries are updated by HMRC to the Business Tax Dashboard:

  • Depending on the dates they are submitted; and
  • In relation to which tax month they are submitted for.

Where an employer submits ‘late’ returns, in the context of HMRC’s processing dates, this affects payments due for a particular tax month.

It is worth reproducing the Timeline by some means and keeping it to hand when trying to reconcile payments due HMRC.

Failure to submit FPS/EPS returns for particular tax month

Very small employers might not make any wage payments for a particular tax month. Where this occurs, the employer should send HMRC an EPS notifying no payments of employment income or earnings have been made.

Therefore, employers who this might affect are asked to check they have sent in all FPS and EPS submissions for the month. If they haven’t sent anything, HMRC may have created a specified charge, which is an estimate of what they believe is due based on the employer’s previous filing or payment history.

Timing of submission of FPS/EPS returns

As an FPS return should be submitted on or before payment is made, the last FPS for a tax month should be submitted on or before the 5th of the month. The same applies to those employers who might have paid employers earlier in the month but who by a relaxation of the rules are allowed to submit an FPS for the tax month by the 5th (e.g. by 5th May for tax month 6th April to 5th May).

However, an employer may need to notify HMRC of corrections to their year to date figures given on an FPS.

Therefore, HMRC advise that an employer should check the date they sent any amendments. Any supplementary FPS sent more than 14 days after the end of the tax month they relate to will be taken into account in the employer’s charge for the next tax month.

An employer may want to recover statutory payments they have made for a particular tax month, or to claim the Employment Allowance. To do this the employer needs to submit an EPS.

Therefore, again HMRC advise an employer to confirm any EPS was submitted in time to be used against the tax month they intended. The timing of the submission of an EPS, with the amounts they want to recover, determines which payment HMRC will adjust in that tax year.

For example, an EPS for tax month ending 5th May and received by HMRC after 19th May will only be taken by HMRC as affecting the employer’s PAYE remittance for the month ending 5th June.

Checking payments due HMRC

HMRC provide the following checklist to help employers and their agents reconcile what they owe HMRC:

“Check your payments to HMRC match the amounts reported in your FPS and EPS submissions:

  • Using tax weeks and tax months not calendar weeks or months;
  • Ensure you have correctly reported leavers and payments after an employee leaves or retires;
  • Confirm any negative amounts, refunds, advances, and student loans are shown correctly;
  • Check you have not included any deductions you’ve made from subcontractors in an FPS;
  • Ensure you have not included your employee’s previous employments on your FPS.

If you have an underpayment or specified charge for a month you’ve made an error on and can’t correct until a later month [i.e. before 20th of the tax month following], you will still need to pay the outstanding amount or the amount you deducted if this is more than the specified charge. You can adjust your payments in the next [tax] month to reconcile with your year to date position.”

And if after the above…

“If after all the checks [HMRC state] you still can’t reconcile the charge, contact:

  • The Employer Helpline on 0300 200 3200 if you have not had contact from someone in HMRC’s Debt Management; or
  • The Debt Management office that has contacted you by letter or phone about a discrepancy on your account.”

Overcoming duplicate employment records under RTI

One of the bugbears of Real Time Information has been the raising of duplicate employment records. This only serves to lead to errors about how much an employer should pay HMRC each tax month.

HMRC have published updated guidance on how employers can ensure that nothing they do at their end could give rise to HMRC raising duplicate employment records.

Duplicate employments are extra employment records created on HMRC’s systems that are a repeat of an existing live or ceased employment. They are automatically created when the payroll data submitted by an employer differs from the data that is held on HMRC’s IT systems from previous submissions. In these instances the automated processes cannot match the latest submitted data to an existing HMRC employment record so a new employment record is set up and the latest Full Payment Submission (FPS) information is posted there.

This duplication of records causes a difference between the HMRC charge calculation, as indicated on the Business Tax Dashboard, and the amount that you believe to be due. This can also lead to unnecessary debt collection activity. And it adversely affects an employee’s claim for Universal Credit.

So what are some of the suggestions HMRC give to help employers avoid actions that may lead to duplicate employment records being created?

When an employee starts

The first Full Payment Submission an employer sends HMRC covering a starter’s first payment of wages should include accurate and complete personal details – name, address, NINO (if there is one), date of birth, and current gender. If the employer submits changed information on a subsequent FPS this can give rise to a duplicate employment record being raised.

The employer is also only supposed to enter the starting date field on the first FPS they submit for a new starter. If this data field is included on subsequent FPS returns this too can lead to a duplicate employment record.

When or after employee leaves

The last FPS an employer sends HMRC covering a leaver’s last payday should include the leaving date field. Changes to this leaving date on subsequent FPS returns (due to corrections, or included in an FPS covering standard payments made after leaving) will give rise to duplicate employment records being raised. Accounting for payments after leaving and issue of form P45 is a complex matter.

Payroll ID changes

Where an employer reports Payroll IDs on FPS returns, HMRC uses these IDs as a unique identifier per employment record. Therefore, if a new Payroll ID is reported on an FPS without completing the change indicator field and giving the old Payroll ID, HMRC will create a new employment record.

Some employees will have multiple employments with the same employer. If Payroll IDs are reported, HMRC needs a separate ID for each individual employment, not the same ID covering more than one employment. A different Payroll ID should also be used for each time an employee is employed, rather than the same ID regardless of how many times during the year an employee is employed.

It is worth reading all the latest guidance on this subject, as there are other hints and tips given by HMRC to help cut down on duplicate employment records.

Pregnancy discrimination after maternity leave has ended

It is quite possible that a woman returning to work from maternity leave may still be experiencing incapacity as a result of her pregnancy. However, would it be direct sex discrimination and/or pregnancy and maternity discrimination to move to dismiss her because of her continued absence? This was the question in the EAT case of Lyons v DWP Jobcentre Plus [2014] UKEAT 0348/13.

In this case, Ms Lyons was at the time only entitled to 26 weeks’ maternity leave and was expected to return to work after that leave and after she took a period of accrued annual leave. She did not return to work due to moderately severe post-natal depression and was still off work around five months later when she was dismissed. Ms Lyons claimed that her dismissal amounted to direct sex discrimination or pregnancy/maternity discrimination contrary to sections 13 or 18 of the Equality Act 2010.

Section 18 of the Equality Act 2010 protects a woman from discrimination by reason of her pregnancy or an illness arising from that pregnancy. However, this protection only applies to the period from when the pregnancy begins to the end of the earlier of her maternity leave or when she returns to work. In this case, until the end of Ms Lyons’ 26 weeks’ maternity leave and her taking her accrued annual leave. She was not afforded any special protection, under section 18, for an illness (although pregnancy related) that stopped her returning to work when expected to do so.

But had she been discriminated against by reason of her sex? Section 13 gives protection from discrimination by reason of sex (i.e. protection from less favourable treatment) and that would include the special protection afforded a woman during pregnancy and childbirth.

In the case of Brown v Rentokil, Ms Brown developed pregnancy-related disorders in the early stages of her pregnancy and did not thereafter return to work. She was dismissed six weeks before her child was born pursuant to a clause in the standard form contract, providing for dismissal after 26 weeks’ continuous sickness absence. This was held by the ECJ (as then was, now the European Union Court of Justice) to be unlawful, notwithstanding the fact that the contractual clause was applicable to both men and women. The EU Equal Treatment Directive was held to preclude the dismissal of a woman at any time during her pregnancy, for absences due to pregnancy-related illness rendering her incapable of work.

However, the Court of Justice also opined that where pathological conditions caused by pregnancy or childbirth arise after the end of maternity leave, they are covered by the general rules applicable in the event of illness. In such circumstances, the sole question is whether a female worker’s absences, following maternity leave, caused by her incapacity for work brought on by such disorders, are treated in the same way as a male worker’s absences, of the same duration, caused by incapacity for work; if they are, there is no discrimination on grounds of sex.

In the Lyons v DWP case, there was no discrimination under section 13 of the Equality Act 2010.

This EAT judgement means that the special protection afforded a woman during pregnancy and after having recently given birth no longer applies once her maternity leave has ended and/or she has returned to work. She should be treated no differently from a man under the same circumstances.

Car leasing arrangements and whether still a ‘company car’

Do arm’s length leasing arrangements between the employee and its employees take the provision of leased cars out being treated as ‘company cars’? This was the question in the Upper Tax Tribunal case of HM Revenue And Customs v Apollo Fuels Ltd & Ors [2014] UKUT 95.

In this case, the employer made an arrangement whereby it leased cars to the workforce for an arm’s length hire rental. Under the arrangements, employees were told that they would be paid for business mileage at the same rate as other employees who used their own cars for business purposes.

Sums due to the employees as mileage allowance payments were set off against the rentals they owed to the employer under the car leases. If an employee gave notice to leave they either had to (a) complete a standing order mandate for future rentals if they wished to continue hiring the vehicle, or (b) return the vehicle and make good any money owing against their termination pay.

The lease also provided that an employee could cancel the agreement at any time, subject to seven days’ notice or mutual agreement. The lease did not restrict in any way the use that could be made of the car by an employee.

HMRC accepted that the rental paid by the employees under the individual leases was an arm’s length commercial rental as would be paid for the particular car if the employee had hired it from a third party car hire company.

However, as far as HMRC were concerned the provision of cars by means of the leasing arrangement was still a taxable benefit under Chapter 6 (Taxable Benefits: Cars, Vans, and Related Benefits) of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Therefore, there was also an amount of income tax and NICs due on the mileage payments.

The Upper Tax Tribunal judgement runs to many pages and involves a careful examination of an amount of case law. Therefore, the summary in this case is given below, along with certain comments.

“The car leases do not create proprietary rights and there is no transfer of any property in the car to the employees. The arrangements are not therefore excluded from section 114 by the wording in parentheses in subsection (1)(a).”

Section 114 of ITEPA charges to income tax a car that is “(a)…made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household… and (c) is available for the employee’s or member’s private use”.

There was an amount of argument in this case as to whether the car leasing arrangement did transfer some kind of proprietary interest to the employee. If so, this would have removed the provision of the car from under Section 114. The Tribunal Judge thought there was no proprietary transfer in the lease arrangement. However, he then went on to state:

“If I am wrong on that and the lease does transfer a proprietary interest in the car to the employee, then the scope of that interest is sufficient in this case to mean that the condition in parentheses in section 114(1)(a) [“without any transfer of the property”] is not satisfied and the car will not fall within section 114.”

Interestingly, the Tribunal Judge seemed to consider that even if the car leases didn’t involve any proprietary transfer to employees, Section 114 of ITEPA still didn’t apply for the following reasons.

“Further, the cars leased to the employees do not fall within section 114 because an amount constitutes earnings from the employment in respect of the benefit of the car because the car is under these leases ‘money’s worth’ for the purposes of section 62 and hence falls to be taxed under section 62 [Earnings], even if that amount is in fact nil. The application of section 114 is therefore excluded by section 114(3).”

Section 114(3) excludes from being taxed under Section 114(1) any car, van, or related benefit, where “an amount constitutes earnings from the employment… by virtue of any other provision [in the Judge’s view in this case, Section 62 of ITEPA].”

“Further, [according to the Judge] the cars leased to the employees do not fall within section 114 because fair bargains are excluded from the regime for taxing benefits conferred on employees because there is no benefit which is properly subject to tax. Since HMRC accept that the leases between the employer and the employees were at arm’s length, there is no benefit here which is subject to tax under Chapter 6.”

BUT, and here the Judge qualifies his judgement…

“If I am wrong and section 114 does apply to these leasing arrangements, then these cars are ‘company cars’… and so the mileage allowance payments made to the employees do not benefit from the exemption in section 229 [mileage allowance payments paid to those using their own vehicles for work-related journeys] and do fall to be taxed.”

It seems that the judgement in Apollo’s favour will be short-lived. In Budget 2014, it was stated that the government intends to (by legislation to be brought forward in the Finance Bill 2014): “Ensure that where an employer leases a car to an employee, the benefit is taxed as a car benefit rather than as employment earnings.”

Could PAYE be used to help fund the Government’s raising of Apprenticeship standards?

In March, the Government published The Future of Apprentices in England – Funding Reform Technical Consultation. The closing date for responses is Thursday, 1 May 2014.

For the last year, the Government has been consulting on ways to improve the standard of Apprenticeships, and how the Government could assist employers financially towards the costs of ensuring apprentices reach a certain standard by the end of their Apprenticeship.

The consultation just published examines how Apprenticeship standards need to be improved and, importantly, how the Government intends to support this financially (i.e. the costs of training and assessment of Apprentices). This could affect payroll because one of the two Government Apprenticeship funding models being put forward will involve the PAYE system.

Employers already make PAYE payments to HMRC for PAYE income tax, National Insurance, Student Loan Deductions, and can adjust their total PAYE remittance due for the recovery of statutory payments. The idea is that once an employer has paid the training provider, they would be able to deduct the government’s Apprenticeship funding contribution from their next PAYE payment to HMRC. This is similar to the system that already exists for statutory payments such as the recovery of Statutory Maternity and Paternity Pay.

There are a number of problems with using the PAYE system to recovery Apprenticeship funding:

  • There will need to be alternative advance funding arrangements for employers who do not have a sufficiently large enough PAYE liability to offset the government Apprenticeship funding contribution (e.g. this would be similar to the current situation where an employer needs to apply for advance funding of, for example, SMP, because they have insufficient PAYE liabilities due).
  • Directing funding through the PAYE system may present additional challenges for employers running multiple payroll schemes.
  • Over half of employers outsource at least some of their PAYE tasks. Therefore, for example, how will the outsourcer know how much Apprenticeship funding should be offset against an employer’s PAYE remittance? Some payroll agencies may charge for any new Apprenticeship function, as it would not be part of the normal payroll.
  • In any event, under the PAYE model, all employers would have to update their payroll software. And there is a cost for developers in this, which will have to be passed on in some way!

Is it likely that Apprenticeship funding could affect your organisation? If so, if you don’t respond to the consultation you could find yourself having to implement yet further new payroll functionality that you’d rather have avoided if possible.

A couple of side issues too… If the Government doesn’t come up with a really cost effective means of supporting Apprenticeship funding, might employers be put off taking on Apprentices to meet the new standards?

Also, the consultation only talks about the future of Apprentices in England. What about Wales, Scotland, and Northern Ireland? The last thing employers need is to end of with different funding requirements depending on where Apprentices live and work!

Sending HMRC an FPS or EPS for 2014/15 before 2013/14 has ended

Do you want to submit your first RTI return for 2014/15 to HMRC before 6th April 2014? If so, this is for you!

From 5th March 2014, HMRC have announced that employers who want to run their payroll in advance of 6th April 2014 for payments made to employees on or after 6th April can send their 2014/15 Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) from 5th March. This is only providing that the employer’s payroll software has been updated with the 2014/15 specification FPS/EPS returns.

Employers who want to send in 2014/15 RTI returns early, as above, will also need to ensure they still have the capability to submit a “final” FPS/EPS return for 2013/14 covering payments made to employees on or before 5th April 2014. They’ll probably need to do this before they are in a position to start submitting returns for 2014/15. Do check the limitations of your payroll software or service.

Employers who use HMRC’s Basic PAYE Tools will be able to make their 2014/15 submissions from 3rd April 2014, provided that they have downloaded the 2014/15 version of the Tools on their computer. The 2014/15 version of the Tools will be available from 3rd April 2014.