Supporting Older People Conference

Transcription

1 Supporting Older People Conference OS6: Payroll taxes are you paying too much PAYE and S:\Dept\Conferences\ \Finance National 2011\Marketing\Handbook Insurance (NI)? Speaker: Chair: Caroline Laffey Senior Manager, Employment Tax and People Services KPMG John Butler Policy Officer National Housing Federation

2 OS6 Payroll taxes Are you paying too much PAYE and NIC? Caroline Laffey KPMG ADVISORY

3 Have you overpaid tax and NIC? Payroll processes HMRC overpayments suspense account Overpaymentsto leavers PAYE SettlementAgreement Workinglunches Business/StaffEntertaining Employee Accommodation Job description Rental Value or GrossRatable Value? Cost or Market Value? Utility bills Travel Allowances Mileage allowances TotalPeople case TerminationPayments No NIC on compensation forloss of officeover 30,000 PILONsare not always subject to tax and NIC 2

4 Increasing tax and National Insurance efficiencies Those benefits which generate major savings through salary sacrifice/flex are shown below:- Benefit Employee perspective Employer perspective TAX NI NI Pension (via salary sacrifice) P P P Childcare Vouchers P P P Holiday (Buy) P P P Bicycles P P P Green Cars P P P Private Medical Insurance O P O Health Screening (Self) P P P Dental Insurance O P O Healthcare Cash Plan (Self) O P O Life Assurance (Self) P P P Critical Illness Insurance O P O Gym O P O Retail Vouchers O O O 3

5 GASS How do the savings arise The employer s position The employee s position CostofemployerprovidedFordKa3DoorHatch1.2Studio. This isthe gross annual salary sacrifice made 3,034 by the employee in return for being provided with Employer car funding costs to cover acompany car. al cost ( s) Annu 3,000 2,500 2,000 1,500 1, Admin fee E'er NIC Motor ins. Maint. Rental This is the employee salary sacrifice required to cover the employer s cost of providing the companycar. This is the annual employer NI (1) saving as a result of the employee sacrificing salary in returnforthe car. (1) Assuming employer s NI calculatedat 13.8%. 3, , This is annual saving in tax and NI paid by the employee as aresult of electing to receive thegass car This is the reduction in income tax (@20%) resulting from the salary sacrifice. (2) Taxable list price 8,300 and company car tax charge of 10% This is the reduction in employee s NI (@12%) resulting from the salary sacrifice. This is the company car tax (2) the employee will have to pay as a result of receiving the GASS car. This is the total annual net cost paid by the employee. This is thetotal monthly net cost paid bythe employee. 4

6 Introduction of Flexible Benefits - Broader benefit options The range of benefits that can be used to generate tax, NI and VAT savings to the employer and employees is broad and evolving. Health Management Private Medical Insurance Health Screening (self and partner) Dental Insurance Optical Care Healthcare Cash Plan Massage or SPA Finder Training Bicycles Childcare Car parking near work Best Doctors Accommodation Cancer Care Protection Life Assurance (self and partner) Critical Illness Cover (self and partner) Permanent Health Insurance Pension Bonus salary sacrifice Personal Accident Insurance Travel Insurance Pension (NICwise) Professional Subscriptions Cars Tax & NIC savings Subsistence for DLO employees (STEER) Uniforms/ cleaning Lifestyle Holiday Buy/Sell Gym Membership Charitable Giving Financial/Pensions advice Cars Wine Account Concierge Service Bicycles Tax return services Roadside assistance Value generation Childcare Vouchers Retail Vouchers Season Ticket Loans Voluntary discounted benefits Lottery Flex Professional Subscriptions Learning Account 5

7 Salary Sacrifice The Detail Risk Groups The salary profile of employees will be examined to enable us to understand whether there are any at risk groups i.e. employees who will not benefit from the arrangement. Typically these would be the lower paid employees who earn close to national minimum wage or lower earnings limit ( 102 for 2010/11 tax year). Employees will need to be confident that the company has been diligent in its analysis and that they will not be worse offas aresult of the salary sacrifice Review termsand conditions It is important to identify areas of potential impact on the operation of salary sacrifice and take appropriate steps to mitigate that impact e.g.on overtime, futurepay increases etc Impacton state benefitsand statutorypayments Full consideration and clear communication around the impact on state benefits and entitlement to statutory payments is vital to respondto any concerns raised by employees Impact on systems Changes will be required to payroll, pension scheme rules and booklets and contracts of employment. It is important that changes are properly managed and thoroughly tested and that those employees responsible for operating the scheme are left with clear guidance foradministering it once it has been implemented Employee Communications The success of ascheme is measured by employee take-up. Maximising take up maximises savings and it is vital that the employee communication programme is clear and comprehensive so that employees have a thorough understanding of the benefits from participating in the scheme HMRC Clearance WhilstHMRC clearance is not required,we recommendthat all schemes are submittedto HMRC forformalapproval 6

8 What is Flex? Changing the rewardmodel Flexible benefits framework makes the link between cash and benefits and overall reward is made in apositive way in addition to providing greater choice for employeesaround how they receive their cash and benefitsmix Disparate benefits Total reward model Flex fund management Medical Life Assurance Choice Life Assurance Pension Medical Pension Salary Salary ` Core Identification and valuation of reward elements Communication of total reward Flexible delivery of total reward 7

9 Overall value for flexible benefits and Total Reward Statements A win-win initiative In KPMG s experience, implementation of a flexible benefits scheme can have clear potential benefits to employees and employers alike, if they are designed with business objectives in mind and delivered compliantly and successfully. The key potential benefits to you and your employees are shown below: Area Benefit to the Company Benefit to employees Flexibility To become an employer of choice Greater choice and variety for staff Communication Reinforcement of the employee proposition within the Company Improved Understanding of benefits package Single reward portal for easier and quicker access to reward Strategy Creation of single reward framework linking into your values Greater transparency and information around reward Cost Saving Direct cost savings through reductions in National Insurance Indirect savings through improved retention and recruitment Administration Streamlined administration through the use of innovative technology with links into the HR/payroll system Direct cost savings from tax and National Insurance savings Immediate self service access to benefits, choices and information via an online reward portal 8

10 Hidden Liabilities Payroll processes IncorrectNIC letters Pensions processed incorrectly Incorrectsalary sacrificearrangements PAYE SettlementAgreement Subsistence StaffEntertaining Travel TerminationPayments Incorrecttax and NIC treatment ConstructionIndustryScheme Are you requiredto operate the scheme? Subcontractor sgrosspayment statuswithdrawn Scope of constructionoperations Processesand controls Company Vans Private use of van Record keeping requirements Employment Status Board Members Subcontractors Contractors 9

11 Contact details KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International). All rights reserved.

12 Supporting Older People Conference OS6: Payroll taxes are you paying too much PAYE and S:\Dept\Conferences\ \Finance National 2011\Marketing\Handbook Insurance (NI)? Speaker: Chair: Caroline Laffey Senior Manager, Employment Tax and People Services KPMG John Butler Policy Officer National Housing Federation