www.croweclarkwhitehill.co.uk Employers Digest Winter 2015 Inside this issue Reporting PAYE on or before Employee travel: revised and updated HRMC Booklet 490 End of contracted out NIC and table letters Scottish income tax Dear customer: HMRC phishing Employment intermediaries reporting deadline HMRC bank accounts are changing Short term business visitors: some good news Payrolling of benefits: careful consideration required Jingle bells: tax exemption and sta parties Welcome to Employers Digest, our newsletter providing updates and comments on relevant sector issues. The end of P11D reporting dispensations is getting close The removal of the P11D reporting dispensations on 6 April 2016 means your scale rate/round sum allowances must be agreed and included in your dispensation. It also brings a change to scale rate payments agreed between the employer and HMRC. P11D reporting dispensations may include bespoke scale rate/round sum allowances payable to employees for travel and subsistence. These agreed rates are reasonable estimates of actual expenses incurred which need to be supported by testing samples. Where an employer s dispensation includes such subsistence rates agreed within the five years preceding 6 April 2016, they will be able to make a simplified application to HMRC for the agreed rates to continue to apply until the fifth anniversary of their agreement. Alternatively, if the agreement is more than five years old, employers will need to undertake a more detailed review of the rates in force. Employers will need to evidence that the proposed rates are a reasonable estimate of the expenses incurred. This will involve a sampling exercise of actual expenses (see EIM05210).
Crowe Clark Whitehill HMRC has said that they will publish detailed guidance on these changes on GOV.UK which will be available around the end of November 2015. However, this may leave some employers with little time to initiate a sampling exercise in time for 6 April 2016. It would be sensible for employers to act now and decide how they will manage the sampling exercise. Not least to take steps to ensure that they hold adequate records. Agreed benchmark rates HMRC has a set of agreed benchmark rates that were set in 2009. These rates will still be available under the new system and will be set by regulation. The current rates are: breakfast rate up to 5.00 one meal (five hour) rate up to 5.00 two meal (ten hour) rate up to 10.00 late evening meal rate up to 15.00. Benchmark scale rates can only be used where all of the qualifying conditions are met which are that: the travel must be in the performance of an employee s duties or to a temporary place of work the employee should be absent from his normal place of work or home for a continuous period in excess of five hours or ten hours the employee should have incurred a cost on a meal (food and drink) after starting the journey. Benchmark scale rates do not apply to employees covered by working rule agreements, for which separate specific rates are already set for particular occupations. HMRC also currently permits employers to use the Foreign and Commonwealth Oice (FCO) rates for employees who travel abroad. The usual sampling methods are not always of use as most employers do not have suiciently large internationally mobile employees on which to base their estimates of actual expenses. Consequently, they also permit employers to use the FCO rates where the employees are required to travel overseas, so long as the travel is: in the performance of their duties (see EIM32350 onwards) or to a temporary workplace (see EIM32000 onwards). Where employers pay less than the published rates, employees are not entitled to a tax deduction for the dierence. The future requirement will also be that employers must have an agreed checking process in place to test the veracity of the expenses (see EIM30059). Dispensation for staying with friends and family Some older dispensations also include allowances for staying overnight with friends or family, typically a sum of around 25 per night which was payable in lieu of hotel accommodation and subsistence. HMRC ceased to approve this category of expense back in April 2009, and wrote to many employers withdrawing the category if it was still in a dispensation. However, we are aware that there are some employers still paying the friend and family allowance. From 6 April 2016, when the dispensations are all eectively withdrawn, this allowance may no longer be paid tax-free. Employers are of course free to pay this allowance under deduction of tax and NIC which may still be more cost eective than paying for a hotel. If employees can substantiate the expense with receipts for, say, food purchased for themselves, from 6 April 2016 that will be an exempt business expense and permissible.
Employers Digest Winter 2015 Reporting PAYE on or before Every time you pay your employees, you should inform HMRC on or before the date you are paying them. However, there are a number of misconceptions when it comes to reporting PAYE and HMRC has recently issued guidance about some of the most common. Micro employees All employers with nine or fewer employees (micro employers) can always report on a monthly basis even if the employees are paid less frequently. But for the 2015/16 tax year, the easement is not open to all micro employers. To qualify, employers must have been operating a PAYE scheme at 5 April 2014 and had nine or fewer employees at 6 April 2015. The easement ends on 6 April 2016. Weekly submissions RTI software will not allow weekly submissions to HMRC so you will need to upgrade your software if it does not permit you to report weekly and you pay weekly. HMRC do not accept software deficiencies as an excuse. Reporting and payment deadlines The date for reporting PAYE and the date when you must pay the tax/nics and other deductions you make from earnings are two dierent obligations with two dierent deadlines. Reporting PAYE to HMRC is on or before the date you pay your employees, not the date you pay HMRC. This payment date depends on the amount of the deductions and the method of payment used. Delaying reporting PAYE means you can delay paying HMRC Late PAYE reporting does not result in a later payment date and delaying either could result in late filing penalties and late payment penalties. Employee travel: revised and updated HRMC Booklet 490 HMRC has published an updated Booklet 490 which can be found at www.gov.uk. This guide describes the tax and NICs treatment of employee business travel. It explains what counts as business travel and the kinds of expenses that qualify for tax relief. The updated guidance takes into account modern day working practices and includes examples of how to apply the rules. End of contracted out NIC and table letters On the 6 April 2016, contracted-out NIC ends and all employees currently paying the lower contracted-out NIC rates will be subject to normal contracted-in NIC rates. Employers should ensure that their end of year payroll routine includes an analysis of the NIC table letters in place so that contracted-out ones are replaced with contracted-in table letters. It is a sensible housekeeping routine to do this every year as some table letters may need to be changed for example, when an employee is past state pension age. In addition, employers may also wish to ensure that their employees are aware of this major change as it will have an impact on the employee s take home pay, as well as the increased cost to the employer. Employers should ensure that their end of year payroll routine includes an analysis of the NIC table letters in place so that contracted-out ones are replaced with contracted-in table letters.
Crowe Clark Whitehill Scottish income tax There is only six months to go until the Scottish rate of income tax (SRIT) is in force on 6 April 2016, and we are likely to have to hear in the New Year if Scotland proposes to alter the rate of tax. HMRC will identify those individuals who will be Scottish taxpayers and their tax codes will be prefixed with the letter S. Employers should not use a tax code prefixed with the letter S unless advised to do so by HMRC, even if there has been a change in the employee s circumstances. The employee must clarify this with HMRC directly. PAYE Settlement Agreements in place for the 2016/17 tax year will require employers to maintain suicient records to distinguish benefits provided to Scottish taxpayers from other taxpayers. The PSA calculation will need to calculate tax on each taxpayer category separately. Therefore, employers should act now to ensure that they have suicient information gathering processes in place to meet the requirements. Dear customer: HMRC phishing HMRC warns taxpayers to be aware of emails and other communications which may appear to originate from HMRC but are in fact scams. In addition, links and attachments may contain links to malware and viruses. The intention is mostly to trick people into disclosing personal information and HMRC points out that bogus websites often contain links to genuine websites. There is some helpful information on HMRC s guidance on recognising genuine HMRC contact and recognising phishing emails on the website www.gov.uk. HMRC warns that fraudsters often send large volumes of email at once and although they may have a taxpayer s email address, they very often do not have the taxpayer s name, so beware of emails with greetings such as Dear Customer. Be aware that fraudsters can fake email addresses to look legitimate. For example @HMRC.gov.uk is a fake email address. HMRC does contact people of course, and not all texts and emails are fake, but be suspicious, remain vigilant and if in any doubt at all, stop and check. HMRC will not penalise you for verifying a communication, we hope.
Employers Digest Winter 2015 Employment intermediaries reporting deadline The next intermediaries report was due to be submitted to HMRC by 5 November 2015. Intermediaries who place workers with clients (the end user of the workers services) who don t operate PAYE on the workers payments must make a return. This includes overseas workers, who have to pay tax in the UK, and payments where the worker is working in the UK or working temporarily abroad. Who needs to make a report? Reports must be sent to HMRC where the intermediary: is an agency (anyone providing temporary workers) has a contract with a client provides more than one worker s services to a client because of the contract with that client provides the worker s services in the UK - or if the services are provided overseas, that the person is resident in the UK makes one or more payments for services (including payments to third parties). The report should not include details of workers who: do not have to pay tax in the UK are the intermediaries own employees. Who does not need to make a report? Intermediaries who merely introduce workers to clients or supply workers to other intermediaries, and are not involved in any arrangements that follow, are not required to make reports. No report is required where the intermediary: supplies workers services at sea in the oil and gas industry wholly on the UK continental shelf does not provide more than one worker s services to a client or make one or more payments for services for an entire year has told HMRC it is no longer an employment intermediary. HMRC bank accounts are changing HMRC is changing bank accounts in February 2016. Taxpayers who are paying their bills electronically need do nothing, according to HMRC. Taxpayers who pay using Bank Giro or Transcash payslips should consider alternative electronic methods of payments. From February 2016, customers making payments from overseas will need to use a new IBAN number when making payments through their bank. Details will be published on the gov.uk website prior to February 2016. Take care that any changes to payment details are checked and that the source of the information is verified. Don t end up sending your PAYE payment to a fraudster s bank account. From February 2016, customers making payments from overseas will need to use a new IBAN number when making payments through their bank.
Crowe Clark Whitehill Short term business visitors: some good news HMRC has announced a relaxation in some of the PAYE obligations associated with short term business visitors (STBV) who come from overseas to work in the UK from time to time, and where the normal operation of PAYE is considered impracticable. Who can benefit? Where PAYE is due in respect of employees who come to work in the UK for 30 days or less in any tax year, HMRC will allow the UK host organisation to operate PAYE via one single annual return at year end. Prior to this change in October 2015, UK organisations were required to set up any such STBV on a UK payroll and account for PAYE in accordance with the Real Time Information (RTI) requirements. This led to great diiculties for many UK employers, given that STBV are often physically paid from a non-uk payroll and the fact that it is not often possible to quickly determine how many days a STBV has spent working in the UK in any particular month. This change will mainly aect UK organisations who host STBV from countries with which the UK does not have a double tax treaty such as Dubai, Bermuda, Oman and Monaco. The reason for this is that any days worked in the UK by employees from these countries are subject to UK tax and PAYE unless they are incidental (i.e. subordinate and ancillary) to their overseas employment. This applies even though the employee may remain nonresident in the UK. The change will not aect the requirement for UK organisations to obtain a short term business visitors agreement from HMRC where you have overseas STBV working in the UK from countries, with which the UK has a double tax agreement, and who you want to exempt from PAYE. What are the reporting requirements? Following HMRC s announcement in October 2015, employers can apply to report annually for eligible employees whereby a return will be due by 19 April following the end of the relevant tax year. Any PAYE payments will be required by 22 April following the tax year end. There will be late filing penalties and interest on any underpaid tax where the relevant deadlines are not met. Employers need to request to report annually. The STBV arrangement is a contractual agreement between the employer and HMRC and so approval must be sought from HMRC. Will a P11D be required where benefits are provided? No. If benefits are provided to the STBV then, having obtained agreement from HMRC, the cash equivalent can simply be included in the end of year report and calculations. Do the new arrangements cover National Insurance? No. In most cases, there will not normally be a UK NIC requirement where employees remain employed by a non-uk organisation and work in the UK for short periods of time. However, if NIC is due, then normal RTI procedures will apply. Are directors covered by the new agreement? No. Non-resident directors of UK companies or employees who spend over 30 days working in the UK during a tax year, will not be eligible to be included in the agreement. Payrolling of benefits: careful consideration required Soon, employers will need to think about whether they will be taking advantage of the new payrolling of benefits system which will be in place from 6 April 2016. Payrolling is a mechanism which collects the tax on benefits provided in real time via payroll. The deadline for registration is 5 April 2016. No registrations for the 2016/17 will be permitted after this date. Where employers choose to adopt payrolling, they will need to register with HMRC to let them know which benefits in kind will be payrolled. This also applies to any employers who are currently payrolling under the current informal system otherwise they will not be able to continue. All benefits except for the following will be permitted: living accommodation beneficial loans credit vouchers and tokens. Section M on the P11D reports other items. For payrolling, this must be treated as all or nothing, either report all other items or none. There will be no change to the P11D(b) process and the Class 1A NIC will still have to be reported on all benefits whether payrolled or not. Employers need to think about what data will be required to complete the P11D(b). Employers should also think about what employee communications will be required if they adopt the new system. Employees may be confused by the changes and certainly will be paying tax earlier. Most importantly though, employers should check that their software providers are up to speed and any updates will be available when required to actually process the benefits via payroll. It may be better to wait until the new system has had a year of operation before committing to operate this. There are a number of teething issues to be worked through, not least the trial legislation, and we believe that there is the potential for the first year to be challenging.
Employers Digest Winter 2015 Jingle bells: tax exemption and sta parties There is not long to go until the festive season is upon us again, and we return therefore to our annual reminders about sta entertaining. As you mull over the arrangements for the oice Christmas or other seasonal social events, make sure you are clear about the total cost of the partying. Sta entertaining is generally taxable unless it meets the terms of the annual event exemption. It is defined as any event where only sta are present but excludes situations where the sta are away from their usual workplace on business, for example, two sta having dinner would be subsistence instead. In all cases, employers should ensure that suicient narrative is provided on claims to evidence the nature of the entertaining, otherwise HMRC is likely to assume that it is taxable. Conditions of exemption For an event to be exempt it must meet these three conditions: the employer holds the same event every year all sta, or all sta at a particular location, are invited to attend the event, although it is acceptable to split it into departments so long as they all can go to the same kind of event only those events (because you can have as many as you like) which total 150 or less per head per tax year will qualify. Employers should keep records to evidence that the terms of the exemption were met. The 150 limit is inclusive of VAT. Even if your organisation can recover the VAT, you must include this in the total costs and when calculating this, you must include all expenses relating to the party including taxis home after the event. Examples An employer holds two annual events; the Christmas Party and the Summer Barbeque. The Christmas Party costs 100 per head and the Summer Barbeque costs 60 per head. Only those events which total 150 per head per tax year or less will qualify in this case the total is 160. So, only the Christmas Party will qualify for the exemption. None of the costs of the Summer Barbeque will qualify because the 150 limit has been breached. An employer holds two events: one party for the admin team who get a budget of 10 per head to spend down at the local wine bar and one party for the senior management team, who all work in the same location as the admin team, with a budget of 50 per head at a nice local restaurant. HMRC denies you exemption for either event because the events are not comparable due to the dierence in budget and nature of the event. The significant budget dierence implies a dierent event to HMRC. There will of course be situations where employers wish to pay for sta entertaining even if it is taxable. So what do you do to report it? There are two options: the employer can either report the benefit on the employees P11Ds or the employer can apply to HMRC for a PAYE Settlement Agreement (PSA) and settle the tax on the sta entertaining benefit on behalf of the employees. The PSA route is the one most commonly adopted. Employers must have the agreement in place prior to 6 July following the end of the tax year so for this December s partying, you will need to get the agreement in place by 6 July 2016.
Crowe Clark Whitehill Employer s Digest Winter 2015 Contact us London Susan Ball susan.ball@crowecw.co.uk +44 (0)20 7842 7100 Cheltenham Karen Goodwin karen.goodwin@crowecw.co.uk +44 (0)1242 234421 Kent Simon Warne simon.warne@crowecw.co.uk +44 (0)1622 767676 Midlands Paul Edwards paul.edwards@crowecw.co.uk +44 (0)121 543 1900 Manchester Rebecca Durrant rebecca.durrant@crowecw.co.uk +44 (0)161 214 7500 Thames Valley Stuart Weekes stuart.weekes@crowecw.co.uk +44 (0)118 959 7222 Follow us on: @crowecw Find out more about us at www.croweclarkwhitehill.co.uk Crowe Clark Whitehill LLP is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity. Crowe Clark Whitehill LLP and its ailiates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member. 2015 Crowe Clark Whitehill LLP 0584 This material is for informational purposes only and should not be construed as financial or legal advice. Please seek guidance specific to your organisation from qualified advisors in your jurisdiction. Crowe Clark Whitehill LLP is registered to carry on audit work in the UK by the Institute of Chartered Accountants in England and Wales and is authorised and regulated by the Financial Conduct Authority.