Reporting PAYE information over the Christmas Period

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Following on from HMRC’s guidance in December 2018 regarding a temporary easement to submitting an FPS (Full Payment Summary) in real time, the decision has been made to make this change permanent.

As we all know some companies pay their employees earlier during the Christmas period due to a variety of different reasons, such as an office shutdown or staff holidays. Under RTI rules this would mean that an FPS would need to be submitted on the date that employees get paid.

However, during December 2018 HMRC advised employers to submit their FPS showing their normal contractual pay date, regardless of when employees were actually being paid, as it was recognised that the early reporting date was having a knock-on effect to a person’s eligibility for universal credit.

For example;

A company has a contractual pay date of the 29th December. For this current year this date falls on a Sunday. Employees will therefore receive their pay on Friday 27th December. The FPS needs to show the contractual pay date of the 29th December and be submitted on or before this date.

So, going forward, in any case where the employee may be being paid earlier than their usual pay date it is important to remember that the payment date on the FPS submission must state the normal contractual payment date, even if this date falls on a weekend or a bank holiday. The FPS must also be submitted on or before the normal contractual payment date.

If you have any questions or require any more information on this subject, please contact Emma Mahoney or our Payroll Solutions team.

National Payroll Week 2019

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National Payroll Week 2019 took place from 2nd – 6th September, established to raise awareness of payroll services and achievements nationally. The introduction of PAYE in the UK marks its 75th anniversary this year so the service has a long history.

Our payroll team of 20 celebrated together with their colleagues, putting something back by fundraising for two selected charities.

Firstly Sands stillbirth & neonatal death charity, who work to reduce the number of babies dying and to improve care and support for anyone affected by the death of a baby.

Secondly Derian House Children’s Hospice, they help children and young people, whose lives are too short, to make happy memories in an environment of fun, with respect and above all, high quality care.

Whilst tucking into delicious buffet treats with colleagues, quizzes and games were enjoyed along with a comedy outfit team competition to add to the fun.

Thank you to our colleagues who celebrated National Payroll Week with us. We very much appreciate the kind donations from MHA Moore and Smalley staff, friends and family which came to the fantastic total of £403.79 plus approximately £20 in foreign currency and as an addition £45 raised using social media (Facebook fundraiser).

Employment Allowance changes from April 2020

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From April 2020 the employment allowance will only be available to businesses and charities with a National Insurance secondary class 1 liability below £100,000, in the previous tax year. This change will be made to support smaller businesses. The amount that can be claimed will remain at £3000.

Another significant change to the regulations means that the employment allowance will be regarded as part of the ‘de minimis State Aid’.

  • EU State Aid rules have been designed to prevent any advantage granted by public authorities through state resources, to any company that could potentially distort competition and trade within the EU.
  • De Minimis state aid rules exempt the government from this approval process if a scheme only gives a small amount of aid. For most employers who receive ‘De Minimis State Aid’ there is a limit of 200,000 euros over a three year rolling period.
  • In practice, if the full amount of the employment allowance is claimed and it exceeds the de minimis threshold then the employer will not be entitled to the allowance.

As a result of these changes it will be necessary for employers to supply information to HMRC to ensure they are compliant with these new regulations. They will need to declare which sector they operate in and, of course, the amount of de minims state aid they have received and when.

HMRC also propose that employers will need to declare the following information through the Employment Payment Summary (EPS):

  • That they have checked their national insurance secondary Class 1 liability for the previous year.
  • That they have checked with connected companies to ensure they are eligible to claim the employment allowance
  • That to their knowledge they will not exceed the relevant de minimis amount for state aid by claiming the full amount of employment allowance, that they are the only connected company to claim the allowance and that they are not aware of any reason why they may be excluded from claiming.

If you have any questions or require any more information on this subject, please contact Emma Mahoney or our Payroll Solutions team

HMRC Vs Cheshire Centre for Independent Living (CIL)

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VAT Exemption on Provision of Payroll Service – does this fall under the exemption in the VAT Act 1994

In a recent first tier tribunal case Cheshire CIL was in dispute with HMRC over the VAT treatment of charges made to disabled people for the running of a payroll service.  The judge found in favour of Cheshire CIL and decided the service was “closely linked to welfare” and as such fell under the welfare services exemption in Schedule 9 Group 7 Item 9 VATA 1994.

Background

Many disabled people may need a carer and they are encouraged to engage directly with their carer, so they become an employer.  Cheshire CIL and other charities get involved in a number of ways and one of which is to offer to manage the payroll on behalf of the disabled person for their carer.  In most case this means running a payroll service for just one employee so charities such as Cheshire CIL will do this on behalf of numerous disabled people as well as managing their direct payments.  In these cases, as a consequence of the disability of the customer, extra guidance and help is needed. So this is not a standard payroll service.  It is the charges made for this payroll service that are at issue in this case.  HMRC said the supplies were standard rated, whereas the charity says they are exempt as a supply closely linked to welfare. 

The first-tier tribunal decided in favour of Cheshire CIL.

Basis for decision

The charity’s argument was that in this case you should not seek only to assess the objective content of a service, divorced from the capacities of its recipient, but should consider what the service means to that recipient.  It is the nature of the need that determines if it is welfare.  They argued the exemption applies solely to charities making supplies to people in certain special classes which denote some form of social security aspect.  The tribunal accepted this.

The tribunal accepted the view that, without the payroll service, the disabled user would not have the capacity to engage the carer.  If charged VAT for the service, the user’s benefits payment would be reduced by the VAT charge leaving them less to use to pay for the carer’s time, thus reducing the level of welfare.  It also accepted that the service was only relevant as a result of the need for care services and was “closely linked” with welfare activity.  It merely better enabled enjoyment of the supply of welfare by the carer, which (HMRC agreed) was, in itself, an exempt welfare service.  The intention behind the welfare exemption was served by exempting this service, as it was part and parcel of the care provision.

The tribunal agreed that the service was ‘ancillary’ to the welfare supply in the manner discussed above, to give a basis for the exemption.

Going forward

The judgement was handed down on 3rd June 2019 and leave of appeal was granted to HMRC who have 56 days to appeal against the decision.

Further Advice

If you would like to discuss this article in more detail or you would like to speak with a member of our team, please on 01772 821021 to be put in contact with a member of our Specialist VAT Advisers team.

Student loans and postgraduate loans 2019/20 threshold and rates

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As we are approaching month 3 of the 2019/20 tax year a small reminder of the thresholds and rates for student loans and the recently introduced postgraduate loans may be of some benefit.

Student Loan Threshold and rates

Student Loan Plan 1 threshold is £18,935

Student Loan Plan 2 threshold is £25,725

Both plan 1 and plan 2 repayments are calculated at 9% of the income above the threshold. If an employee earns £1750 a month and is on Plan 1 then the repayment amount will be £15.00 as the amount is always rounded down to the nearest pound.

Postgraduate Loan Threshold and rates

Postgraduate Loan threshold is £21,000

Postgraduate Loan repayments are calculated at 6% of the income above the threshold. If an employee earns £2000 a month then this is £250 over the monthly threshold, therefore, the repayment amount will be £15.

An employee may have to repay a Student Loan Plan 1 or Plan 2 at the same time as a Postgraduate Loan. If this is the case, then they will pay 15% of the amount they earn over the thresholds.

HMRC will send either a paper notice or an electronic notice to inform employers that they need to begin to take deductions. The amounts taken from the employee will be submitted to HMRC via the Full Payment Submission every pay period.

The payments need to be made to HMRC by the 19th of the following month if paying by cheque, or the 22nd of the following month if paying electronically, along with any tax and national insurance liabilities that may be due. For example, the April pay run deductions need to be paid over to HMRC by the19th or the 22nd of May.

If you have any questions regarding the threshold and rates for the 2019/2020 tax year then please contact Emma Mahoney, or alternatively phone 01772 840414 to speak to our payroll team.

Tracey Simpson

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Professional: Tracey has worked in the payroll profession for almost 20 years, starting in industry and running a small company payroll alongside other administrative tasks. Tracey changed course and having enjoyed the world of payroll, moved into Practice in 1999. Tracey joined Moore and Smalley in July 2013, in the position of Deputy Payroll Manager and became Payroll Compliance Services Manager in April 2015 and then became Payroll Compliance Services Director in 2018. During Tracey’s career there have been many changes and payroll has now become a truly recognised profession. Tracey gained her Foundation in Payroll Administration in April 2002 and studied further to gain her Diploma in Payroll Management in October 2003 with the Chartered Institute of Payroll Professionals, and has been a member of the organisation ever since. Tracey is responsible for a team of 19 Payroll Professionals over 2 locations, who share her passion in providing an excellent service to our clients.

Personal: Tracey has recently taken up SUP (Stand up Paddle Boarding), spending time on a lake or sea. Tracey enjoys sunny and relaxing holidays abroad, particularly the Greek Islands, enjoying the cuisine and the laid back lifestyle. Tracey has also recently taken up running but says she has no intention of entering a Marathon!