In response to the coronavirus outbreak, new Regulations known as The Statutory Sick Pay (General) (Coronavirus Amendment) Regulations 2000 came into force on 13 March 2020. These will remain in force for a period of 8 months. The government will bring forward legislation to allow small and medium-sized businesses (SMEs) and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19.
Employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020.
Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.
Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force.
The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP.
Please contact our payroll team for guidance on the above.
For more information on Covid-19 please make sure to check out our Covid-19 hub for coronavirus guidance and planning below:
Chief
Secretary to the Treasury, Steve Barclay, announced on 17 March 2020 that
the IR35 tax reforms will be deferred due to Coronavirus. The statement
came less than a week after the controversial measures were confirmed in the
Budget.
Mr
Barclay confirmed that the changes, which will clamp down on tax avoidance by
targeting contractors for companies who are, in practice, providing the same
service as employees, would not go ahead in April as previously expected.
Instead, the measures will come into effect on 6 April 2021.
This will be very good news for potentially affected businesses who have enough to focus on due to the impact of Coronavirus. However, it may be a blow to a lot of businesses who had been working very hard to prepare for the changes and have made adjustments to contracts, processes, procedures, policies and infrastructure to be ready for the previously confirmed start date just days away on 6 April 2020.
We are still here to assist those businesses who still want to
be proactive in their readiness for the (delayed) implementation of IR35 in the
private sector, but we imagine for most it will be a sigh of relief and some
welcome breathing space to look at this radical reform later this year after
the country has recovered.
We
recommend that, as far as possible, businesses continue to plan for the
introduction as these rules are still coming however the government is rightly
recognising that business has enough to deal with in the current environment.
What now?
HMRC continue to view the introduction of IR35 as key to addressing a perceived mismatch between the tax paid by contractors compared to employees. They have not changed their view that the changes in their
current form will impact roughly 170,000 individuals working through their own
company, who would be employed if engaged directly, as well as up to 60,000
organisations that use workers employed by a personal service company (PSC),
and raise up to £1.3bn or more in extra tax and NIC, though this is likely to
be pushed out to 2021/22 – 2024/25.
There is more time to prepare for these changes to off-payroll
working rules, which now come in from April 2021, and will mean checking
whether contractors need to have income tax and national insurance
contributions deductions taken, shifting the responsibility for conducting such
checks from the contractor to the organisation using their services.
In addition, the jury is still out on the review of the Check
Employment Status Tool (CEST) which has been given a vote of ‘no confidence’ by
the profession. Nevertheless, it will be still an important tool for those
involved with IR35.
Organisations can’t take a blanket approach to deciding whether
a worker should be treated as an employee for tax purposes, as they need to
provide reasons for each determination.
Next steps for IR35 compliance
1. Check if you are caught under the definition of ‘Small’ or
not.
A ‘Small’ business is defined by reference to the Companies Act
as having two out of three of:
a. A turnover of less than £10.2m b. A balance sheet of less than £5.1m c. Less than 50 employees
The new legislation says that for an unincorporated body they
just need to have turnover that mirrors the requirement in the Companies Act,
currently less than £10.2m
2. Follow the process below
Full
details regarding the planned reforms are set out on our fact
sheet.
Contact us
If you have any questions regarding the IR35 reforms, please do not hesitate to get in touch.
For more information on Covid-19 please make sure to check out our Covid-19 Hub for coronavirus guidance and planning below:
On the 1st April 2020 the new rates of National
Minimum Wage and National Living wage (for over 25-year olds) will come into
effect.
Year
25 and over
21 to 24
18 to 20
Under 18
Apprentice
April 2019 (current rate)
£8.21
£7.70
£6.15
£4.35
£3.90
April 2020
£8.72
£8.20
£6.45
£4.55
£4.15
The higher rate starts to apply from the next ‘pay reference
period’ after the increase. This means someone’s pay might not go up straight
away. The ‘pay reference period’ is the period of time the pay covers. For
example:
if paid daily, the pay reference period is 1 day
if paid weekly, the pay reference period is 1
week
if paid monthly, the pay reference period is 1
month
The pay reference period cannot be longer than a month.
Apprentices
Apprentices are entitled to the apprentice rate if they’re
either aged under 19, or aged 19 or over and in the first year of their
apprenticeship.
Apprentices are entitled to the minimum wage for their age
if they are aged 19 or over and have completed the first year of their
apprenticeship.
It is a criminal offence to not pay an employee the
correct National Living wage or National Minimum wage. If an employer is found
to be in breach, then they will need to pay any arrears due to an employee
immediately. They will also be fined.
It is the employer’s responsibility to ensure that records are kept for 3 years that prove they are paying the correct National Minimum Wage and National Living Wage rates.
For any questions regarding the above, please do not hesitate to get in touch with Payroll Compliance Services Director, Tracey Simpson.
Congratulations to Tracey Simpson, Payroll Services Director
and the 20-strong payroll team at MHA Moore and Smalley on being shortlisted in
the IRIS Customer Awards 2020.
The team has been shortlisted for the ‘Best Payroll
Initiative of the Year’ due to the huge success of their environmentally
focussed project.
The aim of the initiative was simple – to go
paperless. Not such an easy task for a department which produces 18,000
payslips every month!
Tracey Simpson, who heads up the team said: “We set
ourselves the challenge to go green without compromising customer service
excellence. The first step was to encourage our 850 clients to move over
to our secure e-payslip and document exchange facility. We had such a
great reaction from our clients and our statistics make remarkable reading.
“In the first quarter of 2019 the team were printing over
46,000 pages, the equivalent of 5.5 trees and in the last quarter of the year
this dropped to under 1000 pages.
“I’m so proud of our team, we couldn’t have achieved this
without the full commitment of every single team member. We now have an
ongoing healthy competition to see who can print the least each month!”
The winners of the award will be announced at a black tie ceremony on 11th February 2020 at the International Convention Centre in Birmingham.
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 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).
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
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.
