Introduction
There is a lot currently happening in the world of employment tax. Below are six current hot topics/risks/opportunities along with some practical points on dealing with them.
P11Ds
There has been a substantial change from 6 April 2016 with dispensations being abolished and replaced with exemptions for most expenses and benefits in kind previously covered by dispensations (apart from some round sum subsistence allowances which may require HMRC approval). HMRC's Employer Bulletin at the link below has more detail on pages 9 & 10.
Review old dispensations to determine whether the items they covered are now within an exemption or whether further action is required.
Voluntary payrolling of benefits
HMRC introduced voluntary payrolling of benefits from 6 April 2016. The link below to our article in Pay and Benefits magazine explains the new arrangements and points to consider.
www.payandbenefitsmagazine.co.uk/article/payrolling-benefits-rolling-one
An employer must register before the start of the tax year to payroll benefits for that tax year. Consider whether payrolling could be worthwhile for your business.
Employment status
The use of self-employed workers by businesses is a hot topic for HMRC. If a sole trader is reclassified by HMRC as an employee the employer will be liable for his employment tax, NI, interest and a potential penalty of up to 100%.
Review the status of any workers not paid through the payroll to ensure that your businesses' tax and NI obligations are correctly dealt with.
PAYE Settlement Agreement (PSA) – proposed trivial benefit exemption
A new trivial benefit exemption was introduced from 6 April 2016. The new exemption could reduce employers' PSA liabilities for 2016/17 onwards. The LinkedIn article referenced below has more detail and a link to HMRC's draft guidance.
PSAs can be costly; consider having an external cold review to ensure your calculations do not overstate liabilities and effective use is made of the new exemption.
Salary sacrifice
Significant savings may be available from using salary sacrifice, but HMRC are considering restricting the range of benefits that can qualify. If HMRC inspect your business they are likely to examine relevant records. HMRC's detailed guidance on salary sacrifice and our 2016 Budget commentary on HMRC's latest views (point 5.1) are at the following links.
www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye
www.smith.williamson.co.uk/uploads/publications/budget-2016.pdf
Consider whether your business is taking full advantage of salary sacrifice arrangements and if you are, whether they are in line with HMRC's guidance.
Termination packages
The tax and NI treatment of termination packages is complex. HMRC look closely at Payment In Lieu Of Notice (PILON), both contractual and non-contractual, as well as damages.
Changes are proposed from 2018 (see our 2016 Budget commentary at point 5.2). Review the tax and NI treatment of your businesses termination packages. Overcautious treatment of payments (in particular PILON) in the past could potentially result in refunds of employer's NI (going back up to six years).
Please note We have taken care to ensure the accuracy of this publication, which is based on material in the public domain at the time of issue. However, the publication is written in general terms for information purposes only and in no way constitutes specific advice. You are strongly recommended to seek specific advice before taking any action in relation to the matters referred to in this publication. No responsibility can be taken for any errors contained in the publication or for any loss arising from action taken or refrained from on the basis of this publication or its contents.
