Employer Bulletin August 2017 Issue 67 - Gov.uk

Employer Bulletin

Your route to the latest in payroll news

August 2017 Issue 67

Welcome Hello and welcome to August’s edition of the Employer Bulletin This edition contains information about the importance of reporting your PAYE information correctly and on time and gives you some suggestions as to how to do this. You’ll find the latest information about Optional Remuneration Arrangements on page 3. It’s been decided to continue with the risk-based approach to late filing PAYE penalties for the tax year beginning 6 April 2017 and you’ll find further information about this on page 4.

And make sure you don’t miss any future updates by signing up to receive one of our new email alerts. You can also follow us on twitter @HMRCBusiness And finally our aim is to be able to deliver clear, consistent and timely information which is appropriate for employers and helps you to meet your payroll obligations to HMRC. So, if you have any comments or suggestions about any of the content of the Employer Bulletin or would like to see a specific topic covered, please drop me a line at [email protected] Your feedback is always most welcome.

We’ve also introduced a new email alert system for the Employer Bulletin with no restrictions on the number of individuals from one company who can receive the alert. So if you want us to let you know each time a new edition of the Employer Bulletin is published have a look at the article on page 8. We will continue to use the Employer Bulletin to tell you about new products and changes which may affect you and to give you access to further information if you need it.

Content 2 3 4 4 5 5 6

Reporting Pay As You Earn in real time Optional Remuneration Arrangements Tax codes – Get it right first time PAYE penalties – continuation of the risk-based approach to charging penalties PAYE Settlement Agreements Expenses Exemption Apprenticeship Levy

Alison Bainbridge Editor

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Paying HMRC Construction Industry Scheme Changes to Business Tax Account Contacting HMRC Keep up to date with changes Automatic enrolment and ongoing duties – what employers need to know

9 GCSE exam results are coming out this month, what is changing?

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Employer Bulletin August Issue 67

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Reporting Pay As You Earn in real time Accurately reporting Pay As You Earn (PAYE) in real time is really important, it helps to ensure that your employees pay the right amount of tax, and is vital to the success of Universal Credit (UC). UC is designed to increase the financial benefits of work and provide you with a more flexible workforce. Late or inaccurate reporting can negatively impact on your employees as UC payments are linked to the payroll information you report. It is very important to report payroll in real time accurately and on time, as changes in earnings will affect the amount of UC your employees receive. The payment date you report on your FPS should be the earlier of the date an employee is paid or the date they were entitled to that payment, not the payroll run date, or another date from your payroll system. Note: When you receive an electronic message from us saying that we have successfully received your submission, it does not necessarily mean that it was correct and on time – it is just an acknowledgement of receipt.

Late Reporting Reason Codes If you think you have a reasonable excuse for filing late you should use a late reporting reason code, use the code for every payment on the FPS where the circumstances apply.

Don’t ignore Generic Notification Service (GNS) electronic warning messages These messages are intended to be a helpful service to notify you that you haven’t filed on time. We will send you a message:

We may not charge penalties in all instances where employers don’t file on time. However the electronic messages give you a chance to review your submission process to ensure that things are correct in the future. You can check your messages in the same way you do if you receive electronic coding notifications, either by: • logging into PAYE Online and selecting the generic notifications from within the “Notice summary” section • using the PAYE Desktop Viewer • using your commercial software – you should check with your software supplier that their product is compatible with accessing GNS messages • accessing your Business Tax Account and using the ‘messages’ link. We strongly recommend that you check for any electronic notice messages we may have sent you – as they contain helpful and important information.

Do you use PAYE Online, and have you changed your email address? If you change your email address, don’t forget to update PAYE Online to ensure you continue to receive emails alerts when we have issued Tax Codes, Generic Notifications etc. Make sure your software is up to date and before you make any electronic submission – check that you are using the latest available version of the software. HMRC has produced a useful recorded webinar to help you understand your filing obligations.

• once in a month when we receive a Full Payment Submission (FPS) later than the payment date without a valid reason or • on the 11th or 12th of the month where we haven’t received an FPS for the month that just ended on the 5th or an Employment Payment summary (EPS) stating no employees were paid in that month.

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Optional Remuneration Arrangements

OpRA and Voluntary Payrolling:

Optional Remuneration Arrangements (OpRAs) are where benefits are provided through arrangements in which the employee gives up the right to an amount of earnings in return for a benefit which include flexible benefit packages with a cash option, cash allowances and salary sacrifice.

If you have registered to voluntary payroll before 6 April 2017 for:

New rules have been introduced from 6 April 2017 which mean the income tax and employer National Insurance Contributions (NICs) advantages (and employee NICs advantages where a charge exists), are largely withdrawn. This means that any arrangements entered into since 6 April 2017, or arrangements which have been varied or renewed, are now under the new Benefit in Kind (BiK) rules of Finance Act 2017.

• for that type of BiK.

The new rules do not however, affect arrangements in respect of pensions, childcare vouchers, workplace nurseries, directly contracted childcare, Cycle to Work, or cars with emissions of 75g CO2/km or less. A full list of BiKs not affected can be found in the Employment Income Manual. Where the provision of a BiK is under the new OpRA rules, the taxable value is now the higher of the cash foregone or the taxable value under the normal BiK rules. This applies to all BiKs, including those that were previously exempt, such as workplace parking. You need to use the new rules immediately; • for any new employees, or • where an arrangement between the employee and the employer is varied in the terms of the BiK, or • where the arrangement is renewed (this is different for school fees). All arrangements covered by OpRA will move into the new rules on 6 April 2018 apart from those in respect of cars above 75g CO2/km, school fees and accommodation which will come in to force from 6 April 2021. Technical guidance can be found in the Employment Income Manual (EIM).

The voluntary payrolling of BIKs is governed by legislation in the PAYE Regulations 2003. These were not amended at the same time as the Finance Act 2017, however, will be amended later in the year.

• a Benefit • where the new rules OpRA rules apply, and

you will not need to complete a P11D for the 2017 to 2018 tax year, as long as you deduct the tax due on the revised taxable value of the BiK for the full year and return the information through your RTI submission. This concession has been introduced to mirror the regulations so you won’t be faced with two sets of changes and is only available for the tax year beginning 6 April 2017. For example: During the tax year beginning 6 April 2017, the employee gives up the right to a car allowance in the sum of £4,000 in return for a company car with emissions above 75g CO2/km. The employee chooses to upgrade the car to a higher model for an additional £2,000 which the employer allows via a salary sacrifice (OpRA) arrangement. The taxable benefit is the higher of the modified cash equivalent of the car benefit or the amount foregone. In this case, the higher is the cash foregone (£4,000 + £2,000) though the employer only payrolls £4,000 from the start of the tax year. On or before the final payment of wages for the tax year ending 5 April 2018, the employer may include the £2,000 as an additional taxable amount through Real Time Information. The employer must ensure the employee knows what proportion of the cash equivalent amount has been taxed so that there are no surprises for the employee. Please note: Employers still need to work out the Class 1A NICs on the taxable value of the BiK and complete form P11D(b). PAYE Regulations will be amended to ensure that they stipulate that the cash equivalent (or modified cash equivalent) should be used. Our current plans are that we will publish draft regulations for stakeholder consultation as soon as possible after the summer, and these will be formally brought into effect in time for start of the 2018 to 2019 tax year. Further guidance for employers will be available shortly. 3


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Tax codes – Get it right first time Taking on a new employee Did you know that a starter declaration should be completed by every new employee? Both the starter declaration and tax codes need to be worked out in time for the first Full Payment Submission (FPS) for new employees. One of the most common reasons for incorrect tax codes is due to the starter declaration not being completed for the first FPS. Using an incorrect starter declaration code or tax code will result in HMRC issuing an incorrect tax code. This then has to be corrected through your payroll so it is important to get it right first time. We have an online tool which will help you submit the right starter code. You’ll need to get starter information from your employee so you can set them up with the right starter declaration code and tax code on your payroll software. Usually this information is on their P45 so it’s important you remember to ask your new employee to bring this with them on their first day. If your employee doesn’t have a P45 or doesn’t bring it with them, you can get the information you need by asking your new employees to complete a new starter checklist. This will provide you with all the information you need to get your new employees onto the right starter declaration code and tax code and avoid payroll adjustments later on. Experienced employers find it effective to get their new employees to complete this checklist on day 1 as part of their induction processes. They then send starter declaration details to their payroll teams.

Tax code changes for existing employees Your employees’ tax codes can change if there’s a change in their circumstances which makes their tax-free income (Personal Allowance) go up or down. We will send you an email alert if one of your employees’ tax codes changes so it is important that you check your alerts regularly.

PAYE penalties – continuation of the risk-based approach to charging penalties HMRC has again reviewed the effectiveness of the risk-based approach to late filing PAYE penalties and have decided to continue this approach for the tax year beginning 6 April 2017. This means that late filing penalties will continue to be reviewed on a risk-assessed basis rather than be issued automatically. The first penalties for the tax year beginning 6 April 2017 will be issued in September 2017. The approach will also include continuing to not charge penalties if Full Payment Submissions (FPSs) are filed late but within 3 days of the payment date and there is no pattern of persistent late-filing. This is not an extension to the statutory filing date which remains unchanged. Employers are still required to file their submissions on or before each payment date unless the circumstances set out in the ‘sending an FPS after payday guidance’ are met. Employers who persistently file after the statutory filing date but within three days, will be monitored and may be contacted or considered for a penalty. Late payment penalties will also continue to be raised on a risk-assessed basis rather than automatically again, focussing on penalising those who persistently pay late and are of greatest risk. HMRC will continue to review their approach to PAYE penalties beyond 5 April 2018 in line with the wider review of penalties and will continue to focus on penalising those who deliberately and persistently fail to meet statutory deadlines, rather than those who make occasional and genuine errors for which other responses might be more appropriate.

You can find details of new tax codes in PAYE Online (in ‘tax code notices’), the PAYE Desktop Viewer application, or in your payroll software (if it has this feature). Check if your employee’s previous pay and tax are included with the new tax code. If they are, note these figures. As soon as possible, and before you next pay your employee, update their payroll record with their new tax code. Add their previous pay and tax, if you received these figures with the new tax code. 4


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PAYE Settlement Agreements

Simplifying PSAs

Do you have employees who live in Scotland?

HMRC plans to:-

If you have any employees who live in Scotland for most of the year, they need to make sure HMRC have their correct address details on record so they pay the correct amount of Income Tax. Please ask them to ensure their address details are up to date by accessing either their Personal Tax Account or online at GOV.UK: updating your address details. For PAYE Settlement Agreements in relation to the tax year beginning 6 April 2017, you must ensure you take into account the threshold change for Scottish Income Tax when completing your return. Scottish Income Tax bands and rates for the tax year starting 6 April 2017 can be found here.

Paying your PAYE Settlement Agreement PAYE Settlement Agreements (PSA’s) are easements which allow employers to make one single payment, on behalf of their employees, to cover all the tax and National Insurance contributions due on certain small or irregular taxable expenses or benefits providing they meet the relevant criteria. Any electronic payments for a PSA for the tax year ended 5 April 2017 must clear into the HMRC bank account by 22 October which is a Sunday. See also the Paying HMRC section on page 7. If you pay by cheque in the post, payment must reach the Accounts Office by 19 October. If you pay late you may have to pay interest and/or a late payment penalty. To pay your PSA you will need to use the PSA reference number from the payslip we sent to you, for example, XA123456789012. If you do not have your PSA reference number please contact the office dealing with your application for advice.

If you currently submit PSAs, or plan to do so in the future, we would like to tell you about some changes to the PSA process which will take place from 6 April 2018.

• Provide an online digital service for PSA submissions and payment • Remove the need for an annual upfront PSA agreement • Improve and clarify PSA guidance. The new PSA digital process will be developed in response to the PSA consultation exercise that took place in 2016, and we will keep you updated with progress in future editions of the Employer Bulletin.

Expenses Exemption From 6 April 2016, a general expenses exemption was introduced for amounts which would otherwise be deductible. Employers no longer need to apply to HMRC for a dispensation provided that the employee would be able to claim a fully matching tax deduction and neither employers nor employees need to report reimbursed expenses where they meet conditions under the general expenses exemption. As this means that all existing dispensations ceased to be effective after 5 April 2016 you should now be operating a system for checking that employees are incurring and paying expenses and at the point of reimbursement, be satisfied that the expenses are not taxable. Once you are satisfied that the exemption applies in full, the expenses and benefits in kind should not be reported on form P11D or payrolled. For further information please see EIM 30200 onwards: Exemption for amounts which would otherwise be deductible.

Don’t use your PAYE Accounts Office reference to make your PSA payment, because payments received with your PAYE Accounts Office reference are allocated to your normal PAYE account and you will continue to receive reminders for the PSA even though you have paid.

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Apprenticeship Levy June’s Employer Bulletin included information on paying the Apprenticeship Levy from 6 April 2017. Please share this information with your HR/Apprenticeship Manager.

Apprenticeship funding: your investment During August, thousands of people will be considering their next steps as they receive their exam results. This makes August an ideal time for employers to consider how they might maximise the apprenticeship funding available to them, either through the Apprenticeship Levy or government co-investment, to benefit their business and their sector.

The data they submit must match the information you have approved for each apprentice in your Apprenticeship Service account. As a non-levy paying employer, guidance is available on the steps you need to take to recruit an apprentice.

Help and support Call the National Contact Centre helpline on 08000 150 600 or email [email protected] for help with: • Technical queries about the Apprenticeship Service • General levy information and queries

Apprenticeships are now more rigorous, better structured, independently assessed and aligned to the needs of your business. With trailblazing employers designing higher quality apprenticeship standards, you can have greater confidence than ever that apprentices are trained in the relevant skills employers need, bringing value to your organisation.

• Accessing the service

If you are ready to recruit then Find an apprenticeship on GOV.UK is a free recruitment solution used by thousands of employers. The vacancies are also channelled through to other popular recruitment sites such as Indeed Jobs, allowing you to reach even more candidates.

Log onto GOV.UK and search for Apprenticeship Levy for help with the following queries:

Using your funding If you are a levy-paying employer, you should have registered on the Apprenticeship Service and started to report and pay your Apprenticeship Levy to HMRC each month. You can search for apprenticeship training using find apprenticeship training. Once you have registered on the Apprenticeship Service: 1. Sign your agreement to allow you to spend funds on apprenticeships 2. Add one or more organisations 3. Add PAYE schemes 4. Decide the other team members you’re going to add to your account 5. Add apprentices to your account, otherwise your provider will not get paid 6. Declare your Apprenticeship Levy by the 19th of each month to secure your levy funds for that month. If no apprentices are added to your account, your chosen provider will not be paid.

– Accessing your Apprenticeship Levy funds – Advice about the provider payment process.

• General levy collection • Calculating the levy • Connected company questions • Calculating the English percentage.

Reporting the levy Levy Payers

If you are a levy payer (i.e employers with an annual pay bill of over £3 million and groups of connected companies and charities who have annual pay bills over this amount) your levy liability must be reported to HMRC through your usual monthly PAYE process using your Employer Payment Summary (EPS) by 19th of each month. The importance of reporting the amount of levy you have paid to HMRC is required to prevent the need for follow up compliance action by HMRC, but is also critical if you want to see your levy funds and the 10% government top-up in your Apprenticeship Service account, to pay for apprenticeship training in England.Making levy payment alone will not update your Apprenticeship Service account. HMRC will contact employers who they expect to be Levy payers but where it appears the Apprenticeship Levy has not yet been reported and paid. 6


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Connected Companies and Charities If you are a group of connected companies or charities you have one annual levy allowance of £15,000 to share across the members of the group. This means a group of connected companies or charities, where all the pay bills in the group total in excess of £3 million, have to pay levy. If you have incorrectly applied the £15,000 levy allowance to each company/charity in the group, you should correct this in your next EPS submission and report and pay the re-assessed levy liability. Further guidance about the Apprenticeship Levy is available on GOV.UK

Business Tax Account (BTA) • At present, the Apprenticeship Levy charge will be shown within an employer’s HMRC BTA on the summary page where the Levy charge will be included in the amount that employers owe. Under this figure it will show ‘includes Apprenticeship Levy bill of £…’ • An employer’s levy charge is not currently available to view within the existing Liabilities and Payments viewer.

Paying HMRC In October the electronic payment deadline of the 22nd falls on a Sunday. To make sure your payment for that month reaches us on time, you need to have cleared funds in HMRC’s account by the 20th unless you are able to arrange a Faster Payment to clear on the payment deadline. Remember that it’s your responsibility to make sure your payments are made on time and if your payment is late you may be charged interest and/or a late payment penalty. So that you know what date to initiate your payment and make sure we receive it on time, you may need to speak to your bank/building society well in advance of making your payment to check single transaction, daily value limits and cut off times. Find out more about paying us electronically.

Construction Industry Scheme Limited company subcontractor’s repayment iForm If you are a limited company subcontractor and haven’t been able to off-set your company’s Constructions Industry Scheme (CIS) deductions against other PAYE liabilities during the year, you may need to claim a repayment after the end of the tax year. We have recently introduced a new Repayment iForm, which will make the CIS repayment claim process much more efficient. Rather than writing in to claim a repayment, a limited company subcontractor can log into the Government Gateway and submit their claim using the Repayment iForm, which will be the most direct route to the right team in HMRC. Any claims for repayment to be issued to an agent or nominee still need to be submitted in writing with a form R38. Please also allow 40 working days for a reply to your claim. Find out more information about CIS repayment claims for limited company subcontractors, on GOV.UK

CIS Online service-issues and action to take If you experience any issues using CIS online services, whether verifying subcontractors for CIS online, or filing returns, please see our service availability and issues page, which will help you to solve your issue. If your issue is not listed, please contact the Online Services helpdesk. You should not contact the CIS helpline, as CIS helpline advisors cannot help with online issues.

Amending CIS returns using commercial software The CIS Helpline have received a few calls from contractors using commercial software, about being unable to amend their CIS returns online. Please ensure that you have updated your software to a version that allows your returns to be amended online. Any issues with your commercial software should be discussed with your provider.

Webinars on the Construction Industry Scheme For further support and advice about working as a contractor or subcontractor, including repayment claims, you can watch recorded webinars online at Webinars and emails on the Construction Industry Scheme. You can also sign up for future webinars and emails about CIS, and receive answers to your questions about CIS during the live broadcasts. 7


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Changes to Business Tax Account

Keep up to date with changes

A number of changes to Business Tax Account will be taking place during August, September and October, which will improve the accuracy and design of employer Pay As You Earn liabilities and payments information.

Would you like us to tell you each time a new edition of the Employer Bulletin is available? If so why not sign up to our new email alert facility and we will send you an email containing a link to the Employer Bulletin each time a new edition is published on GOV.UK

In August we will be testing the enhanced version with a selected group of Business Tax Account customers. These customers will see their outstanding charges and credits itemised on the Homepage. They will also see a new annual statement page showing charges, credits and payments for the current tax year. In September a new monthly statement will be available. In October the annual statement and monthly breakdown will be further improved. This will be a staged roll out, to a small number of customers who will see the changes around the middle of August. Access will ramp up during the month and it is anticipated that all customers will have access in September. If you are not included in the first tranche you will still be able to access the existing version of Business Tax Account.

Sign up is quick and easy – just enter and confirm your email address, you can even set a password, then on the subscriber preference page click on ‘Add subscription’ and then click on ‘Employer Bulletin’. You can also click on any of the other topics you would like to receive updates about, there is no limit to the number of alerts you can receive. Unlike the old email alert system you don’t need a PAYE reference number to register and there is no restriction on the number of individuals from one company who can register to receive the alert. If you have already signed up to receive an alert you don’t need to do anything further, we’ll continue to send you a copy. But you might want to sign up to receive alerts for other topics or let others in your company know that they can now also receive an e-alert each time the Employer Bulletin is published.

Contacting HMRC We’ve recently noticed an increase in the number of individuals who are using the wrong address when contacting HMRC about queries they have with their own PAYE and National Insurance contributions. This can cause significant delays in response times as queries get allocated to the wrong work queues. If any of your employees approach you asking for contact details for HMRC can you please direct them to HM Revenue & Customs contacts at www.gov.uk/government/ organisations/hm-revenue-customs/contact where they should be able to find the appropriate helpline number or address.

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Automatic enrolment and ongoing duties – what employers need to know Every employer has automatic enrolment duties. They need to assess their staff, put them into a workplace pension scheme if they meet certain criteria, write to them to tell them what they’ve done, and complete and submit a declaration of compliance with The Pensions Regulator (TPR). To date, more than 8 million people have been automatically enrolled in a workplace pension by more than 600,000 employers. And with hundreds of thousands more employers due to reach their duties start date by February 2018, the number of people automatically enrolled will continue to rise. However, an employer’s workplace pension duties do not stop with declaring compliance. And with TPR conducting stop checks on employers across the country to make sure they are complying with their duties, it’s important you are aware what you need to do on a regular and ongoing basis to ensure you comply with the law.

What are my ongoing duties? You will need to pay regular contributions into the pension, monitor the age and earnings of your staff and enrol eligible staff, process any requests to join or leave the scheme, and keep and maintain accurate records. You’ll also need to re-enrol eligible staff into an automatic enrolment pension scheme every three years. Recent research published by TPR shows the majority of employers did not have any difficulty with ongoing duties. The analysis shows that automatic enrolment is ‘business as usual’ for employers, and that it’s easier than they thought it would be. Most micro employers said they spend around half an hour each month meeting their duties and two thirds did not use outside help. Those who did said it cost them around £42 per month to use an accountant or auditor to help them. Further information on ongoing duties can be found on The Pensions Regulator’s website.

Useful links:

GCSE exam results are coming out this month, what is changing? From 24 August 2017, GCSE results in England will start to look a little different. For the first time this summer English and maths will be graded 9 to 1 rather than A* to G, with 9 the highest grade, so students who have sat exams this summer will have a mixture of numbers and letters on their certificates and CVs. The new GCSEs have been introduced to ensure that students leave school better prepared for work or further study. They cover more challenging content and are designed to match standards in the strongest performing education systems elsewhere in the world. Changing from letters to numbers means that employers can see easily whether an applicant has taken an old (unreformed) or a new (reformed) GCSE. As the new GCSE qualifications start to be awarded with number grades rather than letters, you may want to review your advertising campaigns and update any relevant recruitment materials, training and practices in preparation. The new GCSE grade 4 is broadly equivalent to a low/medium grade C, the standard for a level 2 qualification. If grade C is your current requirement for applicants, then a grade 4 is a reasonable expectation to ask for under the new system, unless you have made a deliberate decision to raise the entry bar. The Department for Education recognises grade 4 and above as a ‘standard pass’; this is the minimum level that students in England need to reach in English and maths, otherwise they will need to continue to study these subjects as part of their post-16 education. A grade 5 and above indicates a ‘strong pass’ and the DfE will be using this in its headline measures of school performance; a benchmark comparable with the strongest performing education systems. While the GCSE grading scale in England is changing in all subjects over the course of the next few years, most GCSEs taken by students at schools in Wales and Northern Ireland will continue to be graded A* to G. The grading scales for AS (A to E) and A levels (A* to E) are not changing. Further information on the new GCSE grading scale, and what is changing when is available on GOV.UK There are also fact sheets available for employers, parents and higher or further education and those who work in education.

www.tpr.gov.uk/employers http://www.tpr.gov.uk/ongoing-duties 9
