Last week HMRC published the October 2021 Employer Bulletin. Published six times a year, the bulletin offers both employers and agents the latest information on topics and issues which may affect them, according to the GOV website. In the latest publication the focus is on PAYE, UK Transition, Coronavirus (COVID-19) updates and information, and tax updates and changes to guidance. As a team of chartered accountants in Exeter, Kirk Hills is on hand to guide you through the latest information.
Tax Changes for Health and Social Care
National Insurance Contributions (NICs) will increase by 1.25% for one year for employees, employers, and the self-employed from April 2022.
A new Health and Social Care Levy of 1.25% will be introduced from April 2023 for those who pay all Class 1, Class 1A and 1B, and Class 4 NICs.
This levy applies to all those who are over the State Pension age, which is 66 in England, who are employed or self-employed with profits above £9,568. Levy contributions will start appearing as separate items on payslips from 2023 to 2024.
If you are a self-employed individual who is paying NICs through Self Assessment, you will have to report any rate increase on your 2022-2023 tax returns, and the levy on your 2023-2024 tax returns.
From April 2022 the rate of Income Tax on dividend income will also increase by a further 1.25%.
Business Tax Account and Pay As You Earn (PAYE) for employers
You are able to manage your business taxes online, once you have registered for PAYE for employers, by adding them to your Business Tax Account (BTA). HMRC suggest that you are regularly reviewings your BTA, ensuring that your information is correct and up-to-date.
Through your BTA, you are able to:
- Check your tax position – see up to date information regarding upcoming and overdue payments and any outstanding liabilities
- Contact HMRC through their web-chat platform on the annual statement page
- View your payment history
- See Notices, which may include changes to tax codes, student loan notifications, and employer notices
- Appeal a penalty
- Update your information, like contact details
- Share your employer data with a colleague or staff member
- View or change your tax agent
- View other taxes where you are also registered for the relevant online service
Reporting PAYE information in real time when payments are made early at Christmas.
There has been a permanent easing of reporting PAYE information, something which has been in place since 2019. This helps employers pay employees early at times like Christmas.
If this is something you do, you should report your normal, or contractual, payday as the payment date on your Full Payment Submission (FPS), ensuring that it is submitted on or before this date. They give an example:
If you pay on Friday 17th December 2021 but the normal (or contractual) payment date is Friday 31st December 2021, please report the payment date on the FPS as 31 December and ensure the submission is sent on or before 31st December 2021.
Universal Credit and the importance of correct on time Full Payment Submission (FPS) reporting.
To avoid any issues of double monthly earnings in one Universal Credit assessment period, employers will need to send Full Payment Submissions on or before your employees’ payday, while entering the usual date that you would pay them even if that is earlier or later.
Legislation which has been in force since 16th November 2020 means that for cases affected by the issue previously mentioned, monthly earnings will be reallocated to another assessment period. This means that only one set of earnings will be taken into account, rather than two when determining available allowances. This follows a Court of Appeal judgment concerning employees who receive two calendar monthly payments of earnings in one Universal Credit monthly assessment period, none in another and who lose out on the work allowance. This is different for those who are paid either weekly, fortnightly, or four-weekly, as moving a payment would just move the issue to a different assessment period.
Off-Payroll Working rules (IR35)
Six months have passed since the off-payroll working rules changed. According to HMRC they are, “continuing to provide support to help you to comply with the rules. This builds on previous Bulletins and is a round up of some further areas of support which you may find useful:
- We drew attention in the August 2021 Employer Bulletin to our guidance on ‘contracted out services’ and ‘statements of works.’ Anyone who is engaging contractors working through their own limited company via one of these contracts should make sure that they are applying the rules correctly. We will be delivering webinars to help, which will be promoted on our LinkedIn social media pages and available soon on our help and support page.
- We have worked with stakeholders in the construction and transport sectors to provide customers in these sectors with additional support. If you work in these sectors and have not already seen our factsheets, then you can have a look at our transport and construction sector factsheets on our LinkedIn page.
- If you work in the oil and gas, or banking and finance sector, then you may have received a letter from us asking you to contact us to begin working together to confirm that you are applying the rules correctly. This is in line with our compliance approach outlining how we will support customers to comply with the changes to the off-payroll working rules.
Student loans: Occupational Pension and off-payroll working rules FPS Indicators
According to HMRC, they have found instances where the FPS has shown student loan deductions. Having investigated, they can reveal that:
- Occupational pension indicator is selected, and the customer’s payment does not relate to an occupational pension
- Off-payroll working (OPW) rules indicator is selected but the customer does not fall within the OPW rules
Student loan deductions are not due on:
- Occupational pension scheme payments
- Payments that are subject to the OPW rules
Student loan refunds.
If you read the Employer Bulletin 86 you would remember that the HMRC announced a new approach to refunding student loan deductions, which were being introduced due to the pandemic caused by COVID-19. If this change does impact you, it is advised that you get in touch with HMRC to process the refund. You can do this by visiting their contact us page.
Making your PAYE Settlement Agreement (PSA) payment
If you are making any electronic payments for a PSA for the tax year ending 5th April 2021, you must clear it into the HMRC bank account by 22nd October 2021. If you do not and end up paying later, you may face the prospect of paying interest or a late payment penalty, or even both.
PAYE Settlement Agreements (PSA) – Applying the correct reporting method – PSA1 form
HMRC is reminding employers who make use of PAYE Settlement Agreements that their PSA calculations are now due. Some employers use informal or bespoke methods of reporting the amounts due. This can often prove inefficient for customers and HMRC alike. HMRC wants to encourage the correct method of reporting which is form PSA1.
Found and completed online, the PSA1 form offers several benefits for employers:
- Standardised reporting
- Improved accuracy
- Speedier processing times and fewer queries
Reporting benefits and expenses digitally
According to the October 2021 Employer Bulletin, HMRC is now encouraging employers to consider payrolling the expenses and benefits they pay to staff. Some of the advantages of payrolling expenses and benefits include the fact that employers will not have to submit multiple P11Ds, with employers more likely to pay the correct tax due on their benefits during the tax year. However, employers are still required to work out the Class 1A National Insurance contributions on benefits and complete a single P11D(b) form for the year.
Benefits and expenses can be payrolled as long as you have registered with HMRC before the start of the tax year. To use this method for the 2022 to 2023 tax year, you will need to register online before 6th April 2022. You can find out more by visiting the payrolling page on their website.
UK-Swiss Convention on Social Security Coordination
The Convention on Social Security Coordination was signed by the UK and Switzerland on the 9th September 2021. According to HMRC, it will benefit the citizens of both countries, while supporting business and trade by ensuring that cross-border workers and their employers are only liable to pay social security contributions in one state at a time.
The agreement is due to be made available to use later in 2021, with HMRC ready to inform those it relates to when a start date is confirmed.
Tax updates and changes to guidance
VAT reverse charge for construction and building services
VAT-registered construction businesses should note that this reverse charge came in on 1st March 2021. A Revenue and Customs Brief, which was issued in June 2020, contains further information on the topic.
During which, HMRC introduced concepts which they called ‘end users’ and ‘intermediary suppliers’. To fall into these categories, you have to be a business which does not make supplies of building and construction services to third parties and can be excluded from the scope of the reverse charge. For example, they could be landlords, tenants, property developers, and public bodies which are contractors for CIS purposes. The customer must notify the supplier in writing to be treated as end users and intermediary suppliers.
Voluntary disclosures – PAYE liability involving offshore matters.
The guidance for making a voluntary disclosure to HMRC has been updated. This includes details on how lost tax, involving an offshore matter or offshore transfer can affect the number of years that should be disclosed to HMRC. This applies to income tax (including PAYE), capital gains, or inheritance tax.
Offshore matters are defined as:
- Income arising from a source in a territory outside of the United Kingdom
- Income or assets received in a territory outside of the United Kingdom
- Activities carried on wholly or mainly in a territory outside of the United Kingdom
- Anything having effect as if it were income, assets, or activities of a kind described above
Offshore matters can therefore apply to earnings and activities of globally mobile employees travelling both inwardly to the United Kingdom and on overseas assignments from the United Kingdom.
Extended time limits: 12-year limit for offshore matters
The 12-year time limit within Section 36a of the Taxes Management Act 1970 applies for income tax and PAYE where the lost tax involves an offshore matter. Assessments to recover the under-assessed or over-repaid tax can be made within 12 years of the end of the relevant tax period, as applies:
- From 2013 to 2014 and 2014 to 2015 only – where the under-assessment or over-repayment of tax is due to the careless behaviour of the person or another person acting on their behalf
- From 2015 to 2016 onwards – where an under-assessment or over-repayment of tax has occurred regardless of whether the person took reasonable care or was careless
The 12-year time limit cannot however apply to years before 2013 to 2014 where the income tax (including PAYE) lost involves an offshore matter. That being said, the 20-year time limit continues to apply where tax has been under-assessed or under-declared as a result of deliberate behaviour.
Also, the 12-year time limit does not apply for income tax (including PAYE) where:
- HMRC received relevant overseas information from which they could reasonably be expected to become aware of lost tax
- It was reasonable to expect HMRC to have raised an assessment before the normal time limits expired
If you, or your business, has been affected by anything mentioned in the October 2021 Employer Bulletin, do not hesitate to contact Kirk Hills today to discuss how we can help you.