Employer Bulletin 67 (August 2017)

Reporting Pay As You Earn in real time (page 2)

This section contains the following interesting statement:

“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.”

Is this a change from the information that HMRC published in the February 2015 Employer Bulletin? Even though this is marked “withdrawn – do not use”, the information contained is consistent with my understanding when they say that “the payment date on the FPS should be the employee’s regular payday”. This does have some exceptions. However, the payment date should be the date they are contractually entitled to receive the wages and they have control of the monies. This is consistent with PAYE legislation.

So, using the example in the February 2015 Employer Bulletin, assuming that an employee was due to be paid on Monday 6 April 2015 (Easter Monday) but is paid early on Thursday 2 April, as Good Friday was the 3rd:

• The February 2015 Bulletin says that the payment date on the FPS should be the date that they would have received the money had the payday not been bought forward. This is 6 April 2015. This is consistent with how we would have treated the payment for tax purposes as the first payday in the new tax year.

• The August 2017 Bulletin says that the payment date on the FPS should be the earlier of the two dates. This means that we would have declared 2 April 2015 but apply tax as if it were the first period in the new tax year. This would be interesting, as the FPS technical specification only allows dates to be submitted between the start and end dates of the tax year.

Given that RTI and the payment date is vital for the correct workings of the Universal Credit, there is still a lot of confusion about what this date actually is. I did think that this had all been resolved but apparently not.

OpRA and Voluntary Payrolling (page 3)

I am not sure I understand this at all. This talks of a “concession” if the employer is payrolling benefits that have been provided as part of an OpRA. Let’s talk so I can explain my thinking…

When an employer voluntarily payrolls benefits, they are working to and abiding by the legislation in the Pay As You Earn Regulations 2003. These Regulations give us the day-to-day workings of payroll in practice in line with the governing legislation which is the Income Tax (Earnings and Pensions (Act) 2003, known as ITEPA. The 2003 Regulations make reference to ITEPA all along the way.

When Optional Remuneration Arrangements (OpRA) came into being at the start of this tax year, ITEPA 2003 was amended via the Finance Act 2017. This introduced the terminology “modified cash equivalent” for calculating the value of some benefits when provided via an OpRA. In turn, this tells us the value that we need to declare on the P11D at the end of the year. For example, the way that car benefit is calculated if provided by an OpRA is by reference to new sections 121A and 121B as opposed to the previous way of calculating it using just section 121; 121A and 121B tell us the modified cash equivalent value whereas 121 describes the method for calculating the cash equivalent. The cash equivalent is the pre-OpRA way of calculating car benefit.

As a result of the snap general election, the 2003 PAYE Regulations were not updated. These still make reference to having to payroll values that are the cash equivalent rather than any modified cash equivalent. For example, the way of calculating the car benefit for payrolling is as per the calculation in 121 ITEPA, which refers to the cash equivalent rather than the modified cash equivalent. Therefore, we are in a situation where:

• The taxable value of a benefit provided via an OpRA where the employer is not payrolling is calculated in accordance with ITEPA (updated from 6 April 2017).

• The taxable benefit of a provided via an OpRA where the employer is payrolling is calculated in accordance with the rules in the PAYE Regulations 2003 (not updated 6 April 2017).

This is very confusing and unclear guidance. At one point it says that the 2003 Regulations will be amended “later in the year” and the next it says that they “will be formally brought into effect in time for start of the 2018 to 2019 tax year”. To me it is quite clear. There is no legislative basis for payrolling differently than we have ever done before. OpRA and payrolling are like oil and water and they do not mix.

So, given that we payroll benefits according to the legislation that has not been updated, do we need a concession at all?

Taking on a new employee (page 4)

This is a good reminder of the importance of getting the starter notification right the first time the FPS is sent. As a reminder, taken from the RTI data grid for 2017-18, these are:

1. This is their first job since the start of the tax year (6 April)
2. This is currently their only job
3. They have another job or pension

Despite what the Employer Bulletin says, this information will not usually be in the P45. You will only be able to get this information by asking the new employee to complete a Starter Checklist. In fact, it is not only “experienced employers” that should be asking for this on day one. All employers should be asking for the new employee to complete it, regardless of whether they have a P45 or not. If they do not, how are employers supposed to determine which Student Loan Plan type applies to them?

The sooner we see the P45 confined to payroll past and make the Starter Checklist mandatory the better! Yes, I accept that this will lead to an initial breakdown in the cumulative nature of tax. However, HMRC should be able to pass previous employment’s tax and pay back almost instantly you would have thought.

PAYE penalties (page 4)

Re Full Payment Submission (FPS) late filing penalties, I am so pleased to see HMRC make reference to the fact that the “on or before” rule is all to do with the payment date – ie, employers are required to submit their FPS on or before the date that is declared as the payment date on the FPS.

This is despite the fact that Gov.uk still says that the FPS should be sent before the employee’s payday and the fact that there is confusion over what this date actually is in the first place.

Expenses exemption (page 5)

Good to see a reminder of the Trivial Benefits exemption that saw the abolition of the dispensation effective 6 April 2016. Many employers do not appreciate the wide range of benefits and gifts that can be regarded as trivial and paid free of any P11D obligations.

However, there are limitations and employers are advised to look at the simple Gov.uk guidance and the in-depth coverage in HMRC’s internal Employment Income Manual at EIM30200.

Business Tax Account (pages 7 and 8)

Good information that the Business Tax Account is changing in phases throughout August to October (page 8). Not all BTAs will change at the same time but when yours does, employers need to be aware of the changes and give feedback to HMRC.

Page 7 details that an employer’s Apprenticeship Levy charge is not available to view within the existing Liabilities and Payments viewer. Hopefully, the phased changes will see this display correctly and ensure the liabilities actually balance. If they do not, feed this back to HMRC.

Employer Bulletin email alerts

Good news – anyone can sign up to receive alerts about the latest release of the Employer Bulletin as you no longer need a PAYE reference to register. This means that everyone in the same organisation can register if they want. Use the “email updates” page, enter an e-mail address, “add subscription” and click on “Employer Bulletin”.