Further to the announcement in the June 2010 Budget, HMRC has opened a consultation regarding some far reaching changes to the current PAYE system.

The first proposal is to use “Real Time Information”, which would involve employers providing details to HMRC on pay and deductions every time an employee is paid instead of just reporting at the end of the tax year. The idea is to enable HMRC to issue a tax code to ensure that the employee pays the correct amount of tax/NIC throughout the year without the need to make significant adjustments after the tax year has ended. It is envisaged that the employer would benefit by removing the need for employers to have to complete forms P45 and P46 for starters/leavers and it will also simplify the year end reporting process.

Secondly, building on the concept of Real Time Information, an even more radical proposal being considered in the longer term is to move to a system of “Centralised Deductions”. Under this proposal it would be HMRC rather than the employer who would be responsible for calculating PAYE, National Insurance and Student Loan Deductions, although the employer would still be required to calculate gross pay and any other third party deductions. Under this proposal there would be no need to use tax codes.

This is a very brief summary of the proposed changes and there is a lot of detail involved with these proposals. Full details are included in the attached document from HMRC. The deadline for responding to the consultation is 23rd September 2010.

If you have any queries or comments please contact John Harling on 07768 446381

HM Revenue & Customs has recently updated its advisory fuel rates for users of lease/company cars to reflect current petrol prices.  These rates apply to all journeys on or after 1 June 2010 until further notice and apply whether an employer reimburses an employee for business travel or an employee reimburses an employer for private travel. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.

HMRC has advised that the rates in the table can also apply for VAT purposes, although employers are required to retain receipts in accordance with current legislation.

Full details are available via the attached link http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

If this is something which you would like to discuss further or you would like more information, please contact John Harling on 01353 644148 or 07768 446381.

As many of you will have seen in the news, Birmingham City Council faces a multi million pound liability after losing an Employment Tribunal case brought by predominantly female employees who did not have the same entitlement to receive bonus payments as those in jobs typically done by males. This demonstrates that equal pay settlements are still very much a live issue for many councils throughout the UK.

In addition, once settlement is made there is then the issue of the tax and National Insurance Contributions liability to consider.  HMRC will permit councils to make a central settlement with them rather than require councils to calculate the tax/NIC due under the strict method.

We have assisted a number of councils in this process and have enabled them to keep the agreed liability to a manageable level. So, if this is something which you would like to discuss further or you would like more information, please contact John Harling on 01353 644148 or 07768 446381.

The VAT rate change transition rules can be complex and ambiguous. Elysian Associates is skilled in assisting businesses to navigate their way through the changes.

Despite a recent announcement that tax relief in respect of childcare vouchers was going to be phased out from 2011 and withdrawn completely from April 2015, the Government has bowed to pressure and these changes will not now take place.  We understand that the only change that will now occur is that tax relief will be limited to the basic rate for any new entrants to the scheme from April 2011.

If you would like further information then please contact John Harling on 07768 446381 or email johnharling@elysianassociates.co.uk

National Insurance Contributions

There will be an additional rise of 0.5% in employer’s and employees’ NICs with effect from April 2011. This increase is in addition to the 0.5% increase to employer’s and employees’ NICs announced in the 2008 Pre-Budget Report.

Therefore, from April 2011:

§ The standard rate of Class 1 NICs for employees will be 12% up to the upper earnings limit (currently £844 per week or £43,888 pa).

§ The additional rate of Class 1 for those with earnings above the upper earnings limit will be 2%.

§ Class 1 employer’s NICs will be 13.8%. The increased rate will also apply to Class 1A contributions (charged on benefits in kind) and Class1B contributions (on PAYE settlement agreements).

Income Tax

For the tax year 2010/11 all tax allowances and thresholds will be the same as for 2009/2010. As had already been announced a 50% tax rate will apply to income over £150,000 from April 2010.

For the tax year 2012/13, the higher rate threshold when individuals begin topay higher rate tax will be frozen at the 2011-12 level. The personal allowance will be increased in line with inflation for that year..

Tax reliefs for electric vehicles

From April 2010 electric cars and vans will be exempt from company car tax for a period of five years.

Scale rates for company car benefits

From April 2012, the lowest emissions threshold will be reduced to 99g/km (currently 120g/km), which means that cars with emissions below that level will have a scale rate of 10%. The other existing thresholds in the banded table will be reduced by 5g/km.

Fuel benefit tax

The figures used as the basis for calculating the benefit of fuel provided for private use of a company car or van are being increased to £18,000 (currently £16,900) and £550 (currently £550) from April 2010, respectively.

Workplace canteens

From April 2011, the income tax exemption for providing free or subsidised meals in a canteen or on business premises will be removed when provided via salary sacrifice schemes; that is, employees are deemed to be using a designated amount of their gross remuneration to fund the purchase of food and drink at work

HMRC has published its updated advisory fuel rates to apply to journeys undertaken in employer-provided cars on or after 1st December 2009. The rates can be applied either in respect of the employer reimbursing the employee for business travel or the employee reimbursing the employer in respect of private travel.

Previously, a month’s notice has been given by HMRC of the amended rates to allow employers to update their systems; however, this has not been the case with the latest changes.

Therefore, where employers reimburse employees for business journeys, HMRC has advised that if employers need time to update their systems then they are not obliged to operate the new rates immediately as long as the new rates are not exceeded. However, HMRC has also warned that where the rates are used for the employees to repay the employer for private journeys the full published rates must be used to avoid incurring a fuel benefit charge. As a result, it may be necessary to seek additional payments from employees in certain cases.

Full details are available via the attached link:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

If you have any queries, please contact John Harling on 07768 446381 or e-mail johnharling@elysianassociates.co.uk

HMRC issued a statement on 20th October 2009 saying that during the swine flu pandemic employers should consider relaxing their rules regarding self-certification for Statutory Sick Pay purposes in order to reduce the burden on GPs. Currently, employees can self-certify for up to seven days, but HMRC has advised that employers are encouraged to extend this period or seek other evidence rather than insist on a doctor’s certificate.

The Government’s Business Link web site advises that employers consider extending the self-certification period to 10 calendar days.

Full details are available via the link below.

http://www.hmrc.gov.uk/employers/swine-flu.htm

On 29th September The Prime Minister announced that the tax and National Insurance relief in respect of employer-provided childcare vouchers will be withdrawn in order to fund the provision of free nursery places for two-year olds.

Full details will be provided in the Pre-Budget Report, probably in November, but the basic facts are as follows:

• It will no longer be possible to provide childcare vouchers to employees free of tax and National Insurance Contributions to those who join employer childcare schemes from April 2011.  Currently, vouchers may be provided free of tax/NIC up to a limit of £55 per week, subject to certain conditions being met.
• Where employees participate in existing schemes, they will still benefit from the tax/NIC exemption until April 2015 when the tax/NIC relief will be withdrawn completely.
• The withdrawal of the relief will only affect childcare voucher schemes and not workplace nurseries where, again subject to certain conditions being met, tax/NIC relief is due without any limit.

Many local authorities and other public sector bodies provide vouchers via salary sacrifice arrangements and these changes will have a considerable impact.

If you would like further information then please contact John Harling on 07768 446381 or email johnharling@elysianassociates.co.uk

All VAT registered businesses will be expected to file their VAT returns electronically from April 2010. The sooner businesses are registered on the Government Gateway the better it will be for the smooth declarations of VAT. Don’t wait until April!

From 1 April 2010, all taxpayers with an annual turnover of £100,000 or more – and all newly-registered businesses (whatever their turnover) – will be required to submit their VAT returns online and pay electronically. Other taxpayers will continue to have the option of submitting paper returns but HMRC expects that the obligation to file electronically will be extended to all taxpayers in 2012. There are clear benefits to e-filing, including an extra seven days to submit returns and an extra three days to pay, together with providing immediate confirmation that the VAT return has been validly submitted.

In practice there are two ways in which businesses can e-file a VAT return. These are: 1) directly with the government gateway website; or 2) via an HMRC accredited third party product.

Using the government gateway provides a basic submission mechanism allowing business to input values that replicate a paper based VAT100, and simply submit. The use of an approved third party website to e-file a VAT return can bring added value to the process and include functionality over and above that which is available on the government gateway. Such functionality can include:

• permanent online electronic storage of all VAT100′s filed, so users can quickly and easily refer back to historical VAT100 submissions;
• the ability to compare and contrast current period values to historic periods, giving an extra level of assurance before final submission by using trend analysis;
• tracking voluntary disclosures – monitoring the value and status of disclosures;
• the ability to deal with multiple UK registrations and e-filings from one place, tracking submission deadlines and monitoring progress, final sign off and submission; and
• putting in place simple, but useful, electronic sign-off procedures.

If you require further information regarding any of the points above please do contact us.

Elysian Associates

August 2009

0027