Update 40 (7 December):
P11Ds and ECS/NPS Interface
We have promised to keep you in touch so that we do not lose the benefit to you, and to HMRC, of us being transparent especially where that helps our joint and respective interests. I have been asked to let you know that last week we picked up on a few P11D cases that have gone through the interface where the right code has been issued but on the wrong basis. The number is very small indeed and they were picked up quickly. Nevertheless, we are sorry for any inconvenience caused and we are looking into the issue. We turned off the interface immediately to stem the P11D data flow and it will remain off while we fix the issue. We have done this to keep to an absolute minimum the number of customers inconvenienced and any additional cost to business generated by these errors. We expect to be able to switch on the interface again this week. We will continue to keep you informed of developments.
Update 41 (10 December):
New telephone number for employee tax enquiries
I’m pleased to tell you that there’s now just one telephone number for all employees to call for help with their tax enquiries – 0845 300 0627. Thisreplaces all 60 of the previous 0845 numbers. You have often told us that the system was confusing and this will help to simplify contact into HMRC for employees.
Employers can use this number too, for example if you need to confirm an employee’s tax code. But you should continue to call the Employer Helpline for enquiries relating to running your payroll.
Please remember to use the new contact number, as the old numbers will shortly be ‘switched off’. In the meantime, it would be helpful if you could update any correspondence you send to your employees and perhaps your intranet/internet sites, so that references to ‘tax office’ quote only this new number.
New coding changes for 2011/12
Please note an amendment to the coding changes I told you about in Weekly Update Number 39. This should have stated that we are in the process of making changes to the PAYE regulations which will apply from 6th April 2011. As part of those changes we will be providing for a flat rate code that will collect tax at the additional rate of 50%.
Draft Clauses of the Finance Bill 2011
The draft clauses of the Finance Bill 2011 were published on 9 December. Details are available on the HMRC website (http://www.hmrc.gov.uk/budget-updates/autumn-tax/tiin.htm#pt). I will summarise the main points of the Bill in next week's Update. However, the main issues affecting employers are as follows:
- Income Tax Allowance and Basic Rate Limit
- Employer Supported Childcare – Changes to the “Open Generally” condition
- Changes to tax relief for Employer Supported Childcare
- Protection of Vulnerable Groups Scheme registration fee
- Restricting pensions tax relief
- Removing the effective requirement to annuitise by age 75
- Enabling Retirement Savings Programme-Pensions Taxation
- Security for PAYE & NICs at risk
Please see the following reminder about changes to the PAYE regulations which will allow you to provide P60 information to your employees electronically. The changes come into effect for the tax year 2010-11 onwards. This means that the first P60 that you can provide electronically will be for the tax year ending 5 April 2011. The deadline for providing the P60 information to your employees has not changed, and remains before 1 June following the end of the tax year.
The provision of an electronic P60 must be agreed with your employees and ideally accessible from a secure website or area. If this is not possible the electronic P60 can be issued to an email address that has been provided by your employee. If your employee does not have access to a computer you must continue to provide a paper version of the P60. Further guidance for employers will be available on the HMRC website in the autumn.
The form P60 and the information it contains is not changing. The electronic means by which the P60 information is delivered will not require approval from HMRC. However, the proposed content will require HMRC approval as the paper output arising from that electronic information will be a substitute form P60 and will be subject to the same approval procedure used for substitute paper forms P60. Software developers and employers will therefore be required to send two drafts or proofs of the proposed form for approval to the following address:
HM Revenue & Customs Customer Information Team, Room 54 1st Floor New Wing, Somerset House, The Strand, London WC2
Update 42 (17 December):
NPS P11D Update
We have now switched back on the P11D interface and your employees, pension annuitants and clients will now begin to receive P800s and payable orders. Further updates will follow.
Summary of Draft Clauses of the Finance Bill 2011
Income Tax Allowance and Basic Rate Limit
- The personal allowance for under 65s will increase by £1,000 in 2011-12 to £7,475
- The basic rate limit will fall by £2,400, taking it to £35,000. This means the higher rate threshold (equal to the sum of personal allowance and basic rate limit) falls by £1400 to £42,475
- All income tax rates for 2011-12 will remain at their 2010-11 levels
Changes to Tax Reliefs for Employer-Supported Childcare
Where employers offer employer-supported childcare schemes providing childcare vouchers or directly contracted childcare, up to £55 per week on what would otherwise be a taxable benefit is subject to a tax exemption and associated NICs disregard. Higher rate and additional rate taxpayers receive a greater degree of tax relief on the amount, and Ministers have decided to reform this relief so that all those joining schemes on or after 6 April 2011 receive approximately the same level of tax relief.
This will be achieved by reducing the monetary value of the tax exemption for higher rate and additional rate taxpayers to £28 per week and £22 per week respectively. Draft legislation was published on 9 December 2010. Legislation will be introduced in FB 2011.
Employer-Supported Childcare: Changes to the "Open Generally" Condition
Currently the tax exemption and NICs disregard for ESC schemes only apply if a number of conditions are met. One of these conditions is that the scheme must be open generally to employees. Where ESC is offered through salary sacrifice, working parents who earn at or near the National Minimum Wage (NMW) levels cannot join their employer’s scheme. This is because legislation prohibits deductions from a person’s salary or earnings if the result is that they are paid less than the NMW.
The amendment will allow employers to make their ESC schemes unavailable to those employees earning at or near NMW levels.
Support for those earning at or near NMW levels who cannot join employer-supported childcare schemes will normally be available through the childcare element of Working Tax Credit.
PVGS registration fee
The Protecting Vulnerable Groups Scheme (PVGS) is a new vetting scheme for employees in Scotland who work with children and vulnerable adults. Employees registering under PVGS will be required to pay a registration fee.
- This measure introduces a new income tax relief where an employer pays or reimburses the PVGS fee on the employee’s behalf.
- In the absence of this measure there would be a taxable benefit for what is, in effect, a mandatory fee.
- The amount of relief per person is very small. The PVGS fee is expected to be £59 and so relief for a basic rate taxpayer would be £11.80 (it is not a recurring annual fee)
Restricting pension’s tax relief
Legislation is introduced in Finance Bill 2011 to restrict pensions tax relief for individuals by reducing the annual allowance (AA) to £50,000 (from £255,000), from April 2011, and the lifetime allowance (LTA) to £1.5m (from £1.8m) on or after 6 Apr 2012. Transitional rules for the AA have effect on and after 14 Oct 2010.
Removing the effective requirement to annuitise by age 75
This measure removes the requirement for savings in a registered pension scheme to be used to secure an income by age 75. The existing rules create an effective requirement to purchase an annuity by age 75.
Enabling Retirement Savings Programme-Pensions Taxation
The legislation will:
- Remove the tax charge on borrowing linked to the cost of establishing, managing or administering the National Employment Savings Trust (NEST);
- Remove the tax liability on any interest payments an employer is required to pay to a jobholder’s pension account because contributions were paid late
Security for PAYE and NICs at risk
This measure will allow HMRC to require a security from employers where there is serious risk that tax due under PAYE or Class 1 NICs will go unpaid. The proposal will not affect employees or the PAYE and NICs that they pay, and will support the Government’s aim of supporting those who try and get their tax right but coming down hard on those employers who are deliberate rule breakers.
Customer Address Changes
As we are currently issuing large numbers of tax calculations to customers and these may involve payable orders where they have overpaid tax for the years 2008/9 and 2009/10. I would appreciate it if you could raise awareness within your organisations that it is important for individuals to advise us of their change of address, especially if this has happened in the last two years. I have attached the link to our website (http://search2.hmrc.gov.uk/kbroker/hmrc/locator/locator.jsp?type=1), which enables individuals to notify address changes online. We do not take account of addresses on incoming employer correspondence so it is important that employees and pensioners advise us when they change their address.
Update 43 (24 December):
Improving the Operation of Pay As You Earn (PAYE)
In weekly update 40, we told you that we had published a consultation document ‘Improving the operation of Pay As You Earn (PAYE): Collecting Real Time Information’ on the HMRC website and that we would be participating in a number of consultation seminars around the country.
We can now confirm that we will hold seminars for:
- Employers in London (21/1), Liverpool (10/2) and Nottingham (22/2); and
- Software developers in Coventry (24/1), Salford (14/2) and London (18/2).
If you would like to attend one of these workshops (or host one of your own) please ring 0845 6032691 for a place at an employers event, or 01274 539666 for a place at a software developers event.
As well as the seminars arranged by HMRC, we are working with the Institute of Payroll Professionals, who become the Chartered Institute of Payroll Professionals from 4 January 2011, to provide seminars for employers and payroll practitioners. More information about these events can be found at www.cipp.org.uk/en/learning-and-development/ipp-events/index.cfm/RTI.Please book as soon as possible to ensure a place at your chosen event.”
PAYE Payslip Booklets
We temporarily cannot issue PAYE Payslip Booklets for the tax year 2010-11 because we are issuing the bulk of booklets for 2011-12 starting on 10 January 2011. This will affect customers who request a 2010-11 booklet between the following dates depending on which Accounts Office they are linked to:
- Shipley Accounts Office – 4 January 2011 to 28 January 2011.
- Cumbernauld Accounts Office – 21 January 2011 to 25 February 2011.
Our normal 2010-11 booklet issue will resume after these dates. Due to the stationery changeover the back page of the booklets will show they are for use in 2011-12. This is due to the changeover in stationery to the new tax year and customers can change this to read 2010-11 and use the booklet as usual.
Shipley customers who have a payment to make by 19 January or Cumbernauld customers by 19 February who do not have a payslip (or payment booklet) should use the online facilities to make payment. This will give you until the 22nd of the month to make payment but please make sure the cleared funds reach us by no later than the last bank working day before the 22nd. We recommend that payment is made online as this is the safest, quickest and most secure method. You can also tell us online that no payment is due; again you do not need a payslip. Further information on how to pay and to let us know that no payment is due can be found on the HMRC website www.hmrc.gov.uk/payinghmrc/paye.htm.
To prevent late payment penalties it is important to make sure that HMRC receives payment in full and on time, as the suspension of booklets and the delay or absence of a payslip will not remove the employer’s responsibility to ensure this happens.
If you do not want to wait for us to send you the payslips please send your payment (or notification of nothing to pay) to HMRC Shipley together with a letter including your:
- Company/employer name
- Telephone number
- Accounts Office reference number
- The month, deduction year and amount being paid
- The address to use is:
Update 44 (31 December):
Paying tax at the fifty per cent rate in 2010-11
From the 2010-11 tax year, UK taxpayers - including employees, directors and pensioners with taxable income of more than £150,000 - are liable to tax at 50 per cent.
If these individuals have only one source of employment income, the right amount of tax is already being deducted from their salary/pension through the normal operation of the PAYE tax tables and payroll software that is used by employers and pension providers. However, if they have two or more such employments then an underpayment is likely to arise when their 2010-11 Self Assessment tax return is processed. This underpayment will arise because although the new rate started from 6 April 2010, tax codes issued for 2010-11 do not take account of the 50 per cent rate. This is because HM Revenue & Customs (HMRC) was unable to introduce the changes needed to the National Insurance and PAYE Service when the start date for the new rate was brought forward a year to April 2010 by Budget 2009.
HMRC is currently undertaking an exercise to identify those customers who might be affected by this problem (which applies only to 2010-11). Customers will be given as much notice as possible in writing, to enable them to arrange their finances to cover any underpaid tax that will be due on 31 January 2012.
Those customers not currently within Self Assessment will be registered and allocated a Unique Taxpayer Reference before being issued with a 2010-11 'notice to file' a Self Assessment tax return in April 2011.
From 2011-12, tax codes will be issued to fully reflect the 50 per cent rate, ensuring that the correct rate of tax will be collected from all jobs or pensions for an individual, regardless of how many sources of income that person has.