Member Since: 16th Mar 2013
16th Nov 2015
negative taxable earnings
The £7,500 quarterly bonus, NMW considerations and 2% primary employee NIC over UEL on great part of bonus are all valid points and sound advice.
The issue of 'negative taxable earnings' was dealt with in Martin v Revenue and Customs Commissioners  UKUT 429 (TCC), , where the Upper Tax Tribunal ruled on the liability of the taxpayer to repay to his employer a proportion of a taxable signing on bonus paid under deduction of PAYE and Class 1 NIC, when he had given notice to resign prior to the end of the five year period for which he had committed to remain an employee.
The tribunal held that the individual was able to deduct the repayment from his taxable earnings for the tax year in which the repayment was made, as the repayment was ‘negative taxable earnings’ under the contractual terms surrounding the repayment and not liquidated damages.
The repayment was due in a different tax year to the one on which the full bonus amount was originally subject to PAYE tax and Class 1 NIC. A relief claim can be made under s.128 Income Tax Act 2007 for a deduction from earnings for the tax year in which repayment was made. The relief claim in the NIC regulations does not allow for NICs to be repaid on the original bonus amount, as NIC liability is only refundable on an error made in good faith at the time of payment.
So worth noting this decision when dealing with recovering repayments of previously taxed and NI liable earnings, as s.11(3) ITEPA 2003 taxes earnings less any deduction allowed under specified provisions, which includes s.128 ITA 2007 and recognises that taxable earnings can be a negative figure.
6th Nov 2015
I would be wary of using cumulative figures from the last payslip. Without a P45, how do you know it was the final payslip? There is no basis in the PAYE Income Tax (Pay as You Earn) Regulations 2003 (SI 2003/2682) for accepting a final payslip to perform a future PAYE calculation. I would use the starter checklist procedure to gather relevant personal information and employee declaration, to determine a tax code and basis for first payment and FPS report to HMRC. Let HMRC issue a P6 to notify of any relevant figures to use or change of tax code or basis. Payslips will however be vital in such circumstances, as the only evidence as an employee that tax has been paid on your behalf, is likely to be the payslip.
FA 2011 s 85 amended ITEPA 2003 s 684 to enable HMRC to require the paying of financial security (cash deposit from the business or director) from employers where there is serious risk that they won’t pay over their PAYE tax deductions or Class 1 NICs. Hopefully, if what you think might have happened, is proven HMRC will use this power on the errant property company.
26th Oct 2015
Where the relevant amount is below certain limits no payments on account are required. The limits are:
a fixed amount of taxa fixed proportion of the assessed tax.
The precise value of these limiting criteria is set by regulations. The limits are set at a level that ensures that most employees and pensioners (and others who receive the bulk of their income under deduction of tax or who have relatively small outstanding tax liabilities) will not have to make payments on account. Instead such taxpayers simply have to make one balancing payment after the end of the tax year (or have the balancing payment collected through PAYE). The limits are set by the Income Tax (Payments On Account) Regulations 1996 (SI 1996/1654). Under these Regulations payments on account are not due where the relevant amount is less than:
a fixed amount of £1,000, orthe proportion the relevant amount bears to the assessed amount is less than 1 to 5.
So if more than 80% of the assessed tax is met by income tax deducted at source no payments on account are required.
18th Sep 2015
Going back to the potential BiK tax charge
When the benefit of a van is charged under Section 154 ITEPA 2003, or where it is not charged because private use in the year is insignificant, Section 202(1) ITEPA 2003 excludes it from the residual liability to charge in Part 3 Chapter 10.
There is also no residual liability to charge on any benefit in connection with the van other than where fuel is provided for a van for which the restricted private use condition is not met or exceptionally, expenses are incurred by or on behalf of the employer in providing a driver for the van, so a benefit charge cannot also be made on the provision of, for example, insurance for the van.
There is also legislation forbidding any charge under other employment income provisions in addition to the van benefit charge for:
the discharge of any liability of the employee in connection with the van - Section 239(1)) ITEPA 2003the reimbursement of expenses incurred by the employee in connection with the van - Section 239(2)) ITEPA 2003
The taxable scale charge can be reduced for any payments that an employee is required to, and does actually make, prior to the end of the relevant tax year as a condition of the van being available for private use will reduce the cash equivalent value pound for pound. The benefit cannot be reduced to less than nil.However, payments for supplies or services, such as petrol or insurance, do not count.
30th May 2014
Reg 72 and HMRC guidance
HMRC has discretionary authority to direct under Regulation 72(5) SI 2003/2682 that an employee shall pay tax that the employer has failed to deduct.
The HMRC Officer must be satisfied that the employer took reasonable care to comply with the PAYE regulations and the failure to deduct the correct amount of tax was an error made in good faith
The Recovery Officer must have from the employer a full and proper explanation for the under-deduction.
HMRC has published guidance on employer errors in deduction of Pay As You Earn tax at http://www.hmrc.gov.uk/thelibrary/tax-paye/employer-errors-deduction-paye.pdf...
16th Apr 2014
Extract from HMRC apology and explanation letter
We are sorry if you, or your clients or members, experienced problems trying to send PAYE RTI submissions (or other returns), over the weekend. The problem arose due to issues with the Government Gateway, which led to delays in sending our normal ‘success’ and ‘failure’ responses and, in some cases, to multiple responses.
As soon as we became aware of the issue we worked with colleagues from the Government Gateway to put things right. Any submissions sent since 11pm on Sunday night (13/04/14) have been processed normally and acknowledgements sent as usual. Anyone sending submissions before that time may have experienced delays in receiving their ‘success’ (or ‘failure’) message.
We started to process the backlog of messages early on Monday morning and the majority of employers have now received their ‘success’ (or ‘failure’) message and expect that the small number of outstanding messages should be received by tomorrow morning (Tues 15 April).
In the meantime, we would therefore be grateful if you would ask your clients and members not to
• resend their submissions (unless they get a ‘failure’ message),
• call us about this problem
• delay sending submissions. This is especially important for 2013 – 14 Full Payment Submissions, as our system can only process them up to and including 19th April.
In addition to delays in receiving success and failure messages, some of your clients or members may also have received multiple responses during this period.
As you are aware, once HMRC has processed submissions, it sends a validation response back though the Government Gateway. When we send our validation responses, our system expects the Government Gateway to confirm that the success message has been sent. In this case, our systems did not receive these responses. Where HMRC does not receive the expected acknowledgement, it tries again up to 7 times. So, some customers may have received up to 8 messages for each submission.
In addition, some software products ‘poll’ for a response from the Government Gateway and automatically resubmit if no response has been received. In these cases, substantially more responses may have been received.
We note that some employers may be concerned that this may result in penalties or in ‘late filing’ warning messages. Please be assured, that each submission is ‘date stamped’ as it is received by the Government Gateway.
It is this date that HMRC uses as date of receipt. Therefore, no submission will
• appear to have been received by HMRC later than the date it was actually accepted at the Government Gateway as a result of this issue; and
• no late fling warning should be received as a result
• no late filing penalties for the 2013/14 tax year will result so long as the employer submitted a correct FPS by 19 April or an Earlier Year Update by 19 May.
Guidance about final submissions can be found at http://www.hmrc.gov.uk/payerti/end-of-year/tasks.htm .
We are sorry for any inconvenience this has caused.
19th Feb 2014
Round sum reporting
A round sum allowance cannot be included in a HM Revenue and Customs dispensation notice. Dispensations will be granted for scale rate payments in respect of expenses made to or provided for any employees by the employer.
In reporting a round sum allowance, any amount paid should have been subjected to PAYE through the payroll. This is unless HM Revenue and Customs agrees that the amount is doing no more than reimbursing the employee for the actual business costs incurred, for example, with travel. If this is the case, the amount is reported on Form P11D at the end of the tax year under section N general expenses allowance for business travel, rather than having PAYE and Class 1 NIC applied.
The employee must then make a separate business deduction claim by letter, Form P87, or their self-assessment tax return. Tax relief is then given for any additional amount actually spent by the employee. HM Revenue and Customs would expect an employee to keep records to justify a deduction for reasonable and necessary business expenditure.
Where a round sum allowance is paid, the total payment is earnings for the purposes of Class 1 NICs. However, where a specific and distinct business expense is identified, the amount can be excluded from liability to Class 1 NICs, and then NICs will be due only on any profit element.
15th Jan 2014
As soon as you first employ someone, you will need to register as an employer with HMRC if any of the following is true:
you're paying them at or above the PAYE thresholdyou're paying them at or above the National Insurance Lower Earnings Limitthe employee already has another jobthey are receiving a state, company or occupational pensionyou're providing them with employee benefits
4th Dec 2013
RTI Bits and Pieces
PAYE is calculated and reported with reference to the payment date, not the date the payroll was processed, unless exceptionally these dates are the same. Employers must provide on a Full Payment Submission (FPS) report the employees date of payment. The FPS must however report the correct payment date and this is the date on which the employees are normally actually paid (the ‘regular’ pay date). Therefore, for example, if monthly paid employees are contractually entitled to be paid on the 20th of the month, the date of payment will always be the 20th, even if some months the date is brought forward because the 20th falls on a weekend or bank holiday.
The FPS must normally be submitted by midnight of the employee’s actual pay day, even if the employee actually receives the pay before midnight i.e. paid by cash at lunchtime. Employers should submit the FPS prior to the pay date, for example, at the same time as the BACS file is sent, in order to allow a window of opportunity to correct any errors by submitting a new FPS on, or before, the payments are made, which will overwrite the original file. Payroll software may dictate the timing of the FPS submission to HMRC.
Situations where employers will not have to report PAYE information 'on or before' the time they pay their employee are noted in guidance available at http://www.hmrc.gov.uk/payerti/on-or-before.pdf.
By HMRC concession, until 5 April 2014, employers with fewer than 50 employees, who experience difficulties with reporting every payment to employees at the time of payment, may send information to HMRC by the later of the date of their last regular payroll run in the month and the end of the tax month i.e. the 5th.
There is no time limit on how far in advance of the payment date that an FPS can be filed. For PAYE remittance purposes FPS returns must be received by HMRC between the 6th and the 19th of the month following. For example, FPS returns sent between 6 June and 19 July will be applicable to tax month 3 ending 5 July. Any FPS adjustment received by HMRC after the 19th must be included in a remittance to HMRC for the next tax month.
If an FPS submission is inadvertently not sent to HMRC, continue to file RTI returns as normal from the time the error is discovered, show the year to date figures and record the details of any leavers not previously recorded on the next FPS submission.
Since 21 October 2013 HMRC have been issuing electronic notices informing employers that a filing and/or payment default has occurred, as part of the Generic Notifications Service (GNS). A non-filing notice is sent when HMRC records show that an FPS has not been sent for a particular tax period. A late-filing notice is sent when an FPS appears to have submitted FPS late. A late payment notice is sent where an employer appears not to have made full payment on time, with a notice reminding about late payments acting as a follow up notification where the original offence is repeated.
18th Nov 2013
There is no statutory basis as to what circumstances HMRC require for a self-assessment return to be submitted. HMRC introduced a statutory power (Section 233 and Schedule 51 Finance Act 2013), effective from 17 July 2013, which removes the obligation to file a self-assessment return in appropriate cases (individuals, partnerships and trustees), to withdraw a previously issued notice to file a return and to cancel any penalty for failure to make that self-assessment return in respect of returns for the tax year 2012/13 and subsequent tax years.