As usual, the June 2022 edition of HMRC’s Employer Bulletin contains important updates and reminders. The Tax Faculty touches on a selection of articles within the bulletin. For full details please refer to the bulletin
Increase in NIC thresholds 6 July 2022
As announced at the Spring Statement on 23 March 2022, the class 1 primary national insurance contributions (NIC) threshold increases to an equivalent of £12,570 per annum from 6 July 2022.
HMRC’s Basic PAYE Tools will be updated to calculate the correct NIC for payments on or after 6 July 2022. Employers and agents must install this new update (version 22.1) for employee payments due on or after 6 July 2022.
As an aside, if you are an ICAEW member acting as payroll agent, the faculty recommends that you use proprietary software rather than HMRC’s online tools.
See the Rates and thresholds for employers 2022 to 2023, “Class 1 National Insurance thresholds” guidance for further information.
Student loan deductions
The Employer Bulletin highlights common errors made for student loans, including:
- Incorrectly taking student or postgraduate loan deductions for individuals who are deemed employees under the off-payroll working rules. This should be prevented by the payroll software if the deemed employee/off payroll worker indicator has been selected. Note that this indicator should not be selected for real employees.
- Not ensuring that payroll software is updated with the correct student loan plan shown in start notices, even if the employee’s pay is apparently below the threshold for deducting payments and not stopping deductions on receipt of a stop notice.
Under the law, notices should be kept for three years, although the faculty recommends keeping all PAYE records for six years in case HMRC raises an enquiry.
Paying PAYE and class 1A NIC – use the correct reference
If you are not paying during the tax month in which the deadline for paying PAYE to HMRC falls, add the year and month numbers to the 13-character accounts office reference. For example, to pay other than in the tax month commencing 6 June for the tax month ending 5 June 2022 (month two of the 2022/23 tax year), add the four extra characters 2302 to the end of your accounts office reference, (ie, 23 for the tax year ending 5 April 2023 and 02 for month two). There is no harm in adding the four extra digits even when paying during the tax month in which the due date falls.
When paying class 1A NIC for 2021/22, due by 19 July (if paying by cheque) or 22 July (if paying electronically), cite your 13-character accounts office reference, followed by 2213.
HMRC includes some tips and tricks to help complete P11Ds for medical benefit refunds and cars, but does not mention electric cars, for which you can find here. The deadline for filing forms P11D and P11D(b) is 6 July.
PAYE RTI penalties risk-based approach
Late filing and late payment penalties will continue to be considered on a risk-assessed basis, rather than issued automatically, in the current tax year.
The first penalties for 2022/23 will be issued in August 2022. As in previous years, HMRC will continue not to charge late filing penalties automatically if a full payment submission (FPS) is filed late, but within three days of the payment date, and there is no pattern of persistent late filing. Note that this is not an extension to the current statutory position on reporting PAYE payments; employers are required to file their submissions on or before the contractual payment date unless any of the circumstances set out in HMRC’s Sending an FPS after payday guidance arise.
Employers who persistently file after the statutory filing date but within three days will continue to be monitored and may be contacted or considered for a late filing penalty as part of HMRC’s risk-based approach.
Report payroll information accurately and on time
The bulletin says that “the payment date you report on your Full Payment Submission (FPS) should be on or before the date you pay your employees…”.
This is incorrect. The payment date that must be shown on the FPS and the date by which the FPS must be submitted to HMRC, is the contractual payment date, not the date on which you pay your employees. These two dates may differ. For example, where payments are made early because of a weekend or bank holiday, as explained in the bulletin.
It is also important to show the contractual payment date on the FPS, rather than the actual payment date. This ensures that DWP does not reduce universal credit awards, due to additional earnings being incorrectly reported as having been paid in a universal credit month.
The bulletin contains a reminder that certain COVID-19 easements are ending. For example, the easement of the Enterprise Management Incentive (EMI) working time requirement, pausing Save As You Earn (SAYE) savings, and social security co-ordination with the EU.
Tax treatment of tips gratuities and services charges
Guidance on how tips, gratuities and service charges are taxed has been updated. See the revised E24 guidance on tips, gratuities, service charges and troncs, in addition to the updated Tips at work guidance published in November 2021. The updated guidance reflects a shift towards customers paying tips electronically, including through digital applications specifically designed for this purpose.
A payment made in this way does not change any of the basic principles for deciding how tax is to be accounted for on those tips and whether an NIC liability arises. In brief:
- Where the employer collects the tips and pays them to employees, the employer is required to deduct income tax and NIC from these earnings.
- Where customers pay tips directly to staff, each employee is responsible for declaring these earnings to HMRC who will adjust the employee’s tax code to collect the tax due. These payments are not subject to NIC.
- There are also separate rules for payments made through troncs where the payments are not normally subject to NIC.
Read more here
Employers with multiple employer PAYE references
The rules on when elections for separate PAYE schemes must be submitted have been relaxed from 6 April 2022.
Previously, elections for a separate PAYE scheme had to be made before the beginning of the tax year for which the election was to take effect. From 6 April 2022, a change has been made to Income Tax (PAYE) Regulation 98, covering ‘Multiple PAYE Schemes’, to allow employers to elect during a tax year.
Under the new regulations, an employer must make an election before the beginning of the tax month immediately preceding the tax month for which the election is to have effect. For example, if you want to make an election that takes effect from 6 May, the election must be made before 6 April.
Multi-factor authentication has been introduced on Government Gateway accounts including the business tax account as an additional security feature. This involves HMRC sending a code either by text or by voice call to a designated telephone.
Employer Bulletin advises how to change the telephone number, including in cases where nobody in the business can login to the business tax account. As noted above, this is just a selection of this month’s articles. For full details of all of the articles, see the bulletin.
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
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