Childcare vouchers scheme closes to new joiners in April 2018

Childcare Vouchers Scheme

The Childcare Vouchers Scheme closes to new joiners in April 2018.

If an employer chooses to offer a Childcare Vouchers Scheme, it is possible for employees to purchase childcare vouchers through payroll as a salary sacrifice.  A maximum fixed amount can be provided free of tax and National Insurance, and the employer does not have to report anything to HMRC as long as the amounts are below these thresholds.

The scheme is still live, companies can still join, and employees can join existing schemes.  After April 2018 these schemes will continue to run but will be closed to new joiners.

Thresholds

The limits for childcare vouchers are as follows:

For an employee that joined the scheme before 6th April 2011:  £55 per week or £243 per month

For employees that joined on or after 6th April 2011:

Rate of Income Tax Weekly Limit Monthly Limit
Basic £55 £243
Higher £28 £124
Additional £25 £110

If the contributions exceed these limits then the benefit would be reported through a P11D (or payroll if applicable) and class 1 national Insurance is due on the amount above the limit.

Childcare Options

Salary sacrifice is a benefit that is received in exchange for a reduction in salary.  So if you are considering offering childcare vouchers as a salary sacrifice scheme, advice should be sort for the implications to your company and employees.

There are now far more options for tax free childcare, and parents can already apply for these.  Childcare providers should have this well in hand, as the roll out of the new schemes have already started.

The new schemes do not need to be put through the payroll and it appears that parents will have more control.  Tax-Free Childcare cannot be used at the same time as childcare vouchers, and HMRC have online calculators parents can use to try and work out which scheme is best for them.


Employee Duplication

We had a number of issues with employee duplication this April, but there are steps that can be taken that we would normally expect to prevent this.

What is Employee Duplication?

HMRC hold an individual record for each employee at their current employer.  Duplication is when HMRC creates a second identical record for that employee at the same employer.

Why is it an issue?

Because at this point everything is still automated, HMRC will then assume that the employee is employed twice at the same company, and will issue tax codes such as BR or D0, removing an employee’s tax free allowance.  You can also have 0T or seemingly random tax codes issued.

If the tax code changes are not spotted in time then employees may have a dramatically reduced net pay.  This will cause problems in the workplace.

What is the solution?

Once the duplication has occurred then the best way to resolve it seems to be for the employees to call HMRC individually.  HMRC may look for a better solution in the future but for now that is the best option.

If there are more than 50 BR or D0 tax codes issued then the Finance Director should promptly contact HMRC to trigger an investigation, HMRC should then be able to fix the error en masse.  If there are less than 50 BR or D0 tax codes issued then the employee has to phone the HMRC helpline on their own behalf.

When does it occur?

The usual time is when there is a change in payroll software.  It can occur at any time but it is usually triggered by a change in employee personal details or how they are reported to HMRC.

How can duplication be prevented?

This used to be fairly straightforward but there has been some unannounced changes in April that mean more employees will have been affected this tax year.  There is an indicator in the FPS (Full Payment Submission) to say that the PayId is changing.  The PayId is the unique number used for the employee in RTI (Real Time Information) submissions to HMRC, and is not necessarily the same as the employee reference number or works number.

HMRC have changed slightly how they deal with the PayId change indicator values in April.  They suggest they are still using National Insurance numbers, names and addresses to try and prevent duplication but this appears to be very unreliable.

If you do change payroll software or provider you should always provide the previous PayId.  The previous PayId must match exactly with what was previously submitted.  If you do not have the previous PayId, or are unsure, it is still possible to indicate a new reference.

Unfortunately, even if the submission is perfect, it is still possible for errors to occur.

HMRC helpline for employers  0300 200 3200

HMRC helpline for employees 0300 200 3300


Apprenticeship Levy

The Apprenticeship Levy

The Apprenticeship Levy came into force this April, and will effect companies or groups with a wage bill of £3 million or higher.  We have had many enquiries around the Levy as it is not particularly straightforward, and there has not been as much publicity as might have been expected.  Where it is a single company affected it is not too difficult, but things become more interesting where there is a group of companies.

The wage bill for the purposes of the Levy is all pay subject to secondary class 1 National Insurance Contributions, such as wages, bonuses and commissions.  The Levy is an additional 0.5% charge which will be reported through Real Time Reporting and paid to HMRC in the usual way.

In payroll we are concerned with the Apprenticeship Levy and how money is deducted through the payroll, but there have also been changes with the Apprenticeship Service and how employers source funding for their training needs.

With the Apprenticeship Levy there is a £15 000 per year allowance available per company or per group, this is where the wage bill of £3 million or higher comes in (0.5% of £3 million is £15 000).  The Levy is calculated per month on a cumulative basis, as is the allowance.  The allowance can be divided between companies within a group, or one company could take it all and the others have zero.

Some examples from our understanding of the Apprenticeship Levy –

Example 1

Company has £500 000 annual wage bill and is not part of a group.

Liability would be 0.5%, so £2 500, but the allowance is £15 000 so this company does not have to pay the Levy

Example 2

Company has £500 000 annual wage bill but is part of a group

Liability would be 0.5%, so £2 500, and the allowance has been set to zero, so this company has to pay the additional £2 500 across the year.

Example 3

Company has £2 000 000 annual wage bill but is part of group

Liability would be 0.5%, so £10 000, but they have £5 000 of allowance allocated to them, so this company would pay an additional £5 000.

Example 4

It is month 3, the year to date wage bill is £800 000.

Liability is 0.5%, so £4 000, and the company is not part of the group so has the full allowance.

The allowance available is 3/12 of £15 000, so £3 750, therefore the company has a Levy to pay of £250 to date.

 

In Example 4 if the company’s wage bill reduced and ultimately was lower than £3 million across the year, any overpaid Levy would have been credited back to the company via a reduction in their payments to HMRC.

For more information and the official site see here or see the ACAS site for a little more information on Apprentices.


Personal Tax Accounts

Personal Tax Accounts

HMRC have requested that employers, and their payroll teams, promote Personal Tax Accounts (PTAs) to their employees.  Employees can update their address and personal details in this way.  One benefit to employers is that this may reduce the number of employee enquiries.

HMRC introduced PTAs over a year ago, and are aiming for a digital service for people to take care of their tax in the same way as they manage their banking.  Employees can go online, at a time that suits them, and have access to information such as personal information, tax credits, apply for marriage allowance, check details on company cars and other benefits, complete Self Assessment, review National Insurance contributions, review their state pension etc

It is important that employees update their address with HMRC.  Where an employee lives will have an impact on the Apprenticeship Levy and how funds are allocated, and the Scottish Rate of Income Tax threshold is going to move away from the rest of the UK this April.

Reduced time spent on HMRC telephone support services

HMRC are also hoping the PTAs are going to help with enabling employees to understand their tax position, as well as updating any change in circumstance and accessing support without the need for a phone call.  The HMRC telephone support services do not have the best reputation for speed and efficiency, so if PTAs can help with this function it will be a worthwhile exercise.

The HMRC app

There is also the ‘HMRC app’ for smart phones, giving access to personal tax information.  The app is available for Apple, Android and Windows.

How to Access the PTA

To activate a PTA for the first time you will need:

  • National Insurance Number
  • A payslip, P60 or passport
  • A phone for a 2 stage security access code

It is a little long winded but not too difficult to do, and within ten to fifteen minutes you would have access to your Personal Tax Account.  The two stage verification appears to be required, but as you are unlikely to be signing in very frequently probably will not be too onerous.

So employers should be promoting the Personal Tax Accounts to their employees, and signing up themselves.

 


Minimum Wage April 2017

Minimum Wage April 2017

The annual National Minimum Wage adjustments will be moved to April from this year, and so there will no longer be a change in October. The rates have been released and further details are as below:

Worker Category Old Rate New Rate from April 2017 % Change
National Living Wage
(Aged 25 or over)
£7.20 £7.50 4%
Aged 21 – 24 £6.95 £7.05 1%
Aged 18 – 20 £5.55 £5.60 1%
Aged 16 – 17 £4.00 £4.05 1%
Apprentice Rate £3.40 £3.50 3%

Most workers will be eligible for the minimum wage and further guidance is available on the HMRC or ACAS websites. There are some workers that are not eligible for minimum wage, but it is a criminal offence not to pay an employee the National Minimum Wage or National Living Wage if they are eligible.

The minimum wage rates must be paid for hours worked in the corresponding pay period, so it may be possible that some hours will be paid at the old rate for payrolls with a pay day in April.  HMRC guidance refers to pay reference periods, which should not be longer than 31 days and will depend upon the pay frequency.

If you have any questions about the upcoming changes please contact us.