Annual HR & Payroll Conference 2007 - Tenerife

HRD & Payroll Solutions are proud to present their 13th Annual HR and Payroll Conference 2007, a range of high quality Payroll and HR modules all designed to impart the maximum amount of skill and knowledge in a relaxed and friendly environment. Conference Dates - Fri 2nd March - Tue 6th March 2007 - £1497 Hurry as there are still a few places availabe - For more information click here.

News Items – at 6th February 2007

Advisory fuel rates for company cars

New rates apply from 1 February 2007

HMRC’s advisory fuel rates are used by employers to negotiate dispensations for mileage payments for business travel in company cars.  The rates only apply where employers:

• reimburse employees for business travel in their company cars, or
• require employees to repay the cost of fuel used for private travel.

The rates are based on the fuel cost per mile for the most popular fleet cars.  They were introduced from January 2002 and were adjusted to reflect increased fuel costs in April 2004, July 2005 and July 2006.

As a result of the recent general reductions in car fuel prices, HMRC has reviewed the advisory fuel rates again and the changes from 1 February 2007 are shown in the following table:

HMRC has documented the way in which the rates have been calculated.  They are based on average miles per gallon for the different engine sizes, reduced by 10% to give more realistic fuel consumption figures.  The fuel prices used are

• petrol – 86.3 p per litre (392.2p per gallon)
• diesel – 90.5p per litre (411.2p per gallon)
• LPG – 45.5 p per litre (206.9p per gallon).

Further information:
Company Cars - Advisory Fuel Rates for Company Cars  http://www.hmrc.gov.uk/cars/fuel_company_cars.htm
Company Cars - Advisory Fuel Rates for Company Cars from 1 July 2006  http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
Company Cars - Advisory Fuel Rates for Company Cars – earlier rates
http://www.hmrc.gov.uk/cars/advisory_fuel_archive.htm

Temporary and agency workers

Private members’ Bill seeks to provide employment rights equivalent to direct workers

Among a number of private members’ Bills that received their first readings in the House of Commons in December was one to prohibit discrimination against temporary and agency workers and to provide for the enforcement of their employment rights.  The Temporary and Agency Workers (Prevention of Less Favourable Treatment) Bill is sponsored by Paul Farrelly, Labour MP for Newcastle-under Lyme. 

Private Members' Bills are Public Bills introduced by MPs and Lords who are not government ministers.  As with other Public Bills, their purpose is to change the law as it applies to the general population.  They have to go through all Parliamentary stages but, as relatively little time is allowed for their consideration, most private members’ Bills never become law.
The provisions of the Bill have obvious similarities to the “prevention of less favourable treatment” legislation for part-time workers and fixed-term employees.  Less favourable treatment for those workers and employees is determined by identifying, respectively, “comparable” full-time workers and “comparable” permanent employees. 

The same approach is proposed for temporary and agency workers – they should be treated not less favourably than “comparable” direct workers.  A “direct worker” is a person who is not an agency worker and who is either

• an employee working under a contract of employment, or
• a contractor working under a contract for the provision of services other than as a self-employed worker.

Agency workers are workers who are supplied under a contract between an employment business and an end user.  Less favourable treatment would be identified by comparing the “basic working and employment conditions” provided for an agency worker and those provided for a direct worker. The direct worker would have to be a person, temporary or otherwise, who is

• employed by the same end user,
• performing broadly similar work with, if relevant, similar seniority, qualifications and skills, and
• based at the same establishment or, if there is no direct worker at the same establishment, a different establishment.

A worker’s “basic working and employment conditions” would be conditions relating to

• the duration of working time, rest periods, night work, paid holidays and public holidays,
• pay, including sick pay
• work done by pregnant women and nursing mothers, children and young people, and
• action taken to combat discrimination on the grounds of sex, race or ethnic origin, religion or beliefs, disabilities, age or sexual orientation.

Treatment of an agency worker would only be “less favourable” if

• it is on the ground that the worker is an agency worker, and
• it is not justified on objective grounds.

However, treatment would not be “less favourable” if it could be shown that the “pro rata temporis principle” applies, i.e. the difference in pay and benefits is in proportion to the hours worked by the agency worker and the direct worker.

Agency workers would have to be provided with information by the end user of any vacancies for work as a direct worker and any clause in the contract between the agency and the end user that would prevent an agency worker becoming a direct worker of the end user would be void.  Agency workers would be protected against dismissal, or action short of dismissal, for exerting, or intending to exert, any right under these provisions.  There would be the right for an agency worker to make a complaint to an employment tribunal and, in the case of alleged dismissal, both the agency and the end user would be deemed to be the employer and have joint and several liability for any award of compensation.

Further information:
Temporary and Agency Workers (Prevention of Less Favourable Treatment) Bill  http://www.publications.parliament.uk/pa/pabills/200607/
temporary_and_agency_workers.htm

Alternatives to P11D benefits and expenses reporting

IPP publishes initial findings from its survey of members

The Institute of Payroll Professionals (IPP) has published a summary of the results of a survey conducted among members of ways to reduce the burden of reporting employment benefits and expenses on form P11D.

The Republic of Ireland scrapped its own P11D reporting procedures in 2004 and started to process almost all benefits and expenses through the payroll.  Do you think that would be a better arrangement for UK employers?

A copy of the Executive Summary can be downloaded from the link below.

Further information:
Emerging findings from the Institute of Payroll Professional (IPP) P11D survey  http://www.paypershop.com/downloads/IPP P11D emerging findings final report.pdf

Payroll deadlines during the next month

February 19 – For employers required to pay tax and NICs etc to the Accounts Office monthly, this is the deadline for payment to be received by the Accounts Office, unless made electronically.

February 22 – For employers required to pay tax and NICs to the Accounts Office monthly, this is the deadline for electronic payments to be cleared into the HMRC bank account.  Payments through BACS must be initiated by February 20 at the latest.

Payroll Tip

Payroll Tip – Professional subscriptions and membership fees

How should payment by the employer of employees’ professional subscriptions be reported on form P11D?

The payment of an employee’s professional subscription or membership fees is a benefit in kind that must be reported on form P11D. It is, however, possible for an employer to obtain a dispensation if certain conditions are met.

Where membership is obtained by the employer

If the membership is obtained by the employer (i.e. the employer is invoiced for the subscription, not the employee), the cost incurred by the employer is reported in Section M Other items, on the Class 1A NICs line. The employer must pay Class 1A NICs on the payment.

However, if the employer is aware that the employee is entitled to a fully matching deduction from earnings, i.e. can claim tax relief in full for the amount reported, (see below), the employer may reduce the liability for Class 1A NICs on the subscription payment by using the adjustment facility in section 4 of the P11D(b) Return of Class 1A NICs.

There is no reportable benefit for a lower-paid employee, i.e. an employee with an earnings rate of less than £8,500, including the value of benefits and expenses.

Where membership is personal to the employee

If the employee is personally invoiced for the subscription and the employer pays the bill direct to the professional body, the amount of the payment is reported on form P11D in Section B Payments made on behalf of the employee or, if relevant, on form P9D in Section A(2) Any other payments or benefits. Class 1 NICs are due on the payment and the employer must add the payment to the employee’s gross pay (for NICs only) in the earnings period in which the bill is paid.

If the employee pays the subscription, the employer reimburses the employee and the payment does not qualify for tax relief, the payment is not reported on form P11D but is taxed through the payroll. The employer must calculate the “grossed-up” value of the payment, i.e. the amount which, after deducting tax and NICs at the employees’ rates, gives the amount that was reimbursed. Thise grossed-up up value is added to gross pay for both PAYE and Class 1 NICs in the pay period in which the reimbursement is made.

If the employer reimburses the employee and, as explained below, the payment qualifies for a fully matching deduction from earnings, the payment should not be made through the payroll. It is treated as a normal business-related expenses payment and reported in section N Expenses payments made to, or on behalf of, the employee. There is no P9D reporting requirement in this situation and no Class 1 NICs liabilities to consider.

Claiming a deduction from earnings
If the benefit has been reported on form P11D, the employee may claim a deduction from earnings (i.e. claim tax relief against the amount reported) if

1. the employee is unable to hold the employment and practice the profession unless the payment has been made, or
2. the payment is made to an approved body whose objectives are related to the practice of the profession.

In the first situation, the legislation lists the many professions that may not be practiced unless the employee is registered, certified or licensed. Examples are doctors, solicitors, architects, teachers, air traffic controllers, drivers of heavy goods vehicles, etc.

In the second situation, many professional Institutes have been approved by HMRC. They include the Chartered Institute of Personnel and Development (CIPD) and the Institute of Payroll Professionals (IPP).

The names of all of the professional bodies covered by the two situations above are listed in List 3, available at www.inlandrevenue.gov.uk/list3.

Dispensation

An employer may be able to obtain a dispensation from the tax office if professional subscriptions are only ever paid in circumstances where the employee is able to claim a fully matching deduction from earnings. There is no reporting requirement if a dispensation applies. However, unless a dispensation for this purposes is held, the full reporting requirements, as described above for the various different situations, must be followed.

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