News Items – at 6th March 2007

Attachment of Earnings

HMCS publishes revised Attachment of Earnings Handbook

Her Majesty’s Court Service (HMCS) has released a fully revised version of Attachment Orders - a guide for employers, incorporating guidance on the Schedule 5 orders issued by magistrates’ courts.  It has a publication date of December 2006.

The Handbook has been updated by the relevant government departments in England, Wales, Northern Ireland and Scotland, along with representatives of employers such as the Institute of Payroll Professionals (IPP).

Unlike the previous version, the new Handbook tackles all of the aspects of operating each particular type of order together.  So, for example, section 2.3 explains everything to do with the administration and calculation of Council Tax AEOs.  Reference is made in that section to the new deduction tables that come into use for new CTAEOs from 1 April 2007.

Only brief guidance is given in the Handbook about the relatively rare Income Payment Orders (IPOs) and Income Support Deduction Notices (ISDNs).  A short section also makes reference to “salary sacrifice”, with the advice that “You should be aware of the rules if you have a salary sacrifice agreement with your employee and he is served with an attachment of earnings order”. However, nothing is said about those rules.   With reference to IPOs, ISDNs and salary sacrifice, the Handbook explains: “These are complex issues and it is beyond the remit of this handbook to provide advice” and “You are always advised to seek independent legal advice”.

Further information:
Attachment Orders - a guide for employers  http://www.hmcourts-
service.gov.uk/cms/files/AE-Handbook-Jan2007_for_web-accessible-
version_final.pdf

Budget 2007

Date announced

The Chancellor will deliver his Budget for 2007 on Wednesday, 21 March at 12.30 p.m.

NICs and Tax Avoidance Schemes

New Regulations provide for backdating of NICs liabilities

Sections 1 and 2 of the National Insurance Contributions Act 2006 provides the Treasury with powers to make Regulations that will ensure that payments of employment income made under tax and NICs avoidance schemes, if necessary backdated to 2 December 2004 when the existing tax provisions came into force, can be treated also as earnings for NICs purposes.  These Regulations have now been published in draft and should come into force from 6 April 2007.  They ensure that a liability for NICs will be assessed on the earnings as if that liability had existed at the time the payments were made.

As a consequence of treating payments as earnings from employment, it will be necessary for employers, which have made use of avoidance schemes that are subsequently closed off in a Finance Act and backdated to an earlier tax year, to recalculate the NICs liabilities on those earnings and, if necessary, recalculate entitlements to SSP, SMP, SSP and SAP.

Further information:

Payroll deadlines during the next month

March 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.

March 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 March 19 at the latest.

April 5 – This is the final day of tax month 12 and of the tax year.  Tax and NICs etc. for payments made in the tax month to April 5, and any outstanding tax and NICs etc. for the tax year, are due for payment to the Accounts Office by April 19, or by April 22 if paid electronically.

April 6 – This is the first day of the new tax year.

Payroll FAQ's

Mobile telephones

What does the tax exemption for mobile phones allow us to pay for without a tax charge on the employee?

Section 319 of the Income Tax (Earnings and Pensions) Act 2003 specifically removes any liability for income tax on the provision of a single mobile phone that is placed at the disposal of an employee.  An additional phone for the employee’s use, or a phone provided for the use of a member of an employee’s family or household, is fully taxable under the relevant rules, e.g. the rules for assets as an asset placed at the employee’s disposal, or the voucher rules.

However, earlier rules, which allowed an employee to have more than one mobile phone and family/household members also to be loaned mobile phones, continue to apply to mobile phones that were provided before 6 April 2006.

An employee is not treated as having more than one mobile phone if the employer provides two SIM cards for the same telephone number so that, for example, the employee can have a phone installed in a car and a separate mobile phone.

The current exemption applies to the telephone itself, to the rental and call charges met by the employer under a contract between the employer and the service provider and, if the phone is installed in a car, van or heavy goods vehicle, to any associated hands-free kit and installation costs.

There is no condition imposed relating to the extent of the use of the mobile phone for private use.  The exemption applies if it is provided exclusively for private use or if it can be given up for a higher wage or salary.  There is also no reportable benefit under the voucher rules if the phone or call charges for the single phone are provided by means of non-cash vouchers or by using the employer’s credit card.

However, there are a number of other situations where the exemption does not apply. 

• If the employer buys the mobile phone and gives or sells it to the employee so that ownership is transferred to the employee, the benefit is valued according to the market value of the phone at the time ownership is transferred and the amount is reported in Section A of form P11D.  There is no P9D reporting requirement for lower-paid employees, i.e. those with an earnings rate of less than £8,500.
• If the mobile phone belongs to the employee and the employer reimburses the employee’s costs in acquiring the phone, the payment must be made through the payroll and both tax and NICs deducted.
• If the mobile phone belongs to the employee and the employer pays the employee’s personal bills direct to the service provider, the amount paid is reported in Section B of form P11D or Section A(2) of form P9D.  A liability for Class 1 NICs arises at the time the payment is made.
• If the mobile phone belongs to the employee and the employer reimburses the employee’s business call charges only, the payment is reported in Section N of form P11D.  There is no P9D reporting requirement for lower-paid employees.  There is no liability for Class 1 NICs.  (A dispensation would avoid the reporting requirement here.)
• If the mobile phone belongs to the employee and the employer reimburses the employee’s private call charges, the payment is reported in Section N of form P11D or Section A of form P9D.  A liability for Class 1 NICs arises at the time the payment is made.

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