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News Items – at 14th March 2007
The Agricultural Wages Board for Northern Ireland has proposed changes to the minimum rates of wages for agricultural workers. The proposals follow a meeting held earlier this year and involve the current rates being replaced by a new grading system including new age bands at each grade.
It is proposed that workers entering the agricultural industry on or after 2 April 2007 will start at the new 'Minimum Rate'. Those currently working within the industry will move to the rate set out at Grade 2 'Standard Worker'. This will be a proposed increase of 3.6%. No current agricultural worker should have their pay reduced by this proposed change.
To advance to the next grade, a worker has to attain additional experience and/or qualifications. The definitions for the grades and the qualifications required for each grade, as well as the proposed new structure and rates, are available at the link below.
The Board also proposes the creation of an additional ‘Accommodation Offset’. This is for agricultural workers on a contract of less than 52 weeks. These workers will be defined as 'Temporary and Harvest Employees' and their Accommodation Offset will be £29.05 per week.
The Board will meet again in late March 2007 to consider any objections to the proposals and may make an Order to give effect to the new rates which would come into operation on 2 April 2007.
Further information:
Agricultural Workers Minimum Wage Rates Consultation http://www.nics.gov.uk/press/ard/070308b-ard.htm
AWB New Grading System http://www.dardni.gov.uk/index/publications/pubs-dard-
fisheries-farming-and-food/publications-dard-awb-new-grading-system.htm
We announced the publication of HM Court Service’s revised Attachment of Earnings Handbook in our news items last week. Since then we have worked through the book to update HRD & Payroll Solutions’ training materials on court orders. From a positive point of view, we have made a number of improvements to the course notes from information provided in the Handbook.
However, the Handbook also has a small number of errors, inconsistencies and areas where we think that necessary information is missing. We have itemised these and have submitted the details to HMCS through the Institute of Payroll Professionals (IPP). As far as we can see there are no major problems with this Handbook as there were with earlier versions and, if you have not already downloaded a copy for use in the payroll office, we recommend that you do so.
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
The Low Pay Commission (LPC) presented its 7th Annual Report to the Government in February. On 7 March, the Government announced that it had accepted the recommended rate increases. Accordingly, the adult minimum hourly wage will increase by nearly 3.2%, from £5.35 to £5.52, from the first pay reference period that starts on or after 1 October 2007.
The Youth Development Rate, for workers aged between 18 and 21, will increase from £4.45 to £4.60, and the rate for workers aged 16 and 17 will rise from £3.30 to £3.40. The accommodation offset, currently £4.15 per day or a maximum of £29.05 per week, will increase to £4.30 per day or a maximum of £30.10 per week.
In summary, the Low Pay Commission’s recommendations were
- that the adult rate of the minimum wage should be increased from £5.35 to £5.52 in October 2007
- that the Youth Development Rate should increase from £4.45 to £4.60 and the 16-17 year old rate should increase from £3.30 to £3.40
- again that 21 year olds should be entitled to the adult rate of the National Minimum Wage
- again that the Government invite us to carry out a full review of the apprentice and pre-apprentice exemptions and report in 2008
- that the Government works more collaboratively with other organisations to raise awareness of the minimum wage
- that the Government, as part of its enforcement programme, choose a low-paying sector to target in 2007/08 that has a high concentration of migrant workers
- that, as a deterrent to non-compliance, the Government introduce a penalty to apply to any employer found to have underpaid the minimum wage
- again that the Government continue to make clear that the commissioning policies of local authorities should reflect the costs of care provision. We emphasise, in particular, the need for the Government to monitor actively how far practice matches policy, to examine the reasons for any uneven provision, and, if appropriate, to provide further guidance.
- that the accommodation offset should increase to £4.30 per day in October 2007
- that the Government ask us to report in early 2008 on recommended rates for October 2008.
There has not yet been any formal response from the Government to the LPC’s recommendations other than to accept the recommended increase in the rates. Confirmation has also been given that the next business sectors to be targeted for compliance are the hotel and hospitality sectors.
Further information:
Low Pay Commission’s 2007 Report and Recommendations to Government http://www.lowpay.gov.uk/lowpay/LPC_Press_Notice_2007_Report.doc
National Minimum Wage – Low Pay Commission Report 2007 http://www.lowpay.gov.uk/lowpay/report/pdf/6828-DTi-Low_Pay_Complete.pdf
(DTI) National Minimum Wage rises for a million workers http://www.gnn.gov.uk/Content/Detail.asp?ReleaseID=269285&NewsAreaID=2
On 25 May 2006, the Government published a White Paper entitled Security in retirement: towards a new pensions system which included an announcement that contracting out on a defined contribution (DC) basis (also known as money purchase contracting out) was to be abolished, likely from 2012.
The White Paper explained that the Government would consult on the possibility of reforming or removing the rules applying to contracted-out rights (known as protected rights) already built up or held in DC schemes at the point of abolition. The intention was to increase simplicity and choice for members and to reduce costs and administrative burdens for schemes.
On 13 September 2006, the Government published a consultation document entitled Abolition of defined contribution (DC) contracting out: treatment of protected rights accrued in the past and proposed operational arrangements. Thirteen industry representatives subsequently attended a DWP workshop and 37 written responses were received.
The Government has now published a report on the consultation exercise and with a response on the two main aspects of the consultation, namely:
- the treatment of protected rights accrued in the past; and
- the operational arrangements to be put in place to achieve a smooth abolition of DC contracting out.
Firstly, the Government confirms its decision to abolish DC contracting out. The judgement on whether a person would be better off contracted in or contracted out of the State Second Pension is complex and does not provide the clarity needed when making pensions saving decisions. Provisions contained in the Pensions Bill 2006 will abolish DC contracting out. From the date of abolition, scheme members will begin to build up full entitlement to the State Second Pension.
The rules applying to protected rights
Abolition of DC contracting out will mean that scheme members and their employers will no longer be entitled to a contracting-out rebate in respect of earnings relating to employment. However, they would still have to comply with existing rules that apply to the protected rights accrued prior to the date of abolition.
Protected rights derive from the amount of contracting out rebate that people who are contracted-out on a DC basis receive. The protected rights are a pot of money built up from the amount of rebate, its investment return and any tax relief. The rules that apply to protected rights require them to be tracked separately from other rights in the scheme for a number of reasons, including, for example, for them to be used to provide for a survivor benefit where the member is married or is a civil partner at the point of annuity purchase.
Retaining the rules on protected rights already accrued once DC contracting out is abolished would perpetuate the current difficulties caused by these rules. Removing all of them is the only way in which the whole of the ‘pension pot’ could be treated in the same way. If this were to be done, it would simplify scheme administration and provide greater flexibility and choice for scheme members.
Most of the respondents to the consultation agreed with the proposal to remove the rules on protected rights. Many took the view that it should be for the individuals to decide what provision they make for their spouse, civil partner or dependants and that the decision should be based only on their pers
onal circumstances, their savings and those of their dependents.
The Government recognises that, unless all of the remaining rules are removed, schemes will have to continue to track protected rights separately and HMRC will have to continue to be informed by schemes when protected rights have been secured.
However, the Government also recognises that there are concerns about the potential impact on survivors, especially women, of removing the rule requiring provision of a survivor benefit. The Government believes that this question requires more in-depth consideration and has announced that this will take place as part of the joint DWP/HM Treasury review of the working of the Open Market Option for annuities. This review was announced by the Chancellor at the Pre-Budget Report in November 2006 and is expected to reach its conclusions by the end of 2007.
In the meantime, the Government has taken a power in the Pensions Bill, currently before Parliament, to abolish or vary by regulations some or all of the DWP rules that determine the use of protected rights. The use of this power will be decided once the review of the working of the Open Market Option for annuities publishes its findings.
Operational Matters
Other decisions made by the Government in the light of responses to the consultation include:
- automatic cessation of DC contracting out scheme certificates from the date of abolition
- setting up a working group to develop a communication strategy for ensuring wide publicity about the abolition of DC contracting out and to alert individuals to the need to take account of this when considering their pension savings options.
Further information:
Abolition of Defined Contribution (DC) Contracting Out: Treatment of Protected Rights Accrued in the Past and Proposed Operational Arrangements http://www.dwp.gov.uk/publications/dwp/2006/dc-govt-response.pdf
The standard deduction rate that applies to payments made to subcontractors that are registered for payments under deduction increases from 18% to 20% from 6 April 2007.
Where a payment is processed on or before 5 April but will not be paid until after that date, it may be difficult for a computerised accounting or payroll system to apply the correct deduction rate. HMRC’s guidance is that, where an invoice is to be paid after 5 April but is processed on or before that date, the new rate should be applied. However, as many systems will not use the new rate in those circumstances, HMRC will not expect the contractor to reprocess the payment after 5 April but would expect the correct deduction rate to be applied as soon as the system allows.
In that situation, the contractor should show the amount of payment and the actual deduction made on the monthly return for the month in which the payment was made. HMRC will not usually regard such action as a compliance failure by the contractor. However, HMRC would not expect to see such under-deductions beyond the return for the month ending 5 June 2007, unless there were exceptional circumstances.
Further information:
CIS: handling the change of deduction rate within a computerised accounting system http://www.hmrc.gov.uk/new-cis/change-of-deduction.htm
Starting 12 March 2007, HMRC is sending letters to all contractors accompanied by lists of subcontractors that have been paid by each contractor since 6 April 2005 and therefore do not have to be verified under the new CIS. A paper list is being sent to those contractors with 125 or fewer subcontractors; a CD-ROM is being sent where there are 126 or more subcontractors on the list.
Further information:
Letter to CIS Contractors - CIS333C and CIS333D http://www.hmrc.gov.uk/new-cis/mailshots.htm
Employers that file electronically were sent P35N notifications from 7 March onwards reminding them of their obligation to file their P14 and P35 returns by 19 May 2007.
Employers may file their returns before the end of the tax year, as soon as they are ready. However, the following restrictions should be noted for the period 4 April to 8 April.
Between 6 a.m. on 4 April to 6 a.m. on 6 April, HMRC’s PAYE Online - Internet service will be unavailable due to the annual upgrade. During that period it will not be possible to
- prepare and file returns using the online facilities on HMRC’s website, or
- download coding and other notices from HMRC’s website.
However, employers may continue, during that period, to file returns by Internet or Electronic Data Interchange (EDI) using third-party software.
Returns that are filed electronically on Saturday or Sunday, 7/8 April will not receive an acceptance or rejection message until Monday, 9 April. Employers filing on either of these two dates must wait until the Monday before deciding whether to send the Return again or make an amendment. If an acceptance is not received on the Monday, the Online Service Helpdesk (0845 605 5999) should be contacted on the Tuesday.
Further information:
2006-07 Employer Annual Return: P35 and P35N Notifications http://www.hmrc.gov.uk/employers/p35n-notif06-07.htm
2006-07 Returns: Sending your Return online between 4 and 9 April http://www.hmrc.gov.uk/briefs/brief2107.htm
The application form for operating modified NICs procedures for tax equalised employees coming from abroad (Employment Procedures Manual – Appendix 7A) has been amended to include the following sentence at paragraph 25:
"The new employer record will comprise a reference number and a payslip book to enable the NIC Settlement Return referred to at Part 7 and the residual payment referred to at Part 8 to be made”.
The application form for operating modified NICs procedures for employees working abroad (Employment Procedures Manual – Appendix 7B) has been amended to include the following sentence at paragraph 20:
“The new employer record will comprise a reference number and a payslip book to enable the NIC Settlement Return referred to at Part 7and the residual payment referred to at Part 8 to be made”.
Further information:
Modified NICs procedure for tax equalised employees coming from abroad http://www.hmrc.gov.uk/manuals/epmanual/epapp7a.htm
Modified NICs procedure for employees working abroad http://www.hmrc.gov.uk/manuals/epmanual/epapp7b.htm
Employees needing to claim tax relief for the provision of business-related expenses received during the 2006/07 tax year may do so by completing form P87 Tax relief for expenses of employment year ended 5 April 2007.
The form has sections for claiming mileage allowance relief for the use of a personal car or van for business mileage, hotel and meal expenses, other business expense, and general expense allowances.
Further information:
P87 Tax relief for expenses of employment year ended 5 April 2007 http://www.hmrc.gov.uk/forms/p87.pdf
HMRC has warned of an error on page 10 of the E10 Employer Helpbook, in the guidance for completing form P14. In the section “Columns 1a to 1c”, the third bullet point should read:
“If the employee is normally weekly or monthly paid – and earned consistently above the Earnings Threshold – the amounts in columns 1a and 1b inclusive should always be
1a - a multiple of 84 (LEL) if weekly paid
a mulitple of 364 (LEL) if monthly paid
1b - a multiple of 13 (ET-LEL) if weekly paid
a multiple of 56 (ET-LEL) if monthly paid.”
Further information:
Error in helpbook E10 – Finishing the tax year up to 5 April 2007 http://www.hmrc.gov.uk/employers/e10-error.htm
From 6 April 2007, the official rate of interest increases from 5% to 6.25%. The rate applies to the provision of free or low interest loans to employees during the 2007/08 tax year. The tax charge is on the difference between any interest paid by the employee and the interest which would have been paid at the official rate of interest.
The official interest rate in force at the beginning of a tax year is also used when calculating the cash equivalent of the provision of living accommodation that cost over £75,000.
Further information:
The Taxes (Interest Rate) (Amendment) Regulations 2007 http://www.opsi.gov.uk/si/si2007/uksi_20070684_en.pdf
Explanatory Memorandum http://www.opsi.gov.uk/si/em2007/uksiem_20070684_en.pdf
New deduction tables come into force for Council Tax Attachment of Earnings Orders (CTAEOs) issued by billing authorities in England and Wales from 1 April 2007. The new tables have been added to the source legislation for CTAEOs by means on the Council Tax and Non-Domestic Rating (Amendment) (England) Regulations 2006.
Unfortunately, the Amendment Regulations contained a typographical error, quoting "£335" instead of "£355" as the upper threshold for the 12% band on the weekly table. The error has now been corrected by means of the Council Tax and Non-Domestic Rating (Amendment) (England) Regulations 2007.
Further information:
The Council Tax and Non-Domestic Rating (Amendment) (England) Regulations 2007http://www.opsi.gov.uk/si/si2007/20070501.htm
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.
April 6 – This is the first day of the new tax year.
Payroll FAQ's
Rates and Thresholds
Income tax rates and thresholds
|
Starting rate, 10% |
Basic rate, 22% |
Higher rate, 40% |
2006/07 |
£0 – £2,150 |
£2,150 – £33,300 |
Over £33,300 |
2005/06 |
£0 – £2,090 |
£2,090 – £32,400 |
Over £32,400 |
2004/05 |
£0 – £2,020 |
£2,020 – £31,400 |
Over £31,400 |
2003/04 |
£0 – £1,960 |
£1,960 – £30,500 |
Over £30,500 |
2002/03 |
£0 – £1,920 |
£1,920 – £29,900 |
Over £29,900 |
2001/02 |
£0 – £1,880 |
£1,880 – £29,400 |
Over £29,400 |
2000/01 |
£0 – £1,520 |
£1,520 – £28,400 |
Over £28,400 |
Income tax allowances
|
Emergency Tax Code |
Personal allowance |
Blind person’s allowance |
Married couple’s allowance |
up to age 65 |
age
65-74 |
from age 75 |
up to age 75 |
from age 75 |
2006/07 |
503L |
£5,035 |
£7,280 |
£7,420 |
£1,660 |
£6,065 |
£6,135 |
2005/06 |
489L |
£4,895 |
£7,090 |
£7,220 |
£1,610 |
£5,905 |
£5,975 |
2004/05 |
474L |
£4,745 |
£6,830 |
£6,950 |
£1,560 |
£5,725 |
£5,795 |
2003/04 |
461L |
£4,615 |
£6,610 |
£6,720 |
£1,510 |
£5,565 |
£5,635 |
2002/03 |
461L |
£4,615 |
£6,100 |
£6,370 |
£1,480 |
£5,465 |
£5,535 |
2001/02 |
453L |
£4,535 |
£5,990 |
£6,260 |
£1,450 |
£5,365 |
£5,435 |
2000/01 |
438L |
£4,385 |
£5,790 |
£6,050 |
£1,400 |
£5,185 |
£5,225 |
NICs thresholds
|
Lower Earnings Limit |
Earnings Threshold |
Upper Earnings Limit |
2006/07 |
£84 |
£97 |
£645 |
2005/06 |
£82 |
£94 |
£630 |
2004/05 |
£79 |
£91 |
£610 |
2003/04 |
£77 |
£89 |
£595 |
2002/03 |
£75 |
£89 |
£585 |
2001/02 |
£72 |
£87 |
£575 |
2000/01 |
£67 |
£76/£84 |
£535 |
NICs contracting-out rebates
|
Contracted-out Salary Related schemes |
Contracted-out Money Purchase schemes |
|
Employer |
Employee |
Total |
Employer |
Employee |
Total |
2006/07 |
3.5% |
1.6% |
5.1% |
1.0% |
1.6% |
2.6% |
2005/06 |
3.5% |
1.6% |
5.1% |
1.0% |
1.6% |
2.6% |
2004/05 |
3.5% |
1.6% |
5.1% |
1.0% |
1.6% |
2.6% |
2003/04 |
3.5% |
1.6% |
5.1% |
1.0% |
1.6% |
2.6% |
2002/03 |
3.5% |
1.6% |
5.1% |
1.0% |
1.6% |
2.6% |
2001/02 |
3.0% |
1.6% |
4.6% |
0.6% |
1.6% |
2.2% |
2000/01 |
3.0% |
1.6% |
4.6% |
0.6% |
1.6% |
2.2% |
NICs rates – Employer Contributions
|
Not Contracted-out |
Contracted-out
Salary Related |
Contracted-out Money Purchase |
2006/07 |
12.8% |
9.3% |
11.8% |
2005/06 |
12.8% |
9.3% |
11.8% |
2004/05 |
12.8% |
9.3% |
11.8% |
2003/04 |
12.8% |
9.3% |
11.8% |
2002/03 |
11.8% |
8.3% |
10.8% |
2001/02 |
11.9% |
8.9% |
11.3% |
2000/01 |
12.2% |
9.2% |
11.6% |
NICs rates – Employee Contributions
|
Not Contracted-out |
Contracted-out |
Reduced Rate |
Deferred Rate |
2006/07 |
11.0% |
9.4% |
4.85% |
1.0% |
2005/06 |
11.0% |
9.4% |
4.85% |
1.0% |
2004/05 |
11.0% |
9.4% |
4.85% |
1.0% |
2003/04 |
11.0% |
9.4% |
4.85% |
1.0% |
2002/03 |
10.0% |
8.4% |
3.85% |
0.0% |
2001/02 |
10.0% |
8.4% |
3.85% |
0.0% |
2000/01 |
10.0% |
8.4% |
3.85% |
0.0% |
Statutory Payments
|
Statutory Redundancy Pay |
Statutory Sick Pay |
Statutory Maternity/Paternity*/Adoption Pay* |
Rate |
Recovery |
SER |
Threshold |
2006/07 |
£290 |
£70.05 |
£108.85 |
92% |
104½% |
£45,000 |
2005/06 |
£280 |
£68.20 |
£106.00 |
92% |
104½% |
£45,000 |
2004/05 |
£270 |
£66.15 |
£102.80 |
92% |
104½% |
£45,000 |
2003/04 |
£260 |
£64.35 |
£100.00 |
92% |
104½% |
£40,000 |
2002/03 |
£250 |
£63.25 |
£75.00 |
92% |
104½% |
£40,000 |
2001/02 |
£240 |
£62.20 |
£62.20 |
92% |
105% |
£20,000 |
2000/01 |
£230 |
£60.20 |
£60.20 |
92% |
105% |
£20,000 |
*SPP and SAP introduced from April 2003
An increase of four extra weeks in the entitlement to paid Maternity and Adoptive leave applies Thursday, 1st March 2007.
The increase of four weeks extends the length of paid Maternity and Adoptive Leave to a total of 26 weeks, or six months, with the option of taking an additional 16 weeks of unpaid leave. Up to now paid Maternity Leave was 22 weeks, with the option of an additional 12 weeks unpaid leave.
Based on the increase in the numbers of women claiming the benefit over the last two years, and the growth in Ireland’s population, it is estimated that at least 43,000 women will qualify for the extended leave during the 12 months between March 2007 and March 2008.
Further information:
Minister Announces Increase From This Week Of Four Extra Weeks Paid Maternity And Adoptive Benefit That Will Benefit More Than 43,000 Women http://www.welfare.ie/press/pr07/pr010307.html
Maternity Benefit http://www.welfare.ie/schemes/families/mb.html
Readers Newsletter Forum
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