News Items – at 14th August 2007

Interest Rates for Late and Overpaid Taxes

Increase effective 6 August 2007

Interest is charged by HMRC when income tax and NICs are paid late, and credited when they are overpaid.  New interest rate have been announced and take effect from 6 August 2007.

The rate of interest charged on income tax and NICs paid late increase from 7½% to 8½%. The rate paid on overpaid tax and NICs rises from 3% to 4%.

Further information:
HM Revenue & Customs interest rates   http://www.gnn.gov.uk/environment/fullDetail.asp?ReleaseID=305959&NewsAreaID=2

National Minimum Wage

Regulations introduce new rates and new exemptions

The new National Minimum Wage (NMW) rates take effect from the first pay reference period starting on or after 1 October 2008 under the provisions of the National Minimum Wage Regulations 1999 (Amendment) Regulations 2007.  The adult hourly rate increases from £5.35 to £5.52, the rate for workers aged 18 to 21 increases from £4.45 to £4.60, and the rate for workers who have reached school-leaving age but are under age 18 increases from £3.30 to £3.40.  The accommodation offset increases from £4.15 to £4.30 for each day that accommodation is provided.

The Regulations also have the effect of exempting from the NMW provisions

• workers who are participating in the Programme Led Apprenticeships scheme in England,
• workers who attend a period of work experience as part of a course of further education,
• workers participating in the latest phase of the Leonardo da Vinci Programme, a specific European Community scheme intended to provide its participantwith vocational training, and
• workers participating in the European Community Youth in Action Programme.

The Regulations clarify the exemption from the NMW that applies to workers who attend a period of work experience of not more than one year.  The exemption applies to workers who “undertake” (rather than “attend”) a further education course or a higher education course.

The application of the accommodation offset provisions is also clarified for workers who are both employed and provided with accommodation by a local authority or a registered social landlord.  If a worker’s living accommodation is provided by a local authority or housing association because the worker is also employed by the local authority or housing association, the maximum amount the employer may deducted from wages for the provision of the accommodation is the accommodation offset.  However, if the provision of the accommodation is not connected with the employment, e.g. the worker works for the council but just happens to live in a council house, the employer may not deduct any amount from wages for the provision of accommodation.
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Further information:
The National Minimum Wage Regulations 1999 (Amendment) Regulations 2007  http://www.opsi.gov.uk/si/si2007/uksi_20072318_en.pdf
Explanatory Memorandum to the National Minimum Wage Regulations 1999 (Amendment) Regulations 2007  http://www.opsi.gov.uk/si/em2007/uksiem_20072318_en.pdf

Flexible Working Rights

Definition of “adopter” broadened

The right to request a contract variation in order to care for a child is available to, among others, adopters and foster parents.  The definitions in the Regulations are extended with effect from 1 October 2007 to include:

• adoptions where the UK adoption agency does not place the child with the adopter, for example adoptions by relatives,
• inter-country adoptions, where the child is placed by an agency in the child’s own country,
• private foster carers, and
• employees who hold a residence order in respect of a child.

The changes have been introduced in order to extend the flexible working rights to all employees who have responsibility for caring for children.

Further information:
The Flexible Working (Eligibility, Complaints and Remedies) (Amendment) (No. 2) Regulations 2007  http://www.opsi.gov.uk/si/si2007/uksi_20072286_en.pdf

Payroll deadlines during the next month

August 17 – (August 19 is a Sunday) – 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.

August 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 August 20 at the latest.

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

Payroll FAQ's

Electronic P60s

Can employers lawfully provide electronic P60s instead of printed P60s?

The requirement for employers to provide a P60 is set out in Regulation 67 of the Income Tax (Pay As You Earn) Regulations 2003.  It says: “Before 1st June following the end of the tax year, an employer must give a certificate (Form P60) to every employee (a) who was in the employer’s employment on the last day of the tax year, and (b) from whose relevant payments the employer was required to deduct tax at any time during that tax year.”

Regulation 67 also defines the information that must be included on a P60.  The standard single-part P60 supplied by HMRC contains all of the information needed to meet the statutory requirements.  Employers are permitted, however, to produce a P60 in any format they wish, subject to prior HMRC approval of the content, as long as it includes the information specified in Regulation 67.  Booklet RD1, which contains the guidance for pre-approval of substitute P60s, allows them to be “produced using paper of any reasonable size or paper-weight”, “pre-printed or computer-printed as an ‘overlay’ on plain paper”, using “‘multipart’ or ‘pressure-seal’ mailer stationery”, on white or other colour paper, in “any reasonable ink colour(s)”, in any format or layout, and without following “the precise box-sequence of forms P14/P60”.

The trend towards replacing paper employee payslips with electronic versions has prompted many employers to ask HMRC if P60s may also be distributed electronically.  HMRC’s answer is clearly stated in the guidance for employers on Online Filing:  “Even if you have been giving your employees electronic payslips, you must give your employees a paper form P60 at the end of the tax year.  You must not, by law, give them P60 details electronically for them to print off.”

HMRC’s assertion that electronic payslips are not permitted by law is arguably wrong.  Regulation 67, as quoted above, does not refer to a “written” form, as the Employment Rights Act 1996 does in connection with payslips.  It does describe the P60 as a “certificate”, but that term is used of other documents, such as the certificate section of the P35, which may be filed electronically.

If the P60 can exist in almost any format, provide the specified information in any layout, and be printed by employers on any size or type of paper, why can it not also be sent electronically to employees so that they can print it out on A4 paper when it is needed?  And how would anyone tell the difference between a P60 printed by the employer and one printed by an employee?  In a small office, the printer that the employer uses to print off substitute P60s could be the same printer that is used by employees for printing off their own P60.  They would be identical.

Nevertheless, HMRC is adamant that paper P60s are a legal requirement.  Its position is based on a Table in Regulation 211 of the PAYE Regulations, which sets out two requirements.

(1) Paragraph 211(2) states: “The requirements of the regulation must be complied with in a document or format provided or approved by the Board of Inland Revenue if so indicated in column 4.”  For form P60, the Table in column 4 of the Table says “Yes”.
(2) Paragraph 211(4) states: “Instead of sending a document to the Inland Revenue, the requirements of the regulation may be complied with by an employer arranging for the information it would contain to be delivered to the Inland Revenue by an approved method of electronic communications if so indicated in column 5.”  The entry for form P60 in column 5 of the Table says “No” to electronic communications.

However, the Table applies only to communications between employers and HMRC, not to communications between employers and employees.  The “No” must, therefore, cannot mean “No, form P60 cannot be sent electronically to employees”, but “No, electronic communication is not relevant for form P60”.

Nevertheless, in a written response to the points made above, HMRC is resolute.

“The common and everyday definition of a document is a piece of paper which provides information.  This definition is reflected in Regulation 211.  It would be unusual if this were not so because paper was at one time the only available information medium, whereas today we have a mixture of paper and electronic.  Under 211(2) it is accordingly mandatory to use the [paper] document provided by HMRC or an approved [paper] substitute.  The only exception to that is provided by 211(4) which distinguishes between documentary and electronic information by providing that, instead of ‘sending’ a document to HMRC, information may be ‘delivered’ by electronic means where authority to do so is expressly given.   Column 5 then indicates if authority is given to use electronic delivery and, in respect of form P60, it is clearly withheld. 

It is acknowledged that the ‘no’ in column 5 primarily relates to information between the employer and HMRC (rather than employer and employee).  But given the purpose of form P60 (and, for example, form P45 parts 1A, 2 & 3), the only logical construction possible is that an employer must not give an electronic P60 to an employee.
HMRC have no current plans to review these arrangements.  We feel that electronic P60s will increase the risk of fraudulent manipulation by unscrupulous taxpayers and will therefore devalue the form.  A relaxation of the P60 rules may also have the unwelcome result of some employees being coerced into using the electronic medium against their wishes.  HMRC will however continue to monitor the development of electronic delivery in the modern world and respond appropriately if change becomes necessary or desirable.”

At present, therefore, and until HMRC can be persuaded that the issuing of electronic P60s is no more open to fraud than paper versions, employers must continue to issue only paper P60s.  

Further information:
1.40 End of year certificate - P60  http://www.hmrc.gov.uk/employers/doitonline/1-37_1-45.htm

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