| |
|
News Items – at 20th March 2007
Acas, the employment relations service, has launched a new tool for businesses to check how they currently share information and consult with their employees.
From April 6, all businesses with 100 - 149 employees come within the scope of the requirements of the Information and Consultation of Employees Regulations 2004. This means more employers must consult on issues such as strategic direction, job losses, health and safety or mergers.
The new Information and consultation Health Check Tool and further information on the new regulations are available on the Acas website. The health check takes employers through a range of questions to identify what types of information are shared with employees and through what channels. Users can also find out how their current consultation processes work.
Further information:
Information and consultation health check http://www.acas.org.uk/media/word/q/g/icehealthcheck_1.doc
The Information and Consultation of Employees (ICE) Regulations http://www.acas.org.uk/index.aspx?articleid=338
The Income Tax (Earnings and Pensions) Act 2003 provides limited tax exemptions for the provision by employers of childcare and childcare vouchers. If the conditions for the exemption are met, a tax liability only arises to the extent that the value of the provision exceeds £55 per week.
One of the conditions for the limited exemption is that the type of childcare provided by the employer, or by means of childcare vouchers, is “qualifying childcare”. There are different definitions of “qualifying childcare” depending on whether it is provided in England, Wales, Scotland or Northern Ireland.
Changes are being made by the Income Tax (Qualifying Child Care) Regulations 2007 to the definitions from 6 April 2007 to reflect the provisions of
- the Tax Credits (Approval of Child Care Providers) (Wales) Scheme 2007 which came into force on 1 February 2007
- the Childcare (Voluntary Registration) Regulations 2007 which comes into force on 1 April 2007
- the Tax Credits Act 2002 which has a less restrictive definition of qualifying out of school hours.
The definition of “qualifying childcare” is therefore broadened to include care provided under the Welsh Childcare scheme and care provided by a childcare provided under the Childcare (Voluntary Registration) Regulations.
The existing definition of “qualifying childcare” includes care provided for a child out of school hours by a school on school premises or by a local authority. It is limited, however, to children who are at least 8 years old in England and Wales, and to children who are at least 12 years old in Northern Ireland. These age restrictions are removed by the new Regulations so that, from 6 April 2007, the childcare provided by employers or that can be obtained by means of childcare vouchers can include out of school hours care irrespective of the child’s age.
Further information:
Income Tax (Qualifying Child Care) Regulations 2007 http://www.hmrc.gov.uk/si/2007-0849.pdf
Explanatory Memorandum to the Income Tax (Qualifying Child Care) Regulations 2007 http://www.hmrc.gov.uk/si/2007-0849-em.pdf
Part 7 of the Finance Act 2004 and subsequent Regulations introduced an obligation for developers of tax avoidance schemes to disclose such schemes to HMRC. The current disclosure rules came into operation on 1 August 2006. Heavy penalties are imposed on scheme providers and on users of schemes that fail to follow the notification procedures.
The same rules and penalties are extended, from 1 May 2007, to NICs avoidance schemes by means of the National Insurance Contributions (Application of Part 7 of the Finance Act 2004) Regulations 2007.
Further information:
The National Insurance Contributions (Application of Part 7 of the Finance Act 2004) Regulations 2007 http://www.hmrc.gov.uk/si/2007-0785.pdf
Explanatory Memorandum to the National Insurance Contributions (Application of Part 7 of the Finance Act 2004) Regulations 2007 http://www.hmrc.gov.uk/si/2007-0785-em.pdf
Payroll deadlines during the next month
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 19 – This is the deadline for payment of tax and NICs to the Accounts Office, for tax month 12 by employers who pay monthly, for tax months 10 to 12 by employers who pay quarterly, unless they make their payments electronically. This is also the latest date for paying any outstanding tax and NICs to the Accounts Office in respect of the 2006/07 tax year.
April 20 – (April 22 is a Sunday) – For employers who pay their tax and NICs to the Accounts Office electronically, this is the deadline for electronic payments to be cleared into the HMRC bank account. Payments through BACS must be initiated by April 18 at the latest.
Payroll FAQ's
Mileage Allowance Payments
In many cases there will be no reportable tax benefit. However, there are two factors to consider.
Mileage allowance payments
Mileage allowance payments are amounts, other than passenger payments, that are paid to an employee for expenses related to use by employees of their personal car, van, motorcycle or cycle for business travel. They do not include payments made in respect of company cars. Mileage allowance payments may be:
- mileage payments made in arrears, i.e. a number of business miles multiplied by a mileage rate
- allowances paid periodically, e.g. an essential user allowance, which are intended to reflect the standing costs of the vehicle and are reviewed at least annually
- one-off payments in respect of the business use of the employee’s vehicle, e.g. £50 for making the trip, but only if based on a reasonable estimate of the mileage involved
- payment of expenses incurred in using the employee’s vehicle for business travel, e.g. reimbursing the fuel costs, or the cost of a repair to the vehicle while on a business journey.
Almost any payment is included, therefore, as long as it is
- made to the employee, and
- in respect of the business use of the employee’s vehicle.
Whether there is any tax liability for the mileage allowance payments made to an employee is determined by comparing
- the total amount of all of the mileage allowance payments paid to an employee for a tax year, with
- the “approved amount”, calculated by multiplying the total business mileage for the vehicle in the tax year by the statutory mileage rates.
The statutory mileage rates for tax purposes are:
|
Pence per Mile – 2006/07 |
|
First 10,000 business miles |
Over 10,000 business miles |
Cars and vans |
40.0 |
25.0 |
Motorcycle |
24.0 |
24.0 |
Cycle |
20.0 |
20.0 |
The amounts paid for a tax year are “approved” mileage allowance payments (AMAPs) to the extent that they do not, in total, exceed the “approved amount” for the year. Consequently,
- if the payments made for the year are less in total than the “approved amount”, they are all AMAPs and there is nothing to report on forms P9D or P11D, but
- if the payments made for the year are more than the “approved amount”, the payments up to the approved amount are AMAPs but the excess is not “approved” and must therefore be reported on form P9D or P11D.
It should be clear from the above, therefore, that, if an employee only ever pays a mileage rate that does not exceed the statutory mileage rate for the vehicle and, in the case of cars and vans, for the mileage, and never makes any other payments, such as user allowances, there should not be anything to report on form P9D or P11D. There is, however, another factor to consider.
HMRC guidance
The second factor is that HMRC’s guidance on how to perform the calculation described above is contradictory. There are two conflicting methods provided by HMRC, namely a “tax year” method and a “like for like” method.
The “tax year” method
This procedure is set out on HMRC’s P11D Working Sheet 6 and uses a “tax year” comparison. The comparison is between
- the payments made to the employee in the tax year, and
- the “approved amount” for the number of business miles travelled in the tax year.
Because expenses payments are normally paid in arrears, the mileage used to calculate the payments to the employee is likely to be different from the mileage used to calculate the “approved amount”.
Example: An employee received mileage allowance payments totalling £2,640 between 6 April in one year and 5 April in the next, i.e. 6,600 miles @ 40p. Expenses are paid a month in arrears, so the 6,600 miles were actually travelled in the year between 1 March and 28 February. However, the actual business miles travelled in the tax year totalled 6,000 miles. The “approved amount” is £2,400, i.e. 6,000 miles @ 40p. Only the first £2,400 payments are AMAPs. The £240 excess is reported on form P9D or P11D.
The “like for like” method
In contrast, the procedure set out in HMRC’s online Employment Income Manual, from page EIM31230 (www.hmrc.gov.uk/manuals/eimanual/EIM31230.htm), uses a “like for like” comparison. The comparison is between
- the “approved amount” for the number of business miles travelled in the tax year, and
- the payments made to the employee for those business miles, even if some are made after the end of the tax year.
This method seems to be the more sensible approach as it compares the payments made and the “approved amount” for the same business mileage. It avoids the problem demonstrated in the example above
Example: An employee travelled 6,000 miles between 6 April in one year and 5 April in the next. The “approved amount” is £2,400, i.e. 6,000 miles @ 40p. The employee received mileage allowance payments totalling £2,400 in respect of those miles in the year between 1 May and 30 April. As the payments do not exceed the “approved amount”, there is nothing to report on form P9D or P11D.
In the view of the author, it is the “tax year” method, as used on P11D Working Sheet 6, that is defined in section 229 onwards of the Income Tax (Earnings and Pensions) Act 2003. However, in an exchange of correspondence in 2002, HMRC insisted that it is the “like for like” method that is set out in statute and promised to change to P11D Working Sheet to follow that approach. The Working Sheet has never been changed, however.
The author’s recommendation is that employer’s use the “like for like” method, which HMRC insists is correct, unless the Working Sheet is being used.
Readers Newsletter Forum
If you have any HR or payroll related questions that you think other people who receive this newsletter will be able to answer, please email us and we will add your question to our newsletter.
An area dedicated to readers of the newsletter to enable you to:
- share your comments or views on anything in the newsletter
- to ask a question of other readers, or the tutor team
- to relate a humorous event or story related to HR or payroll
- to provide a useful tip, or seek advice on a software problem
- or maybe to simply provide recruitment information
contact: daniel.ruffle@hrdps.co.uk or reg@hrdps.co.uk
Click Here if you wish to unsubscribe |
|
