FINANCE
BY ADAM LACCHIN , TAX DIRECTOR , AZETS adam . lacchin @ azets . co . uk
Are you aware of the main employment tax risk areas within payroll ?
THE WORLD OF PAYROLL IS NOT AS STRAIGHTFORWARD AS IT USED TO BE . NOT ONLY DO EMPLOYERS PAY EMPLOYEES WITH NUMEROUS DIFFERENT ELEMENTS IN ADDITION TO THE USUAL WAGES AND SALARY , BUT EVER-EVOLVING TAX LEGISLATION HAS INCREASED THE COMPLEXITIES OF REMUNERATING EMPLOYEES , REQUIRING MORE SPECIALIST KNOWLEDGE AND ADVICE .
Termination payments
There is a common misconception that any amounts paid up to £ 30,000 can simply be paid free of tax and NIC . However , a termination package is made up of various elements that may require different treatment and each component part should therefore be considered separately .
To further complicate matters , the legislation for termination payments was updated in April 2018 . There is now a requirement to carry out a Post-Employment Notice Pay ( PENP ) calculation to determine the notice pay element that is required to be subject to PAYE . In addition , from April 2020 amounts in excess of the £ 30,000 exemption are now liable to Class 1A NIC as well as PAYE tax .
Benefits and expenses
Benefits and expenses form a large and complex topic with various reporting and tax and NIC nuances , depending on the expense or benefit and the wider situation of each spend .
It firstly needs to be considered whether there are any exemptions that can be applied . If reportable , it can then be advised whether it should be a payroll or P11D item , or whether it can be included on a PAYE Settlement Agreement .
Where taxable benefits have been traditionally reported on P11D forms each year , employers have been gradually opting to switch over to payrolling benefits following its introduction in April 2016 . As such , benefits are now becoming more the responsibility of Payroll rather than the Tax and Finance personnel who previously dealt with the P11D forms .
The amounts to be payrolled need to be carefully calculated and updated throughout the year .
NationaL Minimum Wage ( NMW )
The subject of NMW is not simply one of ensuring employees are paid at or above NMW rates for the work they do .
What is quite commonly overlooked are the additional elements of the NMW legislation ; namely , with regards to deductions and accommodation , and this is where employers can get caught out for inadvertently breaching these elements of the rules .
Internationally mobile employees
Employees who work in an overseas location for their employer can create complex tax and social security issues that must be carefully considered , whether these be formal international assignments or simply more ad-hoc remote working arrangements .
In many cases , tax aspects must be dealt with separately to social security .
IR35
With the changes to the IR35 rules for public sector organisations in April 2017 and for the private sector in April 2021 , there is now a requirement for payroll payments made to contractors operating via a Personal Service Company ( PSC ) who are determined to be inside IR35 .
For such ‘ deemed ’ employees , there are various nuances that have to be taken into account in order to correctly process through the payroll .
Share structures
Shares issued or promised to employees by their employer will have some intricate tax and NIC implications depending on the plan and its criteria , and each arrangement must be considered in detail .
Arrangements , be they unapproved share plans or other structures providing shares in a business , may trigger a PAYE withholding obligation , and care needs to be taken to understand how to process these transactions through the payroll correctly .
Get in touch
Unlike many payroll bureau providers who simply process the amounts provided to them each week or month for employers , the Azets Payroll team has the support of our internal specialist Employment Tax and HR consultancy teams , ensuring we offer comprehensive employer solutions . For further information , please get in touch with our specialists Azets advisors .
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
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