The zero rate won’t apply to Class 1A or Class 1B NIC’s – e.g. where employee has a chargeable benefit in kind for NIC purposes from employment.

This measure will not affect the individual’s state pension entitlement.

Employers need to be aware that this change has resulted in new NIC category letters and if employing someone aged over 16 but under 21 then a new NIC category letter will need to be selected. It is the employer’s responsibility to ensure the correct letter is selected.

The 7 categories are:

1. M - not contracted-out standard rate contributions
2. Z - not contracted-out deferred rate contributions
3. Y - mariners not contracted-out standard rate contributions
4. P - mariners not contracted-out deferred rate contributions
5. V - mariners contracted-out salary related contributions
6. I - contracted-out salary related standard rate contributions
7. K - contracted-out salary related deferred rate contributions

Three of the new letters (V, I and K) will be removed in April 2016 in line with the ending of ‘contracted-out’ status in relation to salary-related occupational pension schemes.

For full details please refer to HMRC - Abolition of Employers NICs for under 21s

Please contact us  for further advice on operating payroll etc.

If the exemption threshold is exceeded then a benefit in kind charge arises. If no interest is charged or at a rate lower than the official average rate of interest set by HMRC, then the value of the benefit is calculated using the official average rate of interest (less any lower rate of interest charged to the employee). The official average rate of interest for 2014/15 has reduced from 4% in 2013/14 to 3.25%.

If you would like to discuss loans to employees including directors please contact us.

Prior to April 2014 an employer was entitled to recover some of the SSP paid to their employees if the total of SSP paid in tax month was greater than a set percentage of their gross Class 1 National Insurance Contributions -NIC (employer and employees) liability for that month.

Employers will have until 5 April 2016 to recover SSP (under PTS where available) paid for sickness absences occurring before 5 April 2014 (2013/14).

Where a payment for SSP is being made from 6 April 2014 for a period of incapacity before 5 April 2014 but has been notified late then the employer will need to make an application for recovery using form SP32  ‘late claim for recovery of statutory payments or NIC compensation’. The claims under PTS for up to six years can be made up to 5 April 2016 after which time no claims can be made. Claims using form SP32 will be repaid by way of payable order.

If SSP has already been paid but just not recovered, a claim under PTS at 5 April 2014 and then the normal process for making adjustments to a closed PAYE year will need to be followed - correcting payroll errors of a previous year.

Employers will still have to pay SSP (see sick pay entitlement) and will be obliged to produce records that confirm they have met their legal SSP obligations should HMRC require them. The record keeping requirements for SSP prior to 5 April 2014 have been abolished but employers must keep the following records for SSP for three years from the end of the tax year they relate to.

• All sickness periods lasting at least 4 days;
• Your SSP payments; and
• Any weeks you didn't pay and why.

Please contact us for further information

There is still the opportunity to make payment and if the debt is paid, HMRC will amend the tax code.

An individual can contact the HMRC National Insurance contribution helpline on telephone: 0300 200 3505 for information on how to make a payment.

If you need any additional advice then please contact us.

When PAYE (RTI) legislation was introduced from 6 April last year the proposed automatic penalty and interest charges were delayed for one year in order that Employers would be provided time to adapt to the changes involved with online filing of Real Time Information.

There have been some problems in the first year of RTI and HMRC have recently announced that the introduction of the automatic penalties and interest will be phased in over the coming tax year. This is after consultation and feed back from Employers etc concerning the operation of RTI.

The time table for these changes will be:

1. April 2014 – ‘in-year’ interest on any ‘in-year’ payments not made by due date (see below);
2. October 2014 – automatic ‘in-year’ late filing penalty; and
3. April 2015 – automatic ‘in-year’ late payment penalties.

Interest from 2014/15

‘In year’ interest will affect Employers on any late payments (see below) in 2014/15, starting from the first payment date of 19 May 2014. HMRC will issue a late payment interest charge notice when the employer has paid the outstanding PAYE in full.

For further details see HMRC help sheet PAYE/NIC etc Interest - Helpsheet

We will detail the late filing penalties due to be introduced in October 2014 nearer this date.

Please contact us for further advice.

1 April: Corporation tax payment for a company not within the instalment regulations: year ending 30 June 2013.

Reduction in main rate of corporation tax to 21%.

5 April: End of month 12 for PAYE (RTI). All FPS (Full Payment Submissions) due if taking advantage of concession. This concession ends on this date for employers with less than 50 Employees.

2013/14 tax year end.

6 April: Start of new tax year 2014/15.

Start of new PAYE (RTI) reporting concession for existing employers with less than 10 employees.

7 April: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 28 February 2014.

10 April: Direct debit VAT payment will be taken: quarter ended 28 February 2014.

14 April: Submission of forms CT61 together with payment of tax due: quarter ended 31 March 2014

19 April: CIS monthly return deadline: month ended 5 April 2014.

19 April: Cheque payments for PAYE/NI, student loan, CIS  to be cleared into HMRC bank: month ended 5 April 2014.

Final EPS submission including Employer end of tax year 2013/14 declarations should be submitted to avoid late filing penalty.

22 April: Electronic PAYE/NI etc payments to be cleared into HMRC bank: month ended 5 April 2014.

30 April : Company tax return CT600 due to HMRC: years ending 30 April 2013.

30 April: Company accounts (Private Limited Co) due to be filed: years ending 31 July 2013.

30 April: Company accounts (Public Companies) due to be filed: years ending 31 October 2013.

1 May : Corporation tax payment for company not within the instalment regulations: years ending 31 July 2013.

PERSONAL TAXATION

Income Tax

From 6 April 2015, the personal allowance for those born after 5 April 1948 will be increased by £500 from £10,000 to £10,500.

The basic rate limit threshold will be reduced to £31,785 for 2015/16 from £31,865.  The personal allowance and basic rate limit will be £42,285, a 1% increase on 2014/15 £41,865 as previously announced in the Autumn statement 2013.

For people born on or before 5 April 1948 there is no increase in the personal allowance, currently £10,500 with a higher allowance of £10,660 for those born before 6 April 1938.

Legislation will be introduced in the Finance Bill 2014 so that a spouse/civil partner can transfer part of their personal allowance to the other spouse/civil partner. For 2015/16 £1,050 of the personal allowance will be transferable from an individual whose income is below the personal allowance or who is liable at the basic rate, dividend ordinary rate or starting rate for savings. The receiving spouse/civil partner is eligible to receive the allowance if they are liable to tax at the basic rate, dividend ordinary rate or starting rate for savings. For 2016/17 the amount transferable will be 10% of the personal allowance.

For 2015-16 the main rates of income tax will remain at the 2014/15 rates - 20% basic rate, 40% higher rate and 45% additional rate.

From 6 April 2015 the starting rate of tax for savings will reduce from 10% to nil. The maximum amount of taxable savings income that can be eligible for the starting rate will also increase from £2,880 to £5,000. When combined with the increase in the personal allowance, this means that savers will not be liable for tax on any interest if their total taxable income is less than £15,500. The eligibility requirements to enable an individual to have their interest paid gross will change to accommodate the new provisions.

ISA

From 1 July 2014 all ISAs will reform in to a simpler New ISA (NISA) with the overall annual subscription limit increasing to £15,000, £4,000 for Junior ISAs. There will be changes so that the full amount subscribed can be in cash and a wider range of securities will be eligible to be included.

Company Car Tax rates 2017/18 and onwards

For 2017/18 and 2018/19  there will be an increase in the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre of two percentage points to a maximum of 37 per cent.

Van Fuel Benefit Charge 2015/16

The van fuel benefit charge will increase by inflation in 2015-16 based on the increase in the September 2014 Retail Price Index (RPI).

Company Car and Van Fuel Benefit Charge 2015/16

The rate of fuel benefit charge for company cars and fuel benefit charge for company vans will also increase in line with inflation (based on RPI) for 2015-16. The increase will be based on the September 2014 RPI figure.

Pensions

Changes to the limits from 27 March 2014 to drawdown, trivial commutation and small pots will affect the benefits to be taken as pension income drawdown and taxed lump sums.

The government has also announced a consultation document to consider proposed changes from April 2015 to allow greater flexibility for withdrawing from pension contribution schemes.

These changes will have a major effect on retirement options and strategies and we will produce a separate article on this in the next month or two. Please speak to us in the meantime.

CAPITAL TAXATION

Seed Enterprise Investment Scheme – Capital Gains Reinvestment Relief

Legislation will be introduced in Finance Bill 2014 to make permanent the capital gains tax (CGT) relief for reinvesting gains in SEIS shares without time limit. The relief will apply to half the qualifying re-invested amount.

BUSINESS TAXATION

Research and development tax relief for small and medium sized companies

From 1 April 2014 the rate of research and development payable tax credit will be increased from 11% to 14.5% for loss making small and medium sized enterprises.

Class 2 National Insurance process simplification for the self-employed

Legislation will be introduced to simplify the administrative process for the self-employed by using Self Assessment to collect Class 2 NICs alongside income tax and Class 4 NICs. The intention is for this to apply from April 2016.

Annual Investment Allowance

The maximum annual amount increases on 1 April 2014 for corporation tax and 6 April 2014 for income tax from £250,000 to £500,000 for the period to 31 December 2015. From 1 January 2016 it will revert back to the original annual maximum of £25,000.

VAT

Registration and deregistration limits

From 1 April 2014, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £81,000 (currently £79,000).

The deregistration threshold will increase to £79,000 (currently £77,000).

The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased to £81,000 (currently £79,000).

Changes to the rules on prompt payment discounts

To bring the UK in line with European law from 1 April 2015 businesses will need to account for VAT on the amount received for a supply. Currently HMRC accept VAT calculated on the prompt payment discount figure even if the discount is not taken. A consultation process will take place to implement the new rules. However, this will apply to telecommunications and broadcasting services where there is no obligation to provide a VAT invoice from 1 May 2014.

EXCISE DUTY

From 6 pm on Thursday 19 March 2014 the following changes will take effect:

Tobacco duty – 2% above the rate of inflation

The following increases are effective from 24 March 2014:

Alcohol duty – inflationary increase on duty for wine and made-wine, and sparkling cider of a strength exceeding 5.5%. The duty rates on beer will decrease by 6% for low strength beer, 2% for the standard rate of beer duty and 0.75% overall for high strength beer. The duty rates on spirits, ordinary cider and perry have been frozen.

The exemption cut-off will change for vehicle excise duty on 1 April 2014 for vehicles registered before 1 January 1974. This will change annually so that vehicles over 40 years old will be exempt from vehicle excise duty.

OTHER DUTIES

There are proposed reductions to bingo duty and a higher machine game duty.

A document containing the tax rates applying for 2014-15 will be available for download from our website downloads page in due course.

Printed tax tables are also being produced and if you would like to receive a copy then please contact us.

Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2014 Budget in more detail or to apply any changes to your specific circumstances.This article is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this web page.

One of the changes that arose from the introduction of PAYE Real Time Information (RTI) for 2013/14 was the ending of the requirement for employers to submit forms P35 and P14 following the end of the tax year. The payroll details are now submitted in real time under RTI.

However there are questions similar to those included on the P35 declaration that need to be answered and submitted with the final submission - HMRC - Final  submission what to report

For many employers the final submission will be the final Full Payment Submission (FPS) informing HMRC of the last employee payment in the tax year ending 5 April 2014.

The software used by some employers may be prompted to submit the answers to questions on the declaration for ‘Final Submission for the tax year’ using the Employer Payment Summary (EPS). Employers who have not made any employee payments in Month 12 (6 March 2014 to 5 April 2014) will need to use an EPS anyway to make the final submission for the tax year.

The final submission should be made on or before the date of the employer’s last employee payment or by 19 April 2014 if sending an EPS. Penalties may be charged for late submission.

Forms P60 should be provided to employees who are still working for their employer at 5 April 2014. The employer has until 31 May 2014 to provide this form.

If employers have any expense payments or benefits to declare for 2013/14 then Forms P11d, P9d and P11d(b) should be submitted to HMRC by 6 July 2014 to avoid possible penalties.

2014/15 (from 6 April 2014)

There are some changes under the PAYE/NIC and RTI regulations that will apply from 6 April 2014 as follows:

Employment Allowance - The Employment Allowance will be introduced on the 6 April 2014 and will give eligible employers a reduction of up to £2,000 in their employer Class 1 NICs liability for 2014/15 ( Edwin Smith article -  Employers Allowance ).

Change of bandings for Reporting ‘hours worked’ for employees -

From 6 April 2014 there will be an increase to the number of bandings from 4 to 5 relating to normal weekly hours worked by employees. The revised bandings will be:

A) up to 15.99 hours

B) 16 to 23.99 hours

C) 24 to 29.99 hours

D) 30 hours or more

E) Other.

It is very important that an accurate figure is provided as the number of hours is used to support claims to benefits and Tax Credits. The employer needs to make sure that they do not simply carry forward previous selections made into 2014/15 ‘hours worked' bandings which may no longer be appropriate due to the changes.

Micro employers’ concession – the concession that applied in 2013/14 for employers with less than 50 employees will end on 5 April 2014 but will be replaced by a new concession applying to existing micro employers with less than ten employees. The concession will continue the relaxation of the RTI reporting rules for these employers until April 2016 so that FPS reports can be made on or before the last payday in the tax month.

From 6 April 2014 all other employers including new employers (with less than ten employees) will be expected to report each time they pay their employees.

Late reporting - From April 2014, it will be possible to tell HMRC the reason why a particular payment is being reported after the payment date by making an entry in the new ‘Late Reporting Reason’ data field on the FPS.

There is one change for 2014/15 that takes effect this month and it is for:

Employers running payrolls in advance of paydays in new tax year – HMRC have made changes to their software to enable employers who run their payroll in advance of actual payday to make a submission (either FPS or EPS) from 6 March in respect of payments to employees on or after the commencement of the new tax year on 6 April 2014.

If you require further information or assistance regarding PAYE (RTI) or payroll then please contact us.

What is a PAYE settlement agreement or PSA?

A PAYE settlement agreement or PSA is a flexible scheme an employer can use to settle any PAYE tax and NICs due to HMRC on three groups of expenses and benefits:

1. Minor items: e.g. a small present for an employee in hospital or an employee's use of a pool car where the conditions for tax exemption don't apply; or
2. Irregular items: e.g. expenses of a spouse occasionally accompanying an employee abroad, or relocation expenses in excess of the £8,000 tax exemption threshold; or
3. Impractical items: e..g items where it is impracticable to operate PAYE on or determine a value for P9D or P11D purposes, such as shared benefits (like shared cars or taxi journeys, for example) that are difficult to attribute to individual employees.

If HMRC agrees to include an expense or benefit in a PSA, you will not have to include the item on an employee's form P11D or P9D and pay Class 1A NICs on the item at the end of the tax year, or put the item through your payroll to work out any PAYE tax or Class 1 NICs due.

Instead, you settle the tax and NICs due on the items covered by a PSA with a single payment that includes both:

1. the tax due on the expenses and benefits covered by the PSA - this tax would normally be payable by your employee (usually through their tax code) and the tax you pay must be 'grossed up' taking account of the tax rates payable by the employees covered by your PSA; and
2. Class 1B NICs, calculated not just on the value of the items covered by the PSA but also on the tax paid under the PSA - this is because paying an employee's tax liability counts as providing them with a further benefit.

What cannot be included in a PSA?

HMRC won't include any of the following items:

1. cash payments - including salary, wages, bonus, or other payments such as long service awards;
2. large benefits provided regularly to individual employees, such as company cars or beneficial loans;
3. round-sum allowances - lump sums provided to an employee to take care of all their expenses in a tax year;
4. shares;
5. items on which tax has already been deducted through PAYE;
6. items which are already reflected in an employee's tax code; or
7. profits arising from various mileage payment schemes and other regular items arising in Employee Car Ownership Schemes.

How can I apply for a PSA?

To apply for a new PSA, you can write to HMRC  explaining that you require a PSA and describe the expenses and benefits you would like the PSA to cover. Once HMRC have agreed the expenses and benefits to be covered by your PSA, they will authorise the agreement and send you a signed form P626.

When can I apply for a PSA?

You can apply for a PSA at any time, but the timing of the agreement will affect the items that can be covered.

1. If a PSA is agreed before the start of the tax year, then there are no limitations, other than falling in to the three categories above, on the expenses and benefits that can be included in it.
2. If a PSA is agreed during the tax year, you cannot include items provided before the date of the agreement to which either of the following applies:

PAYE has or should have been operated on the item; or

The item has been reflected in the employee's tax code for the year.

1. If a PSA is agreed after the end of the tax year but before 6 July, you cannot include any items provided during the tax year to which either of the following applies:

PAYE has or should have been operated on the item; or

The item has been reflected in the employee's tax code for the year.

What are the deadlines for a PSA?

Details of how to calculate the tax and NICs under a PSA can be found at HMRC. You will need to submit your calculation and can use HMRC form PSA1 to advise HMRC of your liability.

This should be done at the earliest opportunity after the end of the tax year. Payment must reach HMRC by 19 October after the tax year to which it relates (22 October if you pay by electronic means).

More information

Further information on PAYE settlement agreements can be found at HMRC: PSAs.

If you have any questions or would like advice or help preparing your request to HMRC please contact us.