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Tax Year End Procedure 2013-14

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Now that you are reporting PAYE information to HMRC in real time, there is no longer a need for a P35 or P14s anymore. Instead, the usual questions and declaration that were part of the P35, will now be part of your final Full Payment Submission (FPS) or Employer Payment Summary (EPS) if applicable.

For most employers, the final submission will be the last FPS. This is the one telling HMRC about the very last employee payment for 2013-14. The tax year ends on 5th April 2014 so, for most employers, their final submission will be made on or before that date. If you don’t pay any employees in the final month of the tax year, send your final submission on an EPS by 19th April 2014. You can also use an EPS to report the ‘Final submission for the tax year’ and answer the questions, after all your FPS have been successfully submitted. So, for instance, if you file your March FPS on your pay day as usual, but forget to say it is you ‘final’ FPS, you can file a final EPS and answer the same year end questions at this point.
So firstly, ensure you have included EVERY person you have paid during the tax year through your payroll including all students and casuals. Ensure HMRC have successfully received all earlier submissions. Ensure you have all employees’ correct names, addresses, dates of birth and NI numbers.

In previous years, you had a deadline of 19th May to submit your P35 and P14s but RTI has changed that. When sending your final RTI submissions, the usual time limits apply, so you should send your final submission on or before the date of your last employee payment in the tax year (or by 19th April if you are sending an EPS). Employers will not be able to file an EPS relating to 2013/14 after 19th April 2014. If a correction or amendment is needed, employers will need to submit an EYU (Earlier Year Update).

P60s must still be issued to all employees still working for you at 5th April 2014 by 31st May 2014.

Auto enrolment: Start Planning Now

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We can’t stress enough how important it is that you start planning for Auto enrolment now. Your staging date may seem a long way off, if you know it already, but if you leave it too late to think about choosing the right pension for you and your employees, your options will be extremely limited. Many pension providers won’t want to work with you if you leave it less than 6 months before your staging date, as they may not have enough time to assess and implement a plan in time. For employers who had less than 50 employees on the PAYE scheme as at April 2012, your staging date will not be until April 2015 or later, but we are now in 2014 and so it’s time to start planning right now.

The first thing to do is know your staging date. All employers have been written to with their staging date, but you can find this by keying your PAYE reference number in The Pensions Regulator website. This website has all the information and advice you need to help you make a plan for auto enrolment, give you an expectation of your costs as an employer and make sure you are fully compliant. They suggest you start planning 18 months before your staging date.

The second thing you need to do is seek advice and assistance from a good pension advisor. They can help you decide the best course of action, help you choose the best pension provider for you and your employees and help you implement your chosen pension plan. They can tell you how much your employer contributions are likely to cost you, so you can budget for this in time. Of course, all this advice will come at cost, so please bear that in mind.

Christmas Benefits

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With the festive period upon us, some employers may want to provide their employees with a gift or bonus, but how will this affect your payroll?

CHRISTMAS BONUSES
All cash bonuses paid at Christmas count as earnings and must go through payroll in the normal way. Non-cash vouchers, and benefits with a money’s worth are also counted as taxable earnings and must go through payroll. Some employers may wish to pay the tax and NIC the bonus will attract, so that the employee receives the full cash bonus in their pay packet. Most payroll providers can ‘gross up’ bonuses without too much trouble.

CHRISTMAS GIFTS
Employers may choose to provide their staff with goods as a seasonal gift (items that cannot be resold or exchanged for cash) such as a turkey, or a bottle of wine. It is generally considered that items with a cost value of under £50 are deemed as trivial benefits with HMRC, so there is no liability or reporting requirement and are not included in a PAYE settlement agreement (PSA). If the gift is larger, such as a crate of wine or a hamper, HMRC may not consider this as a trivial benefit, and should be reported on a P11D as a benefit (for employees with earnings above £8,500).

THIRD PARTY GIFTS
Small gifts of goods can be given to third party employees, as long as the gift is not made in recognition of the provision of services; it is not provided by the employer or anyone connected to the employer and the cost is less than £250.00

CHRISTMAS PARTIES
Christmas parties are exempt from tax and NIC if they meet these 3 conditions:
* It is an annual event, such as a Christmas or New Year party
* The event is open to all employees to attend
* The cost per head is no more than £150.

The entitlement applies to each attendee, including guests, but the total cost cannot be offset against the cost of a more expensive event. If the £150 per head limit is exceeded, there is no exemption and the full cost would be considered a benefit on the employees who attended.

Don’t pay HMRC too early!

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Since Real Time Information (RTI) started, some employers have been experiencing difficulties in reconciling the difference between the tax they think is due, and the tax HMRC think is due according to the RTI submissions. As I mentioned in my last blog, it is vital for employers to use their correct PAYE Accounts reference for the corresponding tax year and month, but it has now become evident that employers must also pay HMRC as well as submitting any Employer Payment Summaries (EPS) if applicable, within a certain time frame to avoid payments being allocated to incorrect periods.

HMRC derives an employer’s ‘monthly charge’ from values reported in RTI returns comprising the full payment submission (FPS) and the employer payment summary (EPS). An EPS submission is due if an employer needs to report any difference in PAYE/NIC reported in the FPS; such as statutory maternity pay reducing the NIC liability or CIS deductions to be added to the tax liability. EPS submissions do not include tax month data, only year-to-date data, so the timing of submitting the EPS is important. Sending the EPS too early or too late may result in HMRC applying it to the wrong tax month, thereby affecting the ‘monthly charge’. For example; if a monthly payroll is processed on 15th October for the month of October, and the FPS and EPS submissions are also submitted on 15th October for October, HMRC may assume the EPS refers to September as it has been received before September’s payment deadline of 19th October. So the ‘window’ for submitting EPS submissions and paying HMRC should be from 20th of current month to 19th of the following month. If two EPSs are submitted within the same time frame, one will apparently overwrite the other.

RTI: The importance of reporting Hours Worked

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From October 2013, the new Universal Credits system will start to be introduced around the UK. This new benefits system will replace income support, housing benefit, job seekers allowance and employment and support allowance. Then, from April 2014, workers who are currently claiming tax credits will claim universal credits instead.

It is therefore crucial that you report the correct number of Normal Hours Worked for your employees when you submit your RTI FPS report each time your employees are paid. These hours will effect employee entitlements to tax credits, and subsequently the new Universal credits. Currently, for RTI reporting, the hours are banded:
Band A: less then 16 hours per week
Band B: 16-29.99 hours per week
Band C: 30 plus hours per week
Band D: Other

From April 2014 however, there will be an additional band:-
Band A: less than 16 hours per week
Bank B: 16-23.99 hours per week
Band C: 24-29.99 hours per week
Band D: 30 plus hours per week
Band E: Other

Payroll software should automatically apply the bandings from the Normal Working hours entered when employees are added, but if this information is not given to the payroll provider, the software may have to choose ‘Other’ which may then effect any Universal Credit claims.