The seven deadly tax and national insurance risks
With HMRC initiatives on recovery of unpaid tax and NICs continuing unabated, employers are still a prime target. Peter Minchinton, Manager at Baker Tilly Business Services Limited, sets out some of the areas in which HMRC has already shown a keen interest, and other areas where employers can save, or even recover, money
Employment status risk rating very high
Organisations may make payments to workers who are regarded as being self- employed. We are aware that HM Revenue & Customs (HMRC) has always targeted this area and with the continuing thrust on disguised employment this will escalate. Employment status reviews are very high on HMRC’s list as the potential tax yield is very high. l Risk – If HMRC reclassifies these workers as employees, it will seek to recover tax and primary and secondary Class1 national insurance contributions (NICs) from the employer, in addition to interest and penalties. The sums can be substantial. l Action – Before you make payments to workers who are treated as self-employed you should have a comprehensive procedure in place to check their status
PAYE settlement agreements risk rating medium
Under a pay as you earn settlement agreement (PSA), an employer can pay tax and NICs on behalf of the employee on minor taxable expenses and benefits. This can be expensive since the total payable on a ‘grossed up’ basis can nearly double the cost of the benefit itself. Therefore, it is
22 PayrollProfessional
important to ensure that the correct types and amounts of benefits are included. l Risk – If you provide small benefits to employees and these are not included on a form P11D or in a PSA then there is a tax charge that needs to be dealt with. Conversely, there is a ‘reverse risk’ as we have discovered a number of employers have overpaid tax and NICs on their PSA as a result of changes to, or a misinterpretation of, the tax legislation. l Action – Check to see if you need a PSA; if you already have one, have you reviewed it to ensure that the correct expenses or benefits are included in it?
Flexible benefits and salary sacrifice risk rating high
With the current squeeze on spending, employers are looking to provide benefits to employees where both the employer and the employees can make cost savings. For example, benefits available can include
...STATUS REVIEWS ARE VERY HIGH ON HMRC’S LIST AS THE POTENTIAL TAX YIELD IS VERY HIGH
cycle to work, workplace car parking, designated route travel tickets, childcare, workplace nursery, employee travel, staff recognition awards, gym membership, employee cars, mobile phones, workplace nursery, well-persons check, private healthcare, carbon off-setting, luncheon vouchers, car clubs, professional subscriptions and high street vouchers. l Risk – Not having a benefits policy – or operating your policy without the appropriate salary sacrifice arrangements – can result in your missing out on potential savings. Furthermore, you run the risk you cannot attract and retain the calibre of employees that you want. l Action – Review your current benefit policy and consider what other benefits would be suitable.
Termination payments risk rating medium
When an employee leaves he/she may be entitled to a payment for redundancy, compensation for loss of office or other termination payment. In certain circumstances the first £30,000 can be paid free of tax. l Risk – There is a common misconception that the first £30,000 is always tax free. That is not so. Contractual and expected payments are fully taxable and also subject to NICs. Any errors can be
technical
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56