OTS report
as an example, but the CIPP would urge HMRC to review those rules so it can work rather than exclude benefits. Another option put forward by the OTS would be to have a list of benefits to be payrolled until experience is assimilated on all sides. The CIPP/AAT survey findings showed there was an appetite to pay Class 1A NICs monthly with almost 76% in support. The report mentions the payrolling pilot with four large employers which revealed positive results. The OTS recommends extending the pilot, something the CIPP would welcome. The OTS reports its target would be
for the great majority of benefits and expenses to be payrolled, with this approach becoming the normal behaviour/ process of employers. The CIPP has long campaigned for payrolling of benefits and welcomes any recommendations to encourage this change. There are clear benefits that will come as no surprise to the CIPP members such as better employee understanding and management of their personal budgets and the abolition of the annual June/July reporting admin burden period and, of course, the silly façade of reporting the benefits received via salary sacrifice on a P11D. However, the report also highlights obstacles to payrolling, which again will not be a great surprise to the CIPP members. These obstacles include the smaller employer having to deal with benefits on a payday basis rather than at the end of the year (although if they use a payroll bureau, perhaps not). The report gives this as the main reason for opting for voluntary versus mandatory payrolling, but says as payrolling becomes the ‘norm many more employers would be likely to join and even embrace it.
Clearly a number of considerations will need to be consulted on to make payrolling work for all.
PAYE settlement agreements The report identified that many employers find PAYE settlement agreements (PSAs) helpful, albeit expensive. Not surprisingly, many employers shared with the OTS their frustrations around the scope of the PSAs and the process and guidance for employers in agreeing them with HMRC. (The CIPP welcomes the OTS recommendation of simplification which would be to extend the scope allowing employers to settle any tax liability on
...HMRC’S CONCERN THAT EMPLOYERS DELIBERATELY ENGINEER ADVANTAGES TO THEIR EMPLOYEES...
benefits and expenses; again something many CIPP members have asked for in the past.) The report also acknowledges that if other suggested changes are implemented in respect of what is taxable etc then perhaps the PSA process may not need tweaking quite as much. In addition, the OTS recommends the
PSA process be available online, with standardised categories capable of being included in a PSA. Prior approval, the OTS suggests, is in conflict with today’s self- assessment ethos. The OTS report does, however, recognise HMRC’s concern that employers deliberately engineer advantages to their employees by PSAs. (At least now I know why HMRC were so fussy on PSAs.) The OTS says this possibility is widely derided by employer groups, and comments that it is manageable with a simple anti-avoidance measure that would penalise an employer who enters into a PSA with the sole or main purpose of enhancing an employee’s entitlement to benefits. (This seems fair for simplicity.) The guidance could also be enhanced to show employers what cannot be included in a PSA.
Dispensations The OTS makes a fantastic
recommendation with some caveats that HMRC consider allowing an exemption to be added to the legislation for all qualifying business expenses paid for, or reimbursed by an employer. (This makes sense.)
The current dispensation process would be replaced by a more modern and practical approach says the OTS. To safeguard HMRC compliance routines the OTS also recommends any standard P11D dispensation should apply where employers meet minimum record keeping requirements. Guidance would also need to be increased to ensure employers knew what fell within the P11D standard dispensation. The types of expenses included are travel, car hire costs and fees and subscriptions, but the report does say these are just some of the items that should be included. During the OTS team’s exploration, they discovered employers who had managed to secure dispensations for expenses that most employers would not be able to. Any changes would hopefully provide consistency in the process albeit there may also be some losers too. As an alternative to the above recommendations, the OTS has also suggested introducing a universal P11D dispensation.
£8,500 P9D threshold The OTS has finally recommended that this threshold and the accompanying P9D form be abolished. (The threshold has been in place since 1979!) It has recognised the potential ‘losers’ but has included some mitigating steps to address some who might be unfairly disadvantaged by this removal e.g. carers and volunteers. Employers may also be disadvantaged as Class 1A NICs would become payable for those who might previously have fallen into the P9D category. Whilst Class 1A limits could be considered says the OTS, it also suggests the new Employment Allowance be linked. (This would likely be the preferred option by the CIPP – depending upon consultation – as it would just mean an increase in what could be claimed, rather than different Class 1A NICs levels.)
Trivial benefits In its interim report, the OTS said it would visit trivial benefits in more detail. The OTS has recommended redefining in law a
PayrollProfessional 19
Information and guidance for work technical
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