benefits and expenses
one payment that should be first on the list for payrolling. The excess AMAP is liable to Class 1
NICs, but other benefits are not, being only liable to Class 1A. If all the benefits became liable to Class 1 then that would increase the employee’s NICs bill by up to 12%. Not an edifying prospect. The OTS has suggested that this additional charge could be offset by a reduction in the Class 1 rate. However, the NICs on benefits would pale into insignificance compared with the amounts paid on salaries and wages, so any reduction would be minimal and affected employees would still see a large rise in their NIC charge. As an alternative HMRC has suggested the broadening of PAYE settlement
...NOT ALLOWED EMPLOYERS TO INCLUDE LARGER OR REGULAR BENEFITS INTO SCOPE
agreements (PSAs). A PSA is a flexible scheme employers can use to settle any pay as you earn (PAYE) tax and NICs due to HM Revenue & Customs (HMRC) on three types of expense and benefit. These are minor items, irregular items and items it is impractical to operate PAYE on or to value for P9D/P11D purposes. Up to now HMRC has restricted PSAs to the above types of benefits and has not allowed employers to include
larger or regular benefits into scope. Whilst the suggestion is laudable and would generate goodwill with employees if their employer is also paying the tax on their behalf, it can be a costly exercise. The table is an example taken from HMRC’s website. So, although the benefit costs the employer £5,000 the total outlay is £7,586, a 50% increase. If all the
employees are 40% taxpayers the increase is nearly 76%, so it is not an option that many employers are likely to consider.
PP
The OTS has also suggested some substantial changes to travel expenses, and this will be the subject of a future article.
Ticket to ride A
n increase in the promotion of the green agenda and the necessity to have a more mobile workforce has seen the payroll department operating a number of different schemes in support of ensuring organisational effectiveness. One such scheme has been around season ticket loans allowing employees the ability to receive a loan to purchase an annual ticket to use on public transport for their home to work commute.
An announcement in the 2013 Budget to increase the exemption threshold for employment related loans from £5,000 to £10,000 with effect from the 6 April 2014 will have a significant impact on encouraging organisations to review their current schemes or to consider the introduction of a scheme. The threshold change will allow for the financial affordability of increasing the
Ian Hodson, Reward manager at the University of Lincoln, explains that the university will be launching a loan scheme in early 2014 demonstrating how payroll can support the green travel agenda
maximum loan to be considered. This will support widening the catchment area of employee participation whilst also assisting with supporting employees with what can often be one of their biggest overheads. The change to the threshold should prompt payroll departments to consider how the operation of a season ticket loan scheme may help contribute towards the employee reward package and the ‘green’ agenda of their organisation. When designing a season ticket loan scheme there are a number of considerations for the payroll department to consider to ensure that the scheme is effective. Some of these are outlined below.
Affordability l Is there a maximum amount the organisation can lend at any point in time?
Processing l Ensure that the agreement is appropriate and agreed and covers scenarios such as leaving or extended absence. l Ensure that your system can handle reducing balance deductions on an automated basis and can prompt when deductions cannot be taken. l Ensure you have a financial reconciliation control account in place that is balanced after each pay cycle.
Communications l Ensure that communications highlight the support of green travel and the promotion of public transport. l Design your scheme to be eye catching and consider a hosting area for applications and frequently asked questions. l Consider a launch day and promotions that will support awareness.
PP PayrollProfessional 23
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