employment allowance implications
HMRC guidance is that the following is not a function of a public nature: l providing security and cleaning services for a public building, such as government or local council offices l supplying IT services for a government department or local council.
Example – Guarding prisoners on behalf of the government makes up 25% of Padlock Security Limited’s business. The remaining 75% of the company’s work is providing security to private businesses and individual clients. Padlock Security Limited is entitled to the Employment Allowance because the majority of their work is not of a public nature.
Personal and managed service companies cannot claim the allowance for any deemed payments of employment income.
Schools and universities
A possibly significant omission from the examples of functions of a public nature is ‘educational establishments’. Whether such bodies can claim the EA appears to depend on the ‘type’ of school. Schools under the control of, and funded by, local education authorities will be unable to claim the EA. These schools are undertaking functions of a public nature. Independent schools, by contrast, run as a trading business and/or having charitable status will be able to claim the EA. Where a business controls a charity, the two are not deemed to be connected. In this scenario, both the business and the charity can claim the EA. Academies are not classed as businesses but may have charitable status in which case they will be able to claim the EA.
Universities with charitable status will also be able to claim the EA. However, some universities, such as Oxford and Cambridge, operate on a collegiate basis. If each college has charitable status, then each college could potentially claim the EA. However, it is possible that the ‘connected charities’ rule applies if they have the same or substantially similar purposes and activities and are controlled by the same or connected persons. In this situation, only one EA could be claimed.
...NO SEPARATE NOTIFICATION TO HMRC OF THE ACTUAL AMOUNT...
Areas for concern To claim EA, an employer completes the field on the EPS and reduces the amount of NICs paid over to HMRC by the appropriate amount. There is no separate notification to HMRC of the actual amount being claimed.
Given the current problems over duplicate records, with HMRC’s Debt Management & Banking arm over the specified charge, and with payments not showing correctly on the business tax dashboard, the reconciliation aspects between what employers calculate as being due and what HMRC calculate as being due will be a prime area of concern. This aspect is further complicated where an employer is late in claiming the EA. HMRC expects an employer to claim the EA as soon as possible. There may be circumstances were this does not happen, for whatever reason. In such cases where the employer has already paid secondary Class 1 NICs, then the unclaimed EA can be offset against other PAYE liabilities.
Example – An employer starts claiming the EA on 31 July and has secondary Class 1 NICs liabilities of £500 per month, and other PAYE liabilities (including employee Class 1 NICs) of £800 per month. August will be the first month the allowance can be set against the employer Class 1 NICs liability. If the claim had started at the
beginning of the tax year 6 April (rather than July) the claim to date would be £1,500. (The. total allowance that could have been claimed and set off against payments made in May, June, July.) Because none of the EA has been claimed in the previous three months, the full £2,000 EA can be offset against payments due in August. This amount is enough to cover the August employer Class 1 NICs and the other PAYE liabilities and leave a balance of £700 (i.e. £2,000 - £1,300). So, in August, no payment would be made to HMRC, and in September a payment of £600 (i.e. £1,300 - £700) would be made.
A further area of concern is HMRC’s EA guidance that an EPS may be submitted
to claim the EA without a containing any previously submitted figures relating to statutory payments recovery. This contradicts previous EPS guidance that once an EPS has been submitted containing statutory payments recovery details, then any subsequent EPS must contain the statutory payment recovery details.
Further guidance? HMRC’s guidance states that the EA is to be deducted from secondary Class 1 NICs liabilities before any statutory payments recovery. Will this affect the small employer relief (SER) definition in relation to statutory payments recovery, currently £45,000? So, will an employer with a gross annual NICs liability of £46,000, now be able to claim SER since the EA claim will reduce the NICs liability to £44,000? The current 2013 E15 Employer
Helpbook for Statutory Maternity Pay contains this on page 32: “The amount of any SMP recovery should be calculated by reference to the total gross NICs figure before [author’s emphasis] you take off the amount of NICs holiday…” This would suggest that SER will be based on the NICs liability before any adjustment for the EA recovery. Nevertheless, this point needs clarifying by HMRC. Note that, because the assessment for entitlement to SER is based on the employer’s gross annual Class 1 NICs liability in the last complete tax year before the employee’s qualifying week (in the case of statutory maternity pay), guidance on whether the EA claim affects the SER calculation is not relevant until tax year 2015/16. While the Employment Allowance is to be welcomed as a reduction in employer costs during these challenging times, its operation is perhaps not quite as simple as the Chancellor made out in his Budget speech.
PP
See
www.gov.uk/employment- allowance-up-to-2000-off-your-class- 1-nics and
www.gov.uk/government/ publications/employment-allowance- more-detailed-guidance for more information.
PayrollProfessional 33
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