HMRC’s Employer Bulletin February edition has been published. We’ve rounded up a few of the important highlights from the bulletin which employers should be aware of:
1. IR35 Off Payroll Working
New rules for Off Payroll Working are being introduced from 6 April 2021 for medium and large organisations in the private sector from 6 April 2021.
There is also a further change for the public sector from this date regarding the introduction of status disputes process.
If you are in the private sector and you have contractors working through their own limited company, often referred to a personal service company (PSC), you will need to:
- identify contractors who works in this way
- decide if they are inside or outside the Off Payroll Working rules
- inform the contractors of their status determination, and any agencies you engage with
- be ready to add them to payroll and deduct tax and NIC, if necessary
- have a process in place to deal with any status disputes
- maintain a robust audit trail, and test your processes, systems and controls.
If the rules do not apply to small businesses or if the contractor is self-employed.
Legislative changes are planned for April 2021 to the Construction Industry Scheme and these include the definition of a deemed contractor, the cost of materials can only be claimed by the sub-contractor who incurs the cost and the scope of the penalties for false registration will be extended. Furthermore, HMRC will have the power to amend CIS deductions claimed by sub-contractors on their Employer Payment Summary.
3. Student Loans
Student Loan thresholds from 6 April 2021 have been confirmed as follows:
Plan 1 – £19,895, earnings above this threshold will continue to be calculated at 9%
Plan 2 – £27,295, earnings above this threshold will continue to be calculated at 9% Postgraduate loan (PGL) – £21,000, earnings above this threshold will continue to be calculated at 6%
4. Scottish student loans
With effect from 6 April 2021 there is a new type of student loan known as Plan 4
Plan 4 – new plan type, Scottish Student Loans (SSL) £25,000, earnings above this threshold will be calculated at 9%. This new type of loan will affect all employers throughout the UK, not just those based in Scotland.
5. New Starter Checklist
The starter checklist has been updated to reflect the new student loan Plan 4. The new format will be available from March and should be used by employers from 6 April 2021. The student loan section has been reformatted and the initial question (section 9) may cause confusion. See Student Loan article for further details.
6. Year End
End of year reporting tips includes a reminder to set the indicator on the FPS or EPS to show that this is the final submission for the tax year. This will allow HMRC to finalise the records for all employees on this PAYE reference number.
Employers are reminded that form P60 should only be issued to employees in your employment on 5 April 2021. For those who are running pension payrolls it is those who are in receipt of a pension at this date. The deadline for issuing the P60 is 31 May 2021.
8. No FPS
If you are not going to pay any employees or pensioners again this tax year, then you must submit an EPS with the indicator ticked to show you did not pay anyone in the final pay period and that this is your final submission. The deadline to do this is 19 April 2021.
9. Earlier Year Update process change
There is a change to the Earlier Year Update (EYU) process this year. From April 2021, the EYU will no longer be a valid submission to make amendments to the tax year ending 5 April 2021. Any amendments to this and future tax years will need to be made using an additional FPS amending the year-to-date values.
10. NIC holiday for employing veterans
From 6 April 2021 there will be a National Insurance holiday for employers that hire former members of the UK regular armed forces. The holiday will exempt employers from any National Insurance contributions liability on a veteran’s salary up to the Upper Secondary Threshold (UST) in their first year of civilian employment.
11. Informal payrolling must cease
HMRC has identified that there are a small number of employers who are informally payrolling benefits. With effect from 6 April 2021 this must stop as HMRC will no longer accept the informal arrangements. It is essential that those employers affected formally register for payrolling and the deadline is 5 April 2021 for 2021/22.
12. National Living Wage changes
HMRC has confirmed that the qualifying age to receive the National Living Wage changes from age 25 to age 23 from 1 April 2021.
13. Post Employment Notice Pay changes
Draft legislation affecting Post-Employment Notice Pay (PENP) is awaiting Parliamentary approval and if sanctioned will take effect from 6 April 2021. The changes give provide an alternative PENP calculation where an employee’s pay period is defined in months, but their contractual notice period or post-employment notice period is not a whole number of months.
14. Car and Van benefits for 2021/22
The government has confirmed the van benefit charge and fuel benefit charges for cars and vans from 6 April 2021 as follows:
- van benefit charge will uprate from £3,490 to £3,500
- car fuel benefit charge multiplier will uprate from £24,500 to £24,600
- van fuel benefit charge will uprate from £666 to £669
15. Employer provides cycles exemption
Employees who joined an employer-provided cycles scheme, on or before 20 December 2020, can now benefit from a time limited easement. This is because they could not have reasonably foreseen the impact of Covid-19 on their working pattern.
Further details about those joining the scheme after this date as well as details of the easement can be found in the Employer Bulletin (February 2021) here.