The Chartered Institute of Payroll Professionals (CIPP) has unveiled its second annual report on pensions automatic enrolment, investigating the position of the industry six months after the largest of organisations commenced their full automatic enrolment duties on 1 October 2012.

The CIPP second research paper to understand business readiness for automatic enrolment includes responses and comments from 95 participants from a wide range of sectors and consists of employers, pension providers, payroll software developers and those who provide payroll services to employers.

One of the key findings revealed that, unlike the 2012 results where a third (33%) of respondents stated they had not heard of the legislation, all respondents involved in the 2013 survey have. However, it is worth pointing out that nearly three-quarters (71%) of employers who participated in the 2013 research believe that the automatic enrolment legislation is complex, a significant rise from 54% in 2012.

Other interesting findings showed that:

• Whilst the majority of respondents are set to stage in 2013, 39% had a staging date in 2014 compared with just 13% in the 2012 research;

• 62% have a qualifying pension scheme in place compared to 50% in 2012;

• More employers have carried out workforce assessments meaning they will be better equipped to understand the implications on their business;

• Most employers expect less than 25% of their workforce needing to be automatically enrolled and the same in respect of expected opt-out rates;

• The majority of employers intend to use the postponement process, with the main reasons being to assist with pro rata pay periods and casual employees;

• The majority of employers are aware of their software capability. However the results show a higher than expected percentage of those who use a part or fully outsourced service are yet to discuss their Service Level Agreements; and

• Payroll software and service providers are advising their clients on their products and services in 2013; this was, in 2012, one of the major issues concerning employers and the business community who were publicly stating they didn’t know what their providers were going to offer.

The last point is of particular significance to our clients who use the payroll services of Payplus and Virtual Business Source. We are in the process of delivering a major upgrade to our payroll software which will take away the burden of auto enrolment for clients who would like to add on this service.

Watch this space!!

What is a P11D?

P11D is the return that you’re required to make if your business has made benefits or expenses payments to either directors or employees or to members of directors or employees families or households.

When is a P11D required?

A P11D is required when benefits or expenses payments have been made:

1. To an employee or director who has earned £8,500 or more in the preceding year, and
2. To each director who has earned less than this amount, unless they are a full-time working director with no material interest in the company or a director of a charity or non-profit making organisation.

Which expenses and benefits require P11D?

Expenses and benefits that are covered by P11D legislation typically include: living accommodation, cars, vans and fuel, interest free and low interest loans, relocation expenses and mileage allowance payments as well as passenger payments.  It’s important to remember that you must complete a P11D return for payments made to all directors and employees as well as members of directors and employees families or households, unless you have a dispensation or they earn less than £8,500.

Do all expenses and benefits payments require a P11D?

Where expenses payments are made to employees and directors who earn less than £8,500, tax cannot be deducted and therefore this information should be returned on Form P9D and not P11D.

Where an employer has a P11D dispensation, they will not be required to produce these benefit-in-kind forms.  When HMRC have granted a dispensation from P11D, employers no longer need to report P11D expenses and benefits and employees don’t need to note them on their personal tax return and claim the deduction for business expenses.

What are the deadlines for P11D’s?

P11D information needs to be compiled for the full tax year and returned to HMRC by 6^th July after the end of the tax year.

Where can I get the forms?

You can download all the forms you’ll need right here:

Download P11D here.

Download P11D(b) here.

Download P9D here.

What happens if you get it wrong?

By its very nature, P11D legislation is complicated and the penalties for getting it wrong are severe.  It’s for these reasons that it’s essential that you get this aspect of your accounting spot on.

Where to get help

On the HMRC website

All the information you could need to comply with P11D legislation is listed on the HMRC website.  In recent years, HMRC has made a huge effort to make its website more user friendly and their step-by-step guide to P11D is a good example of how much they have progressed.  This comprehensive but plain-speaking guide is here for you to download. The guide will take you through the whole P11D process and will show you how to report your information online, even if you’re not yet involved in reporting your PAYE in real time.

From your accountant

If you’ve worked your way through the HMRC website and feel as if you’re still in the dark, your accountant should be able to help you get your P11D right first time.

That said, if you don’t have an accountant or you feel as if you’re not getting the support you need, we’re here for you.  We’d be delighted to steer you in the right direction and help make sure your P11D responsibilities are met on time and with the accuracy that will help you avoid penalties and problems.

What this means is that the employers affected are required to report payroll information to HMRC when, or before employees are paid.  The vast majority of businesses are likely to pay their employees on a weekly or monthly basis, but for those businesses who pay their employees only once a year, in a single tax month, there is the possibility to request that your scheme be treated as an ‘annual scheme’ by HMRC.

There are any number of reasons why an employer might only make one payment a year to employees and it makes sense to convert your account to an ‘annual scheme’ if this is your case and if you qualify.  That said, when you make your initial request to HMRC to become an annual scheme, it’s best to be aware that they will look at your account history to establish whether or not they deem annual status to be appropriate in your particular case.  They have made it clear that they will deem anyone seeking annual status where their account activity does not reinforce this request as non-compliant and may enforce penalties, so beware.

In order to be accepted as an employer who qualifies for ‘annual scheme’ treatment, you need to satisfy the following criteria:

• All your employees are paid annually;
• All your employees are paid at the same time, on the same date; and
• You are required to pay HMRC annually.

If you fulfill these requirements, you need to advise HMRC in which month you pay your employees so they will know when to expect your Full Payment Submission (FPS).  Once you make your annual FPS, you should also let them know that the submission you have just made will be your last for the current tax year.  When your business has been accepted as an annual scheme member by HMRC, there is no requirement on your part to send an Employer Payment Summary (EPS) for the months when you don’t make payments.  What you need to be careful of however is that you don’t send more than one FPS during the tax year, otherwise your account will default away from annual account status to monthly returns.

Any business owner making quarterly or twice a year payments, will not qualify for annual status and will need to submit FPS returns in the months when you have made a payment and EPS returns in the months when you haven’t.  There is no getting round this and seeking annual status under these circumstances could lead to your account being flagged as non-compliant and give rise to a penalty.

And finally, if you’re in the situation where you aren’t paying your employees at all, this of course raises the question about whether or not you still need to operate a PAYE scheme at all.

Deadlines looming

For the tax year 2012-2013, paper returns for reporting benefits and expenses need to arrive with HMRC by 5^th July as July 6^th is a Saturday.  From an employee’s point of view, each employee employed by you at 5^th April 2013 should receive a copy too. Once again, the applicable date is before 7^th July, so when you issue the copies will depend upon your working week.  For any employees that left your employment before 5^th April, it’s up to them to ask you for their copy.  Once you have received their request, you must provide them with their copy within 30 days or by 6^th July 2013, whichever is earlier.

Online or off?

It is your choice as the employer to decide whether you want to file your returns online or off.  For any employer with appropriate software, they will have the opportunity to deal with the reporting and filing of these forms online and as of this month, HMRC is committed to providing a way of filing these forms online directly.  This system will be called ‘Online end of year Expenses and Benefits forms” and will enable anyone who currently relies on the free HMRC software, or any other software which doesn’t have the required facility, to switch over to online benefits and expenses calculation and reporting.  Anyone who chooses the paper option is recommended to avail of recorded delivery to enable proof of delivery.

Where can I get help?

The HMRC website, which has vastly improved recently, but is nonetheless still perceived as being confusing by some employers, has a host of information and guidance on completing these forms.  The booklets you should seek out are Booklets 480, 490, CWG5, CA33.  There is also a general online guide which is an easy to use and comprehensive A to Z about expenses and benefits.

Failing that, of course you can seek expert advice by contacting us.

Am I obliged to return expenses on forms P11D?

The simplest answer to this is, if your employees receive any of the following:

• Sums paid by round sum allowance;
• Sums paid by reimbursement;
• Costs paid for directly by the you, their employer;
• The use of vouchers and, or credit cards, etc. provided by you, their employer to pay for expenses;
• Facilities put at their disposal,

…then you must return expenses payments on forms P11D, unless you have an official dispensation notice provided by HMRC whereby they specify expenses that need not be reported.  In the case of doubt, it is up to you as the employer to report the expenses and it is the employee’s responsibility to substantiate any business deduction claims they make.

Exceptions to the rule

There are a small number of benefits in kind that don’t attract income tax or National Insurance contributions and therefore don’t need to be returned, but these are subject to strict requirements which you should check in detail because failure to do so could end up in penalties and, or a demand for interest payments.  Trivial gifts to employees can normally be safely ignored, but it is important to differentiate between what is deemed to be “trivial” by HMRC and what is deemed to be “minor” or “irregular”.  Minor or irregular benefits, or indeed benefits that can’t be applied on a per individual basis can normally be treated by HMRC using PAYE Settlement Agreements (PSAs) whereby the employer settles up the dues with the revenue.  Once again, the due date for this is 6^th July 2013.

Still seeking clarification?

If you’re still seeking clarification on the benefits and expenses situation, why not get in touch?  We have experts on hand ready to help you make sure that you meet your obligations timeously and accurately.

Payroll processing

Here are out Top Tips for processing payroll:

1. Get pay dates right.  Employees who don’t know exactly what date they should be paid are few and far between.  For employees, it’s not only expected that they’ll be paid on the right date, they may well suffer a negative financial impact if you get their pay date wrong.  Standing orders and direct debits are often set up to coincide with pay dates and getting it wrong really isn’t an option from your employees’ point of view.
2. Check tax codes.  Every employee has a tax code and using the wrong tax code could cause all sorts of problems under RTI.  One way round this is to make sure that your payroll provider is able to download your employees’ tax notices of coding direct from HMRC.
3. Get the bank details spot on.  Wherever there are manual entries, there is the scope for error.  Mistyped bank sorting codes or bank account numbers can cause havoc with payments.  Double-checking your employees’ bank details before sending any payments is an essential part of any effective payroll process.
4. Make sure leavers don’t get paid.  A common mistake made when processing payroll is to omit to delete a leaver from your payroll list.  This can work out an expensive error and is easily avoided.
5. Pay attention to detail.  Many payslips contain more than just salary.  Things like pension payments, overtime, bonus, holiday pay and expenses may need different treatment from a PAYE and National Insurance point of view, so it’s really important when processing payroll to respect the tax treatment appropriate to each element of your employee’s total income.
6. Defining work patterns.  If you outsource your payroll processing and you don’t specify each employees work pattern to your payroll provider, you could find yourself out of pocket.  Assumptions about working hours don’t just affect income, they also impact on sick pay, holiday entitlement and holiday pay, so it’s really important to get the detail spot on.
7. Treating childcare vouchers appropriately.  This form of salary sacrifice is becoming increasingly popular and it’s essential to make sure the benefit is deducted from gross salary before tax and National Insurance (employee and employer) is calculated.  Only by working this way can you be sure that your employee’s tax and National Insurance is correct and that you don’t wind up paying Employer’s National Insurance when you don’t need to.
8. Identifying permanent and temporary changes.  When an employees pay changes, it’s important to be clear if the change is temporary or permanent.  Pay rises, for example, are (pretty) permanent, but things like a one-off bonus, which is accidentally assumed to be permanent could end up in significant over payments being made when they shouldn’t.

If you’re battling with your payroll in-house, perhaps it’s time to think about outsourcing it to a payroll specialist who will make sure your payroll house is kept in impeccable order.  If you’d like help with your payroll, why not get in touch?

Real Time Information or RTI is now well and truly here and business owners are having to make sure they are properly ready for it.

One of the requirements of RTI is that every employer will need to have payroll software to enable them to report PAYE information to HMRC in real time.   While this may sound like a big commitment for small business owners, there are free software options available, as well as paid for and managed systems, which means that everyone should be able to find a solution that works for them.

Free PAYE software

HMRC for example offers a free Basic PAYE tool that is intended for use by employers with nine or fewer employees.  On their website, HMRC list a further seven free PAYE software options that have varying features, such as checking basic payroll values, making full payment submissions, as well as the preparation of employer payment summaries and NINO verification requests.  For employers with more than nine employees, the only real option is to choose one of the commercial, paid-for PAYE tools or a managed RTI compliant payroll service.  But for employers with nine or fewer employees, is the free PAYE option always the best?

While it may be tempting during these tough economic times to opt for a free solution, it mightn’t necessarily be the best route to go.  This whole new RTI PAYE system is likely to take its toll on payroll and bookkeeping staff throughout the country and opting for a free solution could sooner or later end up as false economy.  In fact, even opting for a paid-for software solution mightn’t be the most effective way to go either.

So what is the best option?

The alternative to doing-it-yourself is to pass your payroll to a managed RTI compliant payroll service provider that will take care of everything on your behalf.  The major benefit of this sort of service is that you can pretty much wash your hands of your payroll responsibilities once you have them on board and have your systems set up.  A fully integrated service from the right payroll service provider will make sure you meet your RTI obligations without the stress of jumping through hoops in-house.

Experts in the ever-changing legislation that surrounds payroll, a managed RTI compliant payroll service provider will enable you and your key people to concentrate on your profit-making activities in your business rather than on payroll activities.  They will look after your payroll efficiently, transparently and at a price you’ll find surprising.  What’s more, at Payroll Services Centre we’ll take care of your payroll responsibilities on a fixed price basis and without any start up costs, allowing you to focus on what’s really important in your business.

If you’d like to find out more about our RTI compliant payroll service, where we guarantee accuracy and compliance then call Robin Mead on 0800 018 o590 or email him at rmead@payplus.co.uk  It costs absolutely nothing to chat and we’re confident that you’ll find our service surprisingly affordable as well as highly professional.

The first phase of auto-enrolment was launched in 2012 and in October firms with at least 120,000 employees were brought into the scheme and those with more than 50,000 followed suit by the end of 2012. By the time this year is over auto-enrolment will cover all businesses which have in excess of 500 employees.

Under the rules firms must enrol all employees aged 22-65 who are paid in excess of £8105 a year into a qualifying pension scheme after no more than 3 months service. Workers do have the right to opt out but cannot do so in advance of being enrolled. Pension contributions will be required for each employee who remains in the scheme.

Pension contributions are calculated as a minimum of 2% on qualifying earnings of between £5564 and £42475 per annum. The employer must pay in at least 1%. In October 2017 these minimum contributions will increase to 5% with at least 2% from the employer. This will rise again a year later to 8% with at least a 3% employer contribution.

Employers can choose not to use qualifying earnings and instead use pensionable earnings. However these would be total, rather than banded earnings, unlike qualifying earnings. If all pay is pensionable, the minimum contribution level by October 2018 only rises to 7% with at least 3% from the employer. If more than 15% of pay is non pensionable, the minimum contribution by October 2018 will be 9% with at least 4% from the employer. Pensionable earnings which represent at least 85% of total pay use the same contribution rates as qualifying earnings.

It is obvious that the potential costs to UK employers can be significant with a 3% pension contribution and Employers National Insurance Contributions on top of that. When facing these significant cost pressures one method by which employers are looking to mitigate the impact and reduce their NIC burden is through the use of salary sacrifice. Employees who agree to reduce their salary liable to NICs in exchange for NIC free employer contributions can save NICs both for themselves and their employer.
Any preparations should include considering using salary sacrifice and, of course, we are here to give you guidance.

Even if you already have a pension scheme in place it may well need to be assessed to ensure it complies with the complex demands of auto enrolment and the Pensions Reform Act.

We have further extensive information on auto enrolment on our website www.payroll-services-centre.co.uk this includes staging dates and eligibility criteria. Alternatively please call us on 01462 687339 and we will give you further guidance.

Even prior to its launch, preparing for this change in procedure is causing employers no end of headaches across the board, but one area where it is going to have a real effect is with new employees or new starters.  With a workforce that is more mobile than (pretty much) ever before, it’s important in the run up to RTI to establish effective and efficient new starter procedures.  In order to help you, we’ve prepared this brief guide.

1. When an employee is paid for the first time then their details must be sent with the next Full Payment Submission under RTI. When those details are submitted then one of 3 statements are made:
   • Statement A – This is their first job since last 6 April and they have not been receiving taxable Jobseeker’s Allowance, Employment and Support Allowance, taxable Incapacity Benefit, state pension or occupational pension.
   • Statement B – This is their only job, but since last 6 April they have had another job, or have received taxable Jobseeker’s Allowance, Employment and Support Allowance or taxable Incapacity Benefit. They do not receive state or occupational pension.
   • Statement B – They have another job or receive a state or occupational pension.
2. If you haven’t created one already, you should develop a way of gathering the information needed to for each employee. HMRC provide a Starter Checklist for this purpose.  Ideally this should be part of your induction or first day recruitment process.  You’ll need to go through this, which is the equivalent of the old P46 process, even if your new starter has a P45.  In broad terms, this process will help you gather and record the following information:
   • The starter’s start date.
   • Their Starting Declaration.  This concerns whether or not this is their first job or their only job as well as gathering information about benefits and pensions.
   • Whether or not they have a student loan.  If they have a student loan, fall within the appropriate timescales and aren’t making payments by direct debit, then you’ll be responsible for making student loan deductions from their pay.
   • Their personal information: full name, address and date of birth, as well as their National Insurance number.
3. If the employee has a P45, this will help you ascertain the emergency tax code you will need to use if the P45 doesn’t relate to the period 6^th April 2013 and 5^th April 2014.  Here are the applicable tax codes (although you should check HMRC website for full detail):
   • For P45s that relate to leavers before 6^th April 2012 and starters on or after 6^th April 2013, the code is 944L for the tax year 2013/2014.
   • For P45s that relate to leavers between 6^th April 2012 and 5^th April 2013 and starters on or after 25^th May 2013, the code is also 944L.
   • For P45s that relate to the periods in between (leavers between 6^th April 2012 and 5^th April 2013 and starters between 6^th April 2013 and 24^th May 2013, you should use the tax code shown on the P45 and then add 134 points, if the code features an L, without carrying forward any markings.
4. Where the employee has a P45 but has more than one job then instead of selecting statement C and operating code BR, the employer should select statement B and operate the tax code on the P45 – unless the tax code on the P45 is BR, 0T or D prefix – in which case statement C will still apply.

In addition to these procedural changes for new starters, it’s important that you make sure you are conversant with the time you have to submit the necessary information, as well as the information that is required before making any submission to HMRC.  These steps, along with verifying the information you are given by your new employee will help streamline your RTI responsibilities.

If the thought of creating a new starter policy fills you with dread, why not get in touch?  We can help demystify the process for you and help you make sure you stay ahead of your RTI obligations.

RTI, or Real Time Information to give it its full title, is the biggest shake up in PAYE reporting since the war.

In its final countdown stage and due to take effect from April 2013, there’s no getting away from the fact that RTI is going to be a real shock to some employers.  Recent research has shown that a whole host of businesses, across a whole range of sectors are far from being ready for RTI.

RTI is all about reporting PAYE information to HMRC on a real time basis.  In other words, post RTI, when you make a payment to an employee, you will be required to inform HMRC in real time, rather than once a year as is the case right now.  Clearly this change calls for a whole new approach to dealing with payroll.  Things like making sure you have your payroll information in order; making sure your software and system is compatible with HMRC and making sure your payroll team is up to steam with what they need to do, are just some of the things you should be working on right now.

The reality is that far too many business owners have buried their heads in the sand when it comes to RTI and they’re now weighing up their options.  If you don’t have your PAYE system ready for RTI, here’s a very brief overview of what you need to be thinking about:

• Making sure your software is RTI ready and compatible with HMRC requirements.
• Getting software if you don’t already have any.
• Registering with HMRC for PAYE online.
• Checking that your payroll data is correct and coincides with the records held by HMRC.
• Obtaining any additional information you need from your employees.
• Communicating the effect and implications of the changes caused by RTI to your staff.
• Making sure you have appropriate systems in place for dealing with starters and leavers.

If this list is making you feel weak at the knees, today is probably the day to think about getting some help on side.  Rather than trying to struggle on alone with the reality of RTI, there is a truly cost effective and efficient alternative.  Our online payroll system relieves you of the headaches associated with making sure you jump through the RTI hoops, in the way you need to and at the right time.

Our online system, which is RTI ready, is backed by a team of payroll experts who are highly trained in the requirements of RTI and are here to help you.  Add to this, their years of experience in making sure our clients’ PAYE requirements are met, and you begin to see the attraction of handing your payroll over lock, stock and RTI barrel to someone who can do it all for you.

If you’d like to discuss the benefits of outsourcing your payroll, why not get in touch today?  After all, it costs nothing to chat and we’ll be able to help demystify the implications of RTI on your business.

With wages bills constantly under scrutiny as a way of saving tax and national insurance, employers often don’t think about looking at other ways of rewarding their employees.

One of the first stages of planning an alternative way of remunerating your staff is to establish what they may or may not deem to be of value in reward terms in lieu of salary.  Irrespective of the “soft” options, such as visible demonstrations of appreciation and general niceness, there are plenty of options to reward your employees that fall outside of the realms of salary.  Here are 10 ways to reward employees without needing to pay them more.

But a word of warning…do remember that each of these suggestions, apart from number 1, has its own rules and regulations from a tax and NI perspective, so do make sure you check out their suitability to your specific needs before proposing them to your workforce:

1. A more positive environment.  In today’s tough economic climate, we’re all battling to get from one end of the week to the next.  Because of this, many workplaces have become less vibrant places than they were during the boom.  As a result, many employees would welcome a totally free of charge reward, delivered in the shape of a more positive working environment.  With this option you can be as creative as you like and there will be neither tax and NI implications nor any cost implication!
2. Pension provision.  Pension is high on many employees’ agendas these days.  Distinct lack of funds is a worry for most people and the provision of some form of pension arrangement in lieu of increased salary may well be interesting for you and your employees as well as a great way of saving tax and NI all round.
3. Childcare facilities.  Childcare voucher schemes or direct payments for childcare are welcomed by many working parents as well as providing opportunities to save tax and NI from both the employer and the employee’s perspective.
4. Loan facilities.  Although slightly less attractive now than when interest rates high, providing low cost or free loans for such things as travel passes is a good way to keep your tax at bay.
5. Car parking at or near your place of work.  Once again, for anyone who has to fund their own parking, this is an opportunity welcomed with open arms.  Irrespective of whether funding is in advance or in arrears, such payments are exempt of tax and NI.
6. Green company cars and mileage allowances.  While treated differently, both mileage allowances for business miles and green company cars can be a good way of making sure your employees are equipped with the tools they need to get out and about to do their job at the same time as saving tax and national insurance and providing meaningful benefits.
7. Health screening.  Under very specific rules, the provision of health screening attracts exemption from tax and NI contributions.  With the UK health care system coming under attack day in and day out, many employees would welcome the benefit of the option to avail of a funded screening or check-up.
8. Training.  Any training which is offered to an employee that is work related will not be charged as a benefit-in-kind to the employee and will at the same time attract NI savings for the employer.  This situation really is win:win for the employer and the employee, as the employee gets to broaden his or her skills and the employer gets a better equipped worker.
9. Bike to work schemes.  Although again subject to pretty specific rules, the provision of a bicycle to an employee is an eco friendly way for them to take advantage of a legitimate salary sacrifice arrangement.
10. Share plans.  One of the more traditional ways of attracting tax advantages is by offering Share Incentive Plans; Save As You Earn schemes; Company Share Option Plans and Enterprise Management Incentive schemes, which mightn’t be suitable for very small companies, but may well be an ideal plan for medium sized enterprises.

If you’d like to explore ways of rewarding your employees through your business payroll in a tax and NI efficient way, why not contact us so we can discuss the best options for your business?