Payroll Fact File

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Payroll Fact File provides practical information on every aspect of payroll procedures. It takes a procedural approach to the subject, with many worked examples, checklists and flow charts provided throughout to help you work logically through all your payroll queries.

There are many situations when you need to know the law as it relates to pay and benefits. You may need to assess the implications of an employee using a company car or to calculate the remuneration owing to a pregnant employee. Whatever the query, it is at times like these when you should turn to the hands-on guidance of Payroll Fact File, to ensure you are carrying out the correct procedures and calculations.

* Regular, comprehensive updates
* Checklists, tables and flow charts
* Numerous worked examples

The Payroll Fact File is designed to keep those engaged in payroll and related tasks updated with ever-changing legislation and payroll procedures.

SOURCE CURRENCY

Issue 157, April 2020

As a result of the UK’s exit from the EU on 31 January 2020 there may be changes to payroll legislation in due course. The changes will be reflected in the Payroll Fact File where applicable in due course.

Chapter 1

Summary of key points

The Employment Allowance continues to be £3,000 per year but please note the qualifying rules have changed from 6 April 2020. Only employers whose secondary NI contributions are £100,000 or less will now qualify.
The emergency tax code has been frozen at 1250L. The PAYE threshold has also been frozen.
The holiday pay reference period for workers with variable hours or pay has increased from 12 to 52 weeks from 1 April 2020.

1.1

The Chancellor has promised to review off-payroll workings in the private sector after six months and a lighter touch on penalties in the first year.

1.2 and 1.6

Employment status section has been updated regarding off-payroll working for the private sector and a link to a list of guidance on gov.uk has been added. Where the engager has to deduct tax and NIC from the worker because they are not deemed to be self-employed, he must deduct tax and NICs and pay them over to HMRC. There is no requirement to offer a workplace pension or pay statutory payments.

1.7

Originally, HMRC’s official guidance for employment status was leaflet IR35. Now, there is a raft of guidance on gov.uk. The online employment status checker has been updated (CEST) to reflect new rules for off-payroll working in the private sector. A further guidance link has been added.

1.8

If a worker is working for a medium to large employer and provides their services through an intermediary, then off-payroll working rules will probably apply. See list of factors for guidance.

1.10

Employers must issue a written statement of particulars from day 1 of employment. The qualifying service of one month has been removed. This applies from 6 April 2020.

1.11

Accommodation offset for NMW has been added, effective from 1 April 2020.

1.13

Entitlement to leave now includes parental bereavement leave of up to two weeks from 6 April 2020.

1.14

A reminder that the pay reference period for calculating holiday pay for casual workers has increased from 12 to 52 weeks from 6 April 2020.

1.17

PAYE threshold and emergency code for 2020/21 updated.

1.30

Agency workers’ rights regarding key information and Swedish derogation arrangements updated.

1.45

Where an employer pays employees after the normal pay day because it fell on a weekend or public holiday, they should enter the normal pay date on the FPS or it will cause problems for those claiming Universal Credits. In these circumstances, ideally send the FPS on or before the normal pay day ie early or use late reporting code G.

1.52D

An employer should only select ‘Seconded employees’ on the FPS if the employees are employed by an overseas employer and they are not simply migrant workers.
Item 209 relating to Class 1A to be reported in real time for termination payments over £30,000 and sporting testimonial awards over £100,000.

1.52E

Statutory Parental Bereavement Pay reclaim has been added to the EPS for 2020/21.

1.60

Class 1A on termination payments and sporting testimonials must be paid in real time.

1.72

The new statutory Parental Bereavement Pay has been added to record retention.

1.143

No maximum contributions for payroll giving schemes for 2020/21 has been added.

1.151

Statutory Parental Bereavement Pay and Leave has been added.


Chapter 2

Summary of key points

With effect from 6 April 2020, Class 1A on termination payments over £30,000 and sporting testimonials that exceed the lifetime allowance of £100,000 should be paid in real time.

2.2

CWG5 (2020) added to the list of guidance.

2.5

Statutory Parental Bereavement Pay has been added to the list of statutory payments that an engager is not required to pay a contractor under off-payroll working rules.

2.16

Accommodation offset rate of £8.20 per day or £57.40 per week from 1 April 2020 has been added. NLW rate from 1 April 2020 is £8.72 per hour.

2.23
P9X(2020) link has been added and should be implemented from 6 April 2020 (see www.gov.uk/government/publications/p9x-tax-codes).

2.23B

Tax codes from employees coming from abroad has been updated for 2020/21.
It is important to identify secondees to the UK on the FPS correctly. This would only apply to secondees from an overseas employer, not to migrant workers.

2.26

Scotland and rUK tax bands and percentages have been frozen for 2020/21 from 6 April 2020. The personal allowance has also been frozen at £12,500. These figures may change with the spring Budget.
FOT payment example has been updated.

2.29

Minor changes to wording for Student Loan Plan 2 and Postgraduate Loans.

2.30

Welsh tax codes are denoted with a prefix C.

2.31

Tax bands and rates for England, Scotland, Wales and Northern Ireland have been frozen for 2020/21 but this may change with the spring Budget. Please note that there is no tax code uplift from 6 April 2020 because the personal allowance has been frozen. The tax code charts for new employees with a P45 have been updated.

2.33

Tax codes for new starters with a P45 for a previous tax year have been updated.

2.34

The personal allowance for 2020/21 has been frozen and therefore, there is no tax code uplift re P9X (2020) instructions.

2.35

The example of an employee who joins towards the end of the tax year has been updated.

2.38

Minor change to reflect the fact that changes were made to the new starter checklist following the introduction of postgraduate student loan deductions.

2.39

Minor change to wording to reflect that postgraduate loans were introduced from 6 April 2019.

2.40

Figure 2D has been updated.

2.53

NIC example has been updated.

2.79

With effect from 1 April 2020, the pay reference period for calculating holiday pay for workers with variable hours, zero hour contracts or variable pay will change from 12 weeks to 52 weeks. Discount any weeks where no work was done up to a maximum period of 104 weeks.

2.84

Checklist for leavers updated. An employee is only entitled to SPP if they are taking the leave and not immediately joining a new employer.

2.115 and 2.119

From 6 April 2020, Class 1A is due on termination payments in excess of £30,000 and must be reported in real time.


Chapter 3

3.8

Clarification and warning on treating some low value benefits in kind as exempt if they are a reward or fall within the meaning of legitimate expectation. For example, the exemption does not apply to working lunches, however, HMRC accepts that birthdays and seasonal gifts are exempt as they are provided in isolated instances within the tax year and may be provided for reasons of staff welfare or in respect of a particular non-work related event.

3.18

Seafarers’ Earnings Deduction has been updated for 2019/20.

3.34

The thresholds for Plan 1 and Plan 2 Student Loans from 6 April 2020 have been included. There is no change to the Postgraduate Loan threshold.

Chapter 4

4.13

Off-payroll working and links to new CEST tool have been added.

4.18

Warning about relying on an employee’s birth certificate or passport to determine State pension age.

4.22

With regard to NIC arrangements with EU and EEA members, the UK left the EU on 31 January 2020 but there is an implementation period until 31 December 2020 to allow for new arrangements to be negotiated.

4.26

Lower Earnings Limit section – the ET has been written out in full as Earnings Thresholds ie Primary and Secondary. From 6 April 2020, the Primary and Secondary thresholds are no longer aligned.

4.34

Statutory Parental Bereavement Pay has been added to the list of remuneration.

4.44

Examples updated for 2020/21.

4.45A

Early payment date examples updated.

4.45B

Late payment date examples updated.

4.58

Mileage rates updated to reflect 1 March 2020 rates.

4.62

Class 1A NICs on termination payments in excess of £30,000 from 6 April 2020 have been updated.

4.65

Example of a new director’s NIC liability updated.

4.76

The Chancellor has promised a soft landing on penalties for the first year of off-payroll working for the private sector. The system will be reviewed after six months.

Appendix 4A

Class 1 NIC rates and thresholds updated for 2020/21 and Class 1A and Class 1B for 2020/21 added.
NIC tables for 2020/21 inserted. Please note that employer’s Secondary Threshold is no longer aligned with the Primary Threshold.
NIC tables for 2019/20 minor typo amended on heading of last column.

Appendix 4B

Average weekly earnings for Statutory Sick Pay for 2020/21 has been confirmed by HMRC as £120.00.
NIC Earnings Limits for 2020/21 have been added and 2011/12 have been deleted.
Class 2, 3 and 4 contributions for 2020/21 have been added.
Statutory Parental Bereavement rates have been added.
SAP and SPP payment breakdown up to 2020/21 have been separated for ease of reference.

Chapter 5

5.2A

Register to payroll for 2020/21 by 5 April 2020.

5.5

Accounting for and paying Class 1A NICs on taxable termination payments and sporting testimonials from 6 April 2020 onwards.

5.24

Lower earnings limit and standard amount for statutory payments for 2020/21.

Appendix 5A

Average official rate of interest for 2019/20 added.

Chapter 5A

5A.20

Reporting zero emission mileage on P46(Car) or FPS.

Figure 5AF

Advisory fuel rates from 1 March 2020.

5A.110A

Christmas and birthday gifts and trivial benefits exemption.

5A Questions and Answers

Appropriate percentage for electric cars 2020/21 onwards.

Chapter 6

General

The Chapter has been updated with the most recent information on the effects of the UK’s departure from the EU on international employments, including visas.

6.5 and 6.5A

The Scottish taxpayer income tax rates for 2020/21 have been announced. As expected, in 2020/21, there is no change to the Welsh taxpayer income tax rates.

6.12A

HMRC has re-issued its residence guidance Booklet RDR3.

6.13

New HMRC Residence, Domicile and Remittance Basis Manual guidance in RDRM11730 on allowable UK transit days, including the use of social media.

66.22A and 6.25A

New HMRC guidance confirms the precedence of the automatic remittance basis over the low foreign earnings exemption.

6.29 and 6.30

The examples of UK days for treaty exemption have been updated to 2019/20.

6.46

The example of a UK employee working abroad has been updated to 2019/20.

6.51

The example of an employee who is non-resident in home and host countries has been updated to 2019/20.

6.54

The example of a No Tax PAYE code has been updated to 2020/21.

6.60A

UK regulations replaced the EU double taxation dispute resolution directive from 31 January 2020.

6.60H

The UK has a new double tax treaty with Gibraltar.

6.61C

Share-based income that is not taxable at all (even on the remittance basis) does not need to be disclosed in year-end reporting.

6.62

Anti-avoidance rules preclude UK foreign tax credit relief for amounts that could have been avoided (for example, by making a claim in the other country).
Non-resident Crown servants and non-resident individuals who are resident in the Isle of Man or the Channel Islands can claim UK double tax relief.
The UK tax credit rules offset the highest rates of foreign tax against the highest UK tax rates.

6.68A

New HMRC guidance on termination payments and post-employment notice pay (PENP), with updated calculation example.

6.71

Additional HMRC guidance on tax-free employee travel and subsistence costs for attending a qualifying temporary workplace.

6.72

The example of business and private travel costs has been updated to 2019/20.

6.115B

The rates of voluntary Class 2 and Class 3 NICs have been updated for 2020/21.

6.129C–6.129D

A new employer guide to the EU Settlement Scheme has been published.
The EU Settlement Scheme document scanner locations have been updated.

6.129G

Expansion of the seasonal workers’ immigration scheme for UK edible horticulture.

6.130A

The UK government intends to introduce a points-based immigration scheme in 2021, to allow entry to highly skilled migrants.

6.130C–6.130F

The NHS surcharge in the UK EU-exit Implementation Period (1 February–31 December 2020) and from 1 January 2021.
Additional commentary on NHS surcharge rules and exemptions.

6.130G

The National Living Wage accommodation offset rates have been announced for 2020/21.

6.137–6.138

The commentary on UK child benefits has been updated to cover the position after the UK’s exit from the EU on 31 January 2020.

6.139

The rates of parental leave pay have been increased for 2020/21. Statutory Parental Bereavement Pay and Leave have been introduced from 18 January 2020.

Chapter 7

7.12D

Brief guidance on the action an employer should take regarding COVID-19 (the coronavirus).

Appendix 7A

The minimum Average Weekly Earnings for Statutory Sick Pay for 2020/21 is £120 per week unless the sickness links to a Period of Incapacity for Work (PIW) prior to 6 April 2020 where the minimum AWE was £118.
The daily rates of SSP for 2020/21 have been added.

Chapter 8

Summary of key points

Statutory Parental Bereavement Pay will be introduced from 6 April 2020 subject to Parliamentary approval. Qualifying parents will be entitled to two weeks’ pay and leave which can be taken as two separate weeks.

8.2

Statutory Parental Bereavement Pay can be taken as two separate weeks (subject to Parliamentary approval).

8.23

The LEL for 2020/21 is £120 and effective from 6 April 2020.

8.44

Example of SMP entitlement updated.

8.49

Example of an employee whose average earnings are equal to the lower earnings limit of £120 and how much SMP she would be entitled to.

8.52

Example of SMP payment calculation has been updated for the new tax year.

8.56

SMP payment and reclaim example updated.

8.60

Example of Small Employers’ Relief reclaim for SMP updated.

8.74

Employees who suffer a stillbirth may qualify for Statutory Bereavement Pay and leave from 6 April 2020. See also 8.159.

8.106

SPP example for someone whose average earnings bring his rate of SPP below the flat rate has been updated. Old rate of SPP has been removed.

8.107

SPP example for minimum average earnings for monthly paid employee has been updated.

8.121

The LEL for 2020/21 and minimum qualifying average weekly earnings for SAP of £120 per week has been added.

8.131

The minimum qualifying average earnings for children matched for adoption from 5 April 2020 is £120 per week.

8.132

Old rate of SAP for 2018/19 has been removed and the new rate from 5 April 2020 has been added. The example for a weekly paid employee has been updated.

8.133

The new rate of SAP has been added and the example updated.

8.151

Example of SPP and SAP reclaim from HMRC has been updated.

8.152

HMRC contact telephone numbers have been updated.

8.153

Form P60 for 2020/21 should show any Statutory Parental Bereavement Pay received during the tax year.

8.159

The details of Statutory Parental Bereavement Pay and Leave scheme has been updated. Entitlement begins from 6 April 2020.

Appendix 8B

SMP tables for 2018/19 have been removed. SMP tables have been updated to September 2020.
SPP tables for 2018/19 have been removed. SPP tables have been updated to September 2020.
SAP tables have been updated for 2020/21 up to September 2020.

Chapter 9

General updating for the changes in tax years.

9.71

Additional information on welfare counselling and trivial benefits has been added.

9.97

New tax year code changes have been updated.

Chapter 10

10.12, 10.18 and 10.40

The apprenticeship rates and apprenticeship levy statistics have been updated and the National Living and Minimum wage rates.

10.14

Some minor changes have been made to the information on senior citizens.

10.27

Information has been added on postgraduate student loans.

Chapter 11

Key Summary

Small Employer’s Relief (SER) which continues to be 3% for 2020/21 (no change to the threshold Class 1 NICs £45,000 or less) and will include the new Statutory Parental Bereavement Pay from 6 April 2020.
HMRC has not yet confirmed if advance funding will be available for Statutory Parental Bereavement Pay but it is anticipated that it will.Statutory Parental Bereavement Pay only applies to Great Britain and not currently Northern Ireland.

11.2

Old rates of SPP for previous years have been removed and the new rate of £151.20 from 5 April 2020 has been added.
Old details regarding reclaiming SSP under the Percentage Threshold Scheme which is now closed have been removed.

11.4 and 11.5

HMRC has yet to confirm that Statutory Parental Bereavement Pay will qualify for advance funding, although it is expected to.

11.7 and 11.8

To claim Small Employers’ Relief, employers should check tax year 2019/20 for babies expected on or after 19 July 2019. The qualifying threshold in total Class 1 NIC is £45,000 or less.

11.10

Details of the SSP Percentage Threshold Scheme have been removed as the scheme closed on 6 April 2014.

11.16

Employers can no longer use the Online PAYE Returns and Forms to submit their FPS or EPS. This product can only be used to submit forms P11D, P11(b) and P46 (Car). Small employers with nine or less on the payroll can submit their FPS using Basic PAYE Tools. All employers, regardless of size can use BPT to send HMRC their Employer Payment Summary (EPS) if their payroll software does not offer this facility.

11.22

Minor change to tense regarding consultation on the Employment Allowance which has now closed.

Chapter 12

12.49

Regulations on Statutory Bereavement Pay and Leave published.

12.75

Update on case law regarding the payment of men on shared parental leave and possible discrimination.

12.148

New guidance on harassment at work published by the Equality and Human Rights Commission.

Chapter 13

Summary of key points

A new Pension Schemes Act will introduce measures to strengthen the Pension Regulator’s powers and include a new criminal offence.

13.13

HMRC Countdown Bulletin 51 sets out the procedure for partial payments of pension scheme sums payable to secure the entitlements of contracted-out members.
HMRC Guaranteed Minimum Pension (GMP) equalisation newsletter, February 2020 accepted that the equalisation process may affect certain contracted-out scheme members’ lifetime allowance, although it should not affect their annual allowances.

13.17B

HMRC Guaranteed Minimum Pension (GMP) equalisation newsletter, February 2020 set out the late notification process for protecting the lifetime allowances of certain contracted-out scheme members who are guaranteed a minimum pension by their contracted-out pension schemes.

13.18A

HMRC Guaranteed Minimum Pension (GMP) equalisation newsletter, February 2020 indicated that the equalisation process for guaranteeing a minimum pension to certain contracted-out scheme members should not affect their annual allowances.

13.29G

The flat rate UK state pension increased to £175.18 per week for 2020/21.
Pre-2016 pension entitlements that exceed the UK flat rate state pension have been increased by 8.2% for individuals reaching pension age on or after 7 April 2020.

13.30

The UK state pension increase for 2020/21 is 3.9% for most pensioners under the ‘triple lock’ guarantee.

13.30B

The UK basic (pre-2016) and flat rate (post-2016) state pension rates have been updated for 2020/21.

13.58A

Update on the introduction of the HMRC Managing Pension Schemes online service.

13.91A

Two recent cases have examined the unauthorised payment charge in relation to pension liberation schemes.

13.92C

New HMRC guidance on the exclusions from the overseas transfer charge after the UK’s EU-exit.
New HMRC guidance on overseas transfer charge refunds.


Chapter 14

This chapter has not been updated for this issue.