Cambridgeshire ACRE’s Payroll Team has produced a useful guide for employers on workplace pension auto-enrolment. You can click on the link below to download your copy.
The importance of PAYE payment reference numbers
At the end of one tax year and the start of the next it’s more important than ever to use the correct payment reference, especially if you pay very early or late. The reference you send with your payment is vital because it tells HMRC which employer record the payment relates to so it can be correctly allocated straight away.
Any delays in allocating your payment could mean you get a message saying you have paid late. You could also be charged late payment penalties and interest if you don’t pay on time and in full.
Common errors to avoid
- Use your Employer PAYE reference to pay. You should pay with your Accounts Office reference which is 13 digits long and is in the format 123PA00012345
- Put extra information such as the type of tax you are paying after your Accounts Office reference. The only thing you should add, if you are paying early or late, is the 4 digit code signifying the tax year and tax month. Your reference then becomes 17 digits long. For example for an early or late payment relating to April 2015 the accounts office reference number 123PA00012345 becomes 123PA000123451601. (16 signifies the year 2015/16 and 01 signifies Month 1)
- Continue to add the same 4 digit code to your Accounts Office reference to pay other months as this will result in payments being incorrectly allocated. Either remove these if you are paying on time or update them to show the tax year and tax month being paid.
- Use words instead of your Accounts Office reference number, for instance your company name or the type of tax being paid.
Warning to all small employers to look out for a letter from The Pensions Regulator!
Between February and May 2015 The Pensions Regulator is writing to all small and micro employers with an auto-enrolment staging date between May 2016 and August 2017. The letter provides key information such as the date the law applies to each organisation and it also contains a unique letter code which will be required when contacting The Pensions Regulator.
The letter asks employers to nominate a point of contact, by a specified date, by logging on to http://www.tpr.gov.uk/letter. Employers must nominate a primary contact to receive all correspondence and employers can also nominate a secondary contact, for example your payroll provider, who will receive email alerts about their client’s automatic enrolment obligations.
This month’s news focuses on when a payment is made for PAYE purposes
Although Real Time information (RTI) has not changed when a payment is made, it is more important than ever to understand when a payment is made for PAYE purposes. The law says that for PAYE purposes, a payment is treated as made the earlier of:
- The time when the payment is made
- The time when the person becomes entitled to the payment
The intention behind the legislation is to ensure that PAYE is operated at the right time and in the correct tax year. So, if the employee is paid late, the employer should still use the regular payday on the FPS where the employee is entitled to be paid on that date. If you pay the employee early, then this will bring the payment date forward and the employer should use this date on the FPS.
Paying by electronic means (such as BACS)
Payment is made when the money is in the employee’s account and they can use it. To ensure that the funds are in the employee’s account by their regular payment date, you may prepare a BACS transfer instruction on an earlier date. However, you should enter the date the funds will reach the employee’s bank account on the FPS.
Paying by cash or cheque
Payment is made when the cheque or cash is given to the employee, the date the cheque is cashed or put into the bank does not matter. Therefore, the date to be entered on the FPS is the date the cheque is given or the cash paid.
When the regular payment date falls on a non-banking day
An easement applies if the employee’s regular payment date falls on a non-banking day. This is currently on page 9 of the CWG2. It explains when you should make your submissions if the regular payday falls on a non-banking day (Saturday, Sunday or bank holiday) and as a result, you make payment on the last working day before the regular payday, or the next working payday after the regular payday.
This is to ensure that PAYE operates as normal so the employee receives the allowances they are entitled to and the payment is allocated to the correct payment period or tax year. For PAYE purposes, the payment can be treated as if it had been made on the regular payday. An important example of where this might apply is the end of this tax year, which falls over the Easter bank holiday. For example if the regular date of payment is the 3, 4, 5 or 6 April but the actual date of payment is 2 April, report the payment as being made on the 3, 4, 5 or 6 as appropriate.
In-year filing penalties for schemes with 49 or fewer employees will begin 6 March 2015
Automated in-year penalties for late payment will begin from 6 April 2015 for all employers. Are you paying HMRC correctly and on time? Further information is available: What happens if you don’t report to HMRC on time
Income Tax Allowances 2015/16
It was announced that the basic personal allowance for the tax year starting 6 April 2015 will be increased to £10,600 and the tax code for emergency use will be 1060L. As a result there will be a general uplift of tax codes with suffix ‘L’ which will be increased by 60.
Abolition of employer NICs for employees under the age of 21
From 6 April 2015 a new Upper Secondary Threshold (for employers) will be introduced at £815 per week. This has been introduced to facilitate the abolition of employer NICs for employees under the age of 21. From 6 April 2015 employers will no longer be required to pay Class 1 Secondary NICs on earnings paid up to the Upper Secondary Threshold to any employee under the age of 21.
Statutory Exception for Trivial benefits
From April 2015 a statutory exemption which be introduced to allow employers to identify and treat certain low value benefits given to their employees as ‘trivial’. Further information is available: Statutory exemption for trivial benefits in kind
From April 2016 the requirement for an employer to apply to HMRC for a dispensation for paid or reimbursed deductible expenses and benefits will be removed. The effect of this will be that there will no longer be any reporting requirement on employers, and employees will automatically receive the tax relief that they are entitled to. Further information is available: Exemption for qualifying expenses payments
Employment Allowance – have you claimed yours yet?
Eligible businesses and charities can reduce their Employer Class 1 National Insurance contributions (NICs) bill by up to £2000 every year by claiming the Employment Allowance. Once you have claimed your Employment Allowance for the tax year ending 5 April 2015 it automatically applies for future years, until you tell HMRC otherwise. If you haven’t claimed your Employment Allowance yet, there is still time. All you need to do is check your eligibility and then claim through your payroll.
Pension reforms introduced in 2012 will, in future, require all employers to automatically enrol all eligible job holders into a pension scheme. The introduction of auto-enrolment is staggered, with the largest employers having to comply first but small employers need to start planning ahead now. Our payroll specialists have produced a brief guide to auto-enrolment for small employers.
Download Brief Guide to Auto-Enrolment