By Diana Bruce – July 2010 Policy Liaison Officer for the Institute of Payroll Professionals
Consultations and Reviews
The emergency budget was the last update we gave you and since then several reviews and consultations have been emerging from the government. They have even launched a website allowing employers to nominate which regulations should be scrapped to make running a business easier. The Your Freedom site also asks the public which laws they would like to see abolished. To follow is an overview of what’s in the pipeline that will affect businesses.
PAYE Simplification
This is a consultation with employers and payroll providers on mechanisms that could support more frequent or real time PAYE data. At the time of writing this we are still waiting for this consultation to be published. The IPP policy team have been involved in initial discussions about the tax simplification proposals since March of this year.
The Chancellor and David Gauke have recently established the Office of Tax Simplification (OTS), consisting of a Board of tax experts who will be responsible for leading the work of the OTS over the next year. Their responsibilities will be to identify areas where complexities in the tax system for both businesses and individual taxpayers can be reduced and to publish their findings for the Chancellor to consider ahead of his Budget. The OTS will undertake two initial reviews over the coming year. They will focus on tax reliefs and small business tax simplification (including IR35). The OTS will publish the initial findings from their work on reliefs in late autumn and on small business tax by the 2011 Budget.
Pension Reforms Review
Last month the Government announced details of a review of how best to support the implementation of automatic enrolment into workplace pensions. The Government’s coalition agreement confirmed its intention to introduce automatic enrolment, however, according to a DWP (Department for Work and Pensions) statement, circumstances have changed since the Pensions Commission published its recommendations in 2005 and they feel it is appropriate to review the position in the light of developments since then.
The review will be conducted by an independent team led by Paul Johnson of Frontier Economics, David Yeandle OBE of Engineering Employers Federation and Adrian Boulding of Legal and General Group PLC. The IPP Policy team have been working with the DWP, PADA (Personal Accounts Delivery Authority) and NEST (National Employment Savings Trust) in respect of the Pension Reforms. For your information, you can read Making automatic enrolment work - Terms of reference. The review will conclude by 30 September. The IFA interviewed the pensions minister Steve Webb regarding his thoughts about the review of auto-enrolment. Click here for full details of an interesting discussion.
When should the SPA increase to 66yrs?
The government announced that they are to review the planned timetable to increase the State Pension Age (SPA) to 66yrs. It is currently due for implementation in 2026, with equalisation for men and women due in 2020. The DWP have published a call for evidence which will run until 6 August if you would like to respond with your views.
Pension transfers for people aged 50 to 55
The Government intends to bring forward regulations to remove the unauthorised payments tax charge where an individual aged 50 and over but under 55 transfers their pension in payment to another pension provider. The Government intends to backdate the regulations to cover transfers made on or after 6 April 2010. For full details visit HMRC’s website.
Annuity purchase requirement and ASPs to be scrapped
The government is set to scrap the requirement to purchase an annuity and abolish alternatively secured pensions. In an HM Treasury consultation on annuity reform, the government said that, under the new regime, retirees would have the choice to go into either a capped drawdown system where income can be withdrawn subject to annual limits or else they can go into a flexible drawdown arrangement whereby unlimited lump sums can be withdrawn on the proviso minimum income requirements have been met.
Other areas which the IPP Policy team are working on and which we hope to update you more on next month include:
Public Sector pay freeze
The government announced that it will introduce a two year pay freeze for public sector workforces from 2011-12, except for those earning £21,000 or less, who will receive an increase of at least £250 in these years. The IPP Policy team would like to understand what the implications of this will be on the payroll department and software providers so that we can contribute to the review expected later this year, so we have surveyed the IPP membership for feedback.
Public Sector pensions
A complete review of public service pensions is taking place and an interim report should be published in September this year to help inform any decisions required for the spending review.
Pensions tax relief
This is a consultation on the best design of a regime to restrict pension tax relief, considering the use of a reduced annual allowance in place of the reforms legislated at Finance Act 2010. HM Treasury are due to publish this consultation some time in the summer of this year.
NlCs Holiday for new businesses
Within the qualifying period, these employers will not have to pay the first £5,000 of Class 1 employer NICs due in the first 12 months of employment. This will apply for each of the first 10 employees hired in the first year of business and operate in selected countries and regions. With a planned implementation date of 6 September 2010, how are employers going to deal with the administration of this proposed scheme?
Childcare Vouchers
The IPP membership has been surveyed again and as a conclusion our recommendation is that HMRC consider taxing CCVs at source via the payroll.
Student taxation
The IPP membership has been surveyed and the general consensus is a preference for the use of P46 for students. As a result we would support the abolishment of form P38(S) providing that the alternative does not pose additional administrative burdens on the employer.