News

What legislation is in the pipeline for 2010 and beyond?

By Karen Thomson MIPPdip – 15 February 2010

Associate Director of Policy, Research, and Strategic Visibility for the Institute of Payroll Professionals

 

 

 

Introduction

As you know the Chancellor held his Pre-Budget Report on 9 December 2009, and of course we are expecting another before the General Election is announced. Irrespective of the election result, key legislation is already in the pipeline that will affect anyone involved in the processing of payroll. Read on to learn about the changes that are coming; be prepared!

Rates and Allowances

Income Tax

For the tax year 2010/11 all tax allowances and thresholds will be the same as for the current year. The following link provides full information on rates and allowances for 2010/11: http://www.hmrc.gov.uk/pbr2009/pn02.htm.

 

Tax Thresholds	2009-10	2010-11
Basic rate: 20%	£0-£37,400	£0-£37,400
Higher rate: 40%	Over £37,400	Over £37,400
Additional rate:50%	N/A	Over£150,000

 

National Insurance

National Insurance Rates	2009-10	2010-11
Lower Earnings Limit	£95	£97
Earnings Threshold	£110	£110
Upper Accrual Point	£770	£770
Upper Earnings Limit	£844	£844

    

All other NICs rates and thresholds are unchanged for 2010/11. The following link takes you to further information on National Insurance Contributions Rates and Thresholds: http://www.hmrc.gov.uk/pbr2009/pbrn1.htm

 

Statutory Payment Rates

Please note that the rate for Statutory Sick Pay remains the same as for 2009/10

 

Statutory	2009-10	2010-11
Maternity	£123.06	£124.88
Adoption	£123.06	£124.88
Paternity	£123.06	£124.88
Sick Pay	£79.15	£79.15

Other Tax news

PAYE payments penalty – FAQs published

HMRC has produced a set of FAQs explaining the new penalty, to be introduced from the start of the 2010 / 11 tax year. These also confirm (in a revision to the original FAQs) that the application of interest to underpaid / late remittances will now not take effect until at least April 2012, not April 2010 as originally announced. Interest will therefore continue to be payable only on sums outstanding as at the tax year end.

 

Taxpayer charter launched

The much debated; well certainly by agents and representative bodies, taxpayer charter has now been published by HMRC. Please ensure you read this to know what HMRC’s obligations are to you, and your obligations to HMRC.

 

Employment Law

ECJ ruling on parental leave and notice calculations

The European Court of Justice (ECJ) has handed down a ruling in the case of Meerts v Proost NV that an employee who is dismissed whilst on parental leave should have pay in-lieu-of-notice calculated at the pre-leave rate.

 

Employees Can Lose Holiday by Failing to Comply with Notice Requirements

With all the changes in respect of holiday pay during 2009 i.e. after the Stringer v HMRC case etc the following is a welcome change from The Employment Appeals Tribunal (EAT). They have confirmed that employees must correctly follow their employer's rules for taking holiday (or, if no such rules exist, the holiday notice provisions of the Working Time Regulations (WTR). If not, employees could lose unused holiday entitlement at the end of the leave year.

The Working Time Regulations have rules about giving notice of holiday. Employees must give notice that is twice as long as the holiday asked for; however these statutory rules can be varied in an employment contract.

Case:

Mr Lyons was employed as an 'as required' security officer for Mitie Security. On 6 March 2008 he requested nine days outstanding holiday. His request was refused because he had not given the correct contractual holiday notice (four weeks) that was required under his contract of employment. His holiday was therefore forfeited. Mr Lyons resigned, citing the refusal to pay holiday pay as one of his reasons and brought tribunal proceedings.

 

National Minimum Wage

A reminder that from October 2010 the higher hourly rate will commence at age 21yrs and not age 22yrs as now.

 

Limits on awards and payments from February 2010

	Relevant statutory provision	Subject of provision	Old Limits	New Limits
1	Section 176(6A) of the Trade Union and Labour Relations (Consolidation) Act 1992	Minimum amount of compensation where individual excluded or expelled from union in contravention of section 174 of the 1992 Act and not admitted or re-admitted by date of tribunal application.	£7,300	£7,200
2	Section 31(1) of the Employment Rights Act 1996	Limit on amount of guarantee payment payable to an employee in respect of any day.	£21.50	£21.20
3	Section 124(1) of the 1996 Act	Limit on amount of compensatory award for unfair dismissal.	£66,200	£65,300

 

 

 

 

 

 

 

 

 

Expenses and Benefits news

Car and Vans: Changes to Fuel Tax

Those affected will be employees who receive free private fuel from their employers for company cars or vans and employers who pay Class 1A National Insurance Contributions (NICs) on the taxable benefit of provided fuel.

The measure sets the fuel benefit charge for company cars and vans from 2010/11 with company car fuel benefit charges increasing to £18,000 and company van fuel benefit charge increasing to £550.

Link to further information: http://www.hmrc.gov.uk/pbr2009/pbrn29.htm

 

HMRC tightens up three popular salary sacrifice schemes

Cycle to work schemes

HMRC will no longer accept that the tax exemption is applicable where certain employees within the organisation cannot participate in a cycle to work scheme because:

• They are aged under 18 and therefore there are restrictions on them signing a credit sale agreement as part of the cycle to work scheme unless an adult acts as a guarantor
• They are paid at the level of the National Minimum Wage so could not participate in a salary sacrifice

The recent DfT guidance and the HMRC new guidance indicates how employers can ensure that a cycle to work scheme can still comply with the rules in order to obtain the tax exemption for their scheme; for example by varying the type of bicycle on offer such that more expensive cycles are available via salary sacrifice and a pool of bicycles is available to loan to employees who cannot participate in a sacrifice arrangement. Where employers do not wish to take such steps and therefore there are employees who cannot participate in the scheme HMRC will:

• Accept that employees who had entered into a cycle to work agreement before 18 December 2009 that is effective no later than 6 April 2010 may continue to take advantage of the exemption until the end of that agreement
• Renewals of such agreements can then only enjoy the exemption if the necessary changes to ‘general availability’ have been made
• Any agreements including renewals made after 18 December 2009 can only enjoy the exemption if the ‘generally available’ condition is met

Where the exemption is lost the benefit will be taxable via the P11D section at section L ‘Assets placed at the employee’s disposal’ and subject to Class 1A NICs. Equally where a bicycle is sold to the employee for less than market value after the end of the loan period a tax and class 1A NICs liability will arise to be reported in section A ‘assets transferred’ of the P11D.

Bus passes

In order for the tax exemption for subsidy of a public bus service to be available the employer must be providing support for a specific bus route or service to enable employees to travel to work, not just a bus pass that provides general subsidised travel. HMRC will take this approach to bus pass salary sacrifice schemes:

• Bus pass agreements entered into by 18 December 2009 can continue without any amendment to scheme rules as long as the pass is valid for no longer than 12 months effective from 6 April 2010 at the latest
• Any renewals or new agreements after 18 December must meet the conditions of the exemption

Where the exemption is lost, the benefit will be taxable and subject to Class 1A NICs via the P11D.

Employer-provided canteens

HMRC have published draft legislation to enact the measure announced in PBR 2009 to limit the exemption for employer-provided canteens where the exemption is used in conjunction with salary sacrifice or flexible benefits arrangements. Also published is the related explanatory note.

Other news

Scottish Earnings Arrestment Orders

Changes to the Scottish Earnings Arrestment tables are expected April 2010. The Regulations (SSI 2009/395) are available to view on the OPSI website. Changes will be made to the current version of the Employers Attachment Orders Handbook; this booklet can be downloaded from the HM Court Service web pages.

 

P46 Car

There are changes to how we operate the form P46 Car to be introduced from 6th April 2010:

• In April 2009 - Employer can choose to send in replacement P46 car forms but must submit starter form and finish form.
• From 2010 employers must only submit forms when an employee is provided with a company car, and only when the employee no longer has the company car.

A temporary revised version of the form is available on the HMRC website which has been in use for the first quarter of 2009/10. A new form will be created for use from 2010/11 onwards.

 

Pensions News

NEST

Pensions Reform has been ongoing for some time and the main aim of the Government is to ensure that UK workers save for their retirement. As a result, from April 2012 we see the phased introduction of a work place pension named the National Employment Savings Trust (NEST), formerly Personal Accounts.

For more information on this visit the following link: http://www.personalaccounts.info/page.aspx?mepaid=55

 

Default Retirement Age

As a result of changes brought in by the 1995 Pensions Act, from 6 April 2010 the age at which women reach State Pension Age will gradually rise to become the same as it is for men (65). It will be essential that payroll professionals monitor the sliding scale for retirement from April 2010.

The Pensions Service web pages have produced a table to assist with the sliding scale.