PAYE Online

HMRC have issued a reminder to employers concerning their PAYE online service. The online service, which is used by many employers to submit the employer annual returns P35 and P14, is also used by HMRC to issue PAYE notices and reminders back to the employer.

Employers can opt out of online notification and we have included a link at the bottom of this article to enable you to do this if appropriate.

HMRC have also reminded employers that they must access and action the online notices regularly. If not, there is a risk that employers may make incorrect deductions from their employees by using out of date tax codes.

The online system is also used to advise smaller employers, those with less than 50 employees, that HMRC have awarded them the tax-free payment for filing end of year returns.

Internet links: HMRC article and How to opt out of online notification

28 Days Holiday Entitlement – But Not Yet

A couple of months ago we reported on the government’s proposal to increase the minimum statutory holiday entitlement from the current 20 days (including bank holidays) to 28 days (bank holidays inclusive). The 28 days equates to 5.6 weeks for an employee working a five day week.

The government has recently published its response to the further consultation and the regulations are making their way through parliament. Parliamentary approval should be forthcoming by the end of June which will give employers three months notice to implement the changes.

Following the consultation some amendments have been made. The main change is delaying when employees will be entitled to the full amount of additional leave.

The government will delay introducing the second increase from 4.8 to 5.6 weeks until 1 April 2009. This will increase the holiday entitlement of an employee, who works a five day week, from 24 days to 28 days leave. Apparently there has been pressure from the health and social care sector, which has led to the government proposing the later date. The original proposal had been to introduce the change from 1 October 2008.

The initial increase from 4 to 4.8 weeks, or 20 to 24 days for an employee who works a five day week, will come into effect on 1 October 2007, as originally suggested.

The government have amended the proposals to enable employers to pay employees for the additional holiday entitlement (the additional 0.8 weeks or 4 days) until 1 April 2009. This is a temporary measure to ease the transition.

The increased leave entitlement includes bank holidays, so employees who already get four weeks leave plus bank holidays will not be entitled to an increased entitlement.

Part time workers minimum entitlement will be calculated on a pro-rata basis (4.8 then 5.6 times their usual working week), regardless of whether or not they usually work on bank holidays.

Increases from October 2007 and April 2009 will be calculated proportionally depending on when the leave year starts. The DTI’s announcement includes the following example.

‘If your leave year started in April, you work a 5 day week and you currently receive 20 days including bank and public holidays, you will be entitled to 2 additional days from October 2007 to March 2008.’

The government also state that they plan to cap the maximum statutory holiday entitlement at 28 days, but that employers may give more contractual holiday than that if they choose. Also some or all of the additional holiday may be carried forward to the following leave year with the agreement of both the employer and employee. Payment in lieu of additional holiday will not be permitted from 1 April 2009 unless paid on termination of employment.

The DTI will make an online calculator available shortly and we will let you have the link for this as soon as it is available.

These proposals relate to England, Wales and Scotland. The Department for Employment and Learning in Northern Ireland are in the process of making proposals for Northern Ireland.

Internet links: DTI annual leave press releaseand to be kept informed of developments email

Tax Credits Final Reminder

Tax credits are state benefits which are generally available to lower income families. However, entitlement to the credits is significantly increased where individuals pay for childcare or have a dip in normal levels of income perhaps due to incurring trading losses.

Individuals who have already claimed tax credits for 2006/07 have to finalise their provisional award, which would have originally been based on their 2005/06 income, and advise HMRC of any changes in their circumstances for 2007/08. This procedure is known as the renewals process. The deadline for the submission of tax credit renewals is 31 July 2007, which is a month earlier than the renewal date last year which was 31 August.

HMRC have been busily advertising the renewals process in the national press. Claimants need to be aware that the payment of tax credits will stop at the end of July if they have not renewed their applications by that date.

HMRC are also reminding claimants that the deadline for letting them know that their circumstances have changed has been reduced from three months to just one. Some examples of the sorts of changes which have to be notified in year are changes in family circumstances, perhaps a partner moving in or out of the family home, or a reduction in childcare costs. A reduction of £10 a week for a mere four weeks has to be reported!

If you need any help with the completion of your form or any advice on tax credits generally please do get in touch.

Internet links: HMRC tax credits page and change of circumstances reminder

Arctic Systems Decision

The long running saga of Geoff and Diana Jones and their company Arctic Systems Limited has been back to the courts last week, this time to the House of Lords.

Just in case you need a reminder, the case concerned a company owned by a husband and wife, Geoff and Diana Jones, and hinged on whether dividends paid by the company to Mrs Jones (who was not a higher rate taxpayer) should be shown on her husband self assessment return and taxed as his income at a higher rate of tax. You may recall that the case went to the Court of Appeal where the taxpayer won.

The case was heard in a mere two days and the outcome of the hearing is expected shortly. We hope to bring you the decision and its implications in next month’s enews.

Internet link: BBC news article

Personal Accounts Pensions

The government has published details of a new savings scheme which will give all employees the right to a workplace pension with a contribution from their employer. At present employers with five employees have to offer access to a pension scheme but do not have to make an employer contribution.

The government made the announcement in response to the Personal Accounts consultation which was recently published and new research showed strong support for plans to tackle ‘savings inertia’ by automatically enrolling employees into the new scheme.

Some of the key findings of the report were:

  • 84% of people surveyed supported the idea of a national pension savings scheme such as personal accounts.
  • 68% supported automatic enrolment, particularly if there was an employer contribution.
  • Whilst most people recognise that saving for their retirement is important, one in three has never contributed to a private pension.
  • 29% of people prioritise spending today over saving for tomorrow.

Secretary of State for Work and Pensions, John Hutton, said:

“The new pensions saving scheme we are setting out today will be a major step forward for employees across Britain and can kick-start a new culture of retirement saving.

We know that people are far more likely to save for their retirement if they have access to a simple, low cost pension with a contribution from their employer. That is exactly what Personal Accounts will provide.

The details of the new scheme we are setting out today can help people overcome the inertia that holds people back from saving while taking important steps to protect existing pension provision.”

The government expect that six to ten million people would save in personal accounts from 2012. Personal accounts will have low charges which should ensure that people keep more of their savings.

Under the Personal Accounts scheme employees should see their savings in personal accounts matched £1 for £1 by a combination of contributions from their employer and the government. The proposal is that employees will be expected to contribute a minimum of 4% of their salary. The employer would contribute a minimum of 3% and this would be topped up by a further 1% from the government in tax relief.

This is a radical change as for the first time employees will have the right to a contribution from their employer which will increase the value of their pension fund.

To read more about the Personal Account Pensions visit the Department for Work and Pensions website.

Internet link: DWP website