Payroll

New workplace rights to paid leave for bereaved parents came into effect on 6 April 2020. The new law has been welcomed by charities helping bereaved parents to cope with losing a child.

The new allowance gives employed parents the right to claim statutory parental bereavement pay and / or parental bereavement leave. Bereaved parents can only claim if they are employed in England, Scotland or Wales and the death or stillbirth of their child happened on or after 6 April 2020.

This change gives all qualifying employed parents a day-one right to 2 weeks’ leave if they lose a child under the age of 18 or suffer a stillbirth from 24 weeks of pregnancy. Employed parents can take the 2 weeks together or as 2 separate weeks of leave.

The leave can start on or after the date of the death or stillbirth and must finish within 56 weeks of the date of the death or stillbirth.

In the Budget speech, the Chancellor confirmed that the government would honour its promise to increase the Employment Allowance by a third to £4,000 from April. This represents a tax boost for almost 500,000 small businesses who can claim an increased reduction on their NIC liabilities or even reduce their bills to zero.

It had previously been announced that access to the Employment Allowance would be restricted from 6 April 2020. The new £4,000 NIC Employment Allowance will only be available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance.

The allowance will only be allowed to be claimed once across all employer’s PAYE schemes or connected companies. Employers will be tasked with deciding which PAYE scheme to set the claim against. Starting this April, Employment Allowance claims will also need to be submitted each tax year. This means that claims will not automatically roll over from the previous tax year as was previously the case. There are currently a number of excluded categories where employers cannot claim the employment allowance.

The P9X form is used to notify employers of tax codes to use for employees. The form confirms expectations that the basic personal allowance for the tax year starting 6 April 2020 will remain at £12,500. The emergency tax code will remain at 1250L. The threshold (starting point) for PAYE will be £240 per week (£1,042 per month).

The basic rate limit is also expected to remain at £37,500 except for those defined as Scottish taxpayers who have a lower basic rate limit as well as an intermediate rate. As a result of the basic personal allowance remaining the same most tax codes should remain the same. The new form P9X is available online on GOV.UK to download or print.

The P9X (2020) form also includes information to help employers in the new tax year. The document reminds employers – that have new employees starting work between 6 April and 24 May 2020 and who provide you with a P45 – to follow the instructions at www.gov.uk/new-employee

The P9 Notice of Coding form is used to notify employers of the tax codes to use for employees. HMRC has begun to send email notifications to employers advising that the coding for the tax year starting 6 April 2020 can be viewed online. The emails are being sent up until 10 March 2020. HMRC has also advised that the paper P9 coding notices should arrive with employers on or around 21 March 2020.

If an employer does not receive their paper P9 notices in time for the first pay period on or after 6 April 2020, they can request a duplicate from the Employer Helpline on 0300 200 3200. A request for a duplicate can only be made in respect of a full employer scheme and is not available for individual tax codes.

HMRC has stated that as Income Tax thresholds and rates for the UK Government and devolved administrations will not be finalised until March, tax codes are calculated using 2019-2020 rates and thresholds for all parts of the UK.

After the Budget announcements, HMRC may need to carry out a re-coding exercise to include changes to rates or thresholds. If this is the case, any changes will be issued to employers on a P6b. These codes should only be operated on or after the date shown on the P6b.

This article is a reminder to payroll staff about the electronic PAYE payment dates. The due date for electronic PAYE payments falls on the 22nd of the month and when a payment is made electronically, a payment on the day usually suffices.

However, where the due date falls on a non-banking day (weekend or bank holidays), HMRC must have cleared funds by the last bank working day before the 22nd. This advice is particularly relevant this month i.e. for electronic payments due on 22 February 2020, which this year falls on a Sunday. The electronic payments must therefore clear HMRC’s bank account by Friday 21 February 2020.

Remember that electronic payments sent using the Faster Payments Service (FPS) are able to clear into HMRC’s account on a non-banking day – a Saturday, Sunday and most Bank Holidays. The service enables electronic payments to be made and processed in hours rather than days.

The definition of a connected person for tax purposes includes certain relatives, trustees, partners and companies.

A person is connected with an individual if that person is

• the individual’s spouse or civil partner
• a relative of the individual
• the spouse or civil partner of a relative of the individual
• a relative of the individual’s spouse or civil partner
• the spouse or civil partner of a relative of the individual’s spouse or civil partner.

The term 'relative' does not cover all family relationships. In particular, it does not include nephews, nieces, uncles and aunts.

When it comes to making a claim to deduct wages paid to relatives or connected persons, the reason for the payment must be wholly and exclusively for the purposes of the trade. If there is another reason (either in addition or instead), then the deduction will not be allowable. There have been a number of important cases that have looked at this issue including in relation to payments made to minor children and spouses.

We would like to remind employers about the electronic PAYE payment dates. The due date for electronic PAYE payments falls on the 22nd of the month and when a payment is made electronically; a payment on the day usually suffices.

However, where the due date falls on a non-banking day (weekend or bank holidays) HMRC must have cleared funds by the last bank working day before the 22nd. This advice is particularly relevant this month i.e. for electronic payments due on 22 December 2019 which this year falls on a Sunday. The electronic payments must therefore clear HMRC’s bank account by Friday 20 December 2019. This also coincides with the day a lot of employers will close up shop for the Christmas break.

Remember that electronic payments sent using the Faster Payments Service (FPS) are able to clear into HMRC’s account on a non-banking day – a Saturday, Sunday and most Bank Holidays. The service enables electronic payments to be made and processed in hours rather than days. Finally, if you pay by cheque through the post, the deadline is Thursday 19 December 2019.

In December 2018, HMRC wrote to employers to advise of a temporary easement on reporting PAYE information in real time over the Christmas period. This was put in place because many employers pay their employees earlier than usual over the Christmas period.

This can be for a number of reasons, for example during the Christmas period the business may close early or because in certain businesses employees have traditionally received their pay check early in December.

HMRC has now confirmed that following feedback from employers and the Department for Work and Pensions (DWP) this extended Christmas payroll easement is to be made permanent. If employers pay their staff early over the Christmas period, they should report their normal (or contractual) payday as the payment date on their Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.

For example, an employer who pay staff on Friday 20 December 2019, but the normal/contractual payment date is Tuesday 31 December 2019, should report the payment date on the FPS as 31 December and ensure the submission is sent on or before 31 December.

Doing this will help protect Universal Credit claimant’s eligibility for Universal Credit as reporting the payday as the payment date may affect current and future entitlements.

HMRC is clear that the overriding PAYE reporting obligation for employers is unaffected by this announcement and remains that employers must report payments on or before the date the employee is paid, i.e. payday.

A waiver of remuneration happens when a director or an employee gives up their right to salary or other cash remuneration and gets nothing in return. Where the employee gets a non-cash benefit in return, this is called a salary sacrifice.

The treatment of a waiver of remuneration, when a director / employee gets nothing in return, is different to the scenario when this is treated as a salary sacrifice.

The effect of a waiver for Income Tax purposes depends on its timing.

• If the remuneration waived is given up before it is treated as received for employment income purposes, then the remuneration given up will not be taxable earnings.
• If the remuneration waived is given up after it is treated as received for employment income purposes, then the employee remains taxable on the remuneration given up.

The view taken by HMRC is supported by case law decisions, including the cases of Parker v Chapman (13TC677) and Reade v Brearley (17TC687) quoted in the Employment Income Manual.