HMRC have published their Employer Bulletin for August 2023. We have summarised the key content for you, with links to our detailed guidance on the topics covered.
PAYE
Tax relief on employee contributions to registered pension schemes
There are two main methods for employers to use to get tax relief on employee pension contributions.
HMRC has found some employers are making mistakes. This may be because of the names given to each method which are known as:
- Net pay.
- Relief at Source.
Net pay
- For a net pay arrangement, the employer deducts the pension contribution upon which relief is due from an employee’s gross income before operating PAYE.
- The employee then gets tax relief at their marginal rate of income tax without needing to make any additional claim.
Relief at source
- The employer deducts an amount from net pay (after tax and National Insurance deductions) equal to the pension contribution net of basic rate tax relief.
- The scheme provider then claims the basic rate tax equivalent from HMRC Pension Scheme Services (PSS) and tops up the individual’s pension pot by the amount claimed from PSS.
- The individual will then need to claim any higher or additional rate tax relief from HMRC against their tax code or through Self Assessment.
The individual cannot choose the method of relief for themselves.
- The default for all new registered pension schemes has been relief at source since April 2006.
- However, an employer can elect at the start of a new pension scheme to operate net pay if the scheme meets certain conditions. Once registered, the form of tax relief is set.
- An employer reporting pension contributions as net pay through Real-Time Information (RTI) should check with the scheme provider how the scheme is registered. If pension contributions have been reported through RTI incorrectly they should correct this immediately. Errors identified from previous periods must be reported through the Digital Disclosure facility.
- If you are a Large Business with a Customer Compliance Manager (CCM), you should report this through direct engagement with your CCM.
Every employer provides a report of employee and employer pension contributions to their pension scheme provider.
- If they accidentally report additional employer contributions linked to a salary sacrifice as employee contributions, then the relief at source scheme provider will claim further undue relief from HMRC PSS.
- In these cases, the pension scheme provider is deemed legally responsible for the overclaimed relief.
- The employer must inform the pension scheme provider that their reports have been inaccurate, and the pension scheme provider must contact HMRC PSS if they have claimed too much relief at source for pension scheme members.
See Pensions: Tax rules and planning
Ceasing your PAYE scheme
You can tell HMRC you are ceasing your PAYE scheme and contractor elements of a scheme by:
1. Selecting the ‘Final submission because scheme ceased’ field.
2. Completing the ‘Date scheme ceased’ field on your final Full Payment Submission (FPS) or Employer Payment Summary (EPS). The date you enter must be the date the scheme ceased and cannot be a date in the future.
On receipt of this, HMRC will check the information and in most cases, the scheme will be automatically ceased. Any estimated monthly charges raised for a pay period after the date of cessation will be cancelled.
See RTI: Real-Time Information for PAYE
Ceasing your PAYE scheme that includes payments to subcontractors
- To cease the contractor element of the scheme you must contact the Construction Industry Scheme to inform them of the date you stopped using subcontractors.
Ceasing a PAYE scheme which has subcontractors only
- To cease a contractor-only scheme you need to contact the Construction Industry Scheme helpline to inform of the date you stopped using subcontractors.
See CIS: Contractors and Subcontractors
The National Minimum Wage
HMRC’s National Minimum Wage (NMW) team is offering live webinars about salaried hours work and the National Minimum Wage, in response to customer feedback.
The webinars will be taking place throughout September 2023 and you can register here.
See National living/minimum wage rates
NMW Naming published by the Department for Business & Trade
In June 2023, over 200 employers were named by the government for failing to pay their lowest-paid staff the minimum wage.
How to avoid naming and penalties
Benefits in kind: informal payrolling 2022-23
- If an employer has formally payrolled all of their benefits in kind for the 2022-23 tax year, HMRC do not need forms P11D to be filed online.
- Employers must still work out the Class 1A National Insurance contributions on the benefits and complete form P11D(b) online.
- HMRC only require a P11D from employers with an informal agreement for the 2022-23 tax year, whereby they have started payrolling midyear.
For example, if an employer requested an informal arrangement to payroll Benefits In Kind on 1 June 2022, HMRC would need the P11D to cover the period from 6 April 2022 to 1 June 2022. From 2 June 2022 onwards, if the employer has payrolled the benefits in kind no P11D is required for the period 2 June 2022 to 5 April 2023.
- The employer will need to tell HMRC by using the online form PAYE notification of payrolled benefits so those benefits in kind on the P11D reflect 6 April 2022 to 1 June 2022.
Tax updates and changes to guidance
Dividend diversion scheme used by owner-managed companies to fund education fees — Spotlight 62
HMRC is aware of a tax avoidance scheme currently being marketed to owner-managed companies, designed to divert dividend income from themselves to their minor children in order to utilise the children’s rates and allowances. The scheme is promoted as a tax planning option to help fund children’s education fees.
HMRC’s view is that this scheme does not work as the arrangements are caught by specific anti-avoidance legislation contained in Income Tax (Trading and Other Income) Act 2005, from section 619 onwards, which prevents this type of arrangement from providing the tax advantage that is sought.
See Spotlight 62: Dividend diversion scheme used to fund education fees
Helping customers steer clear of tax avoidance schemes
HMRC is reminding contractors and agency workers that they publish details of tax avoidance schemes and their promoters to help customers steer clear of, or exit them.
- The list now contains the details of over 35 schemes but is not a complete list and there may be other schemes, promoters, enablers and suppliers that HMRC cannot publish information about at this time.
- Contractors Duncan and Tanya share their personal video stories of what it was like for them to be caught up in tax avoidance to help other people learn from their mistakes.
- You can help protect your workers from the risks of tax avoidance by sharing HMRC’s campaign messages, including published details of tax avoidance schemes.
See When the tax inspector calls... for details of all HMRC spotlights, and Named tax avoidance schemes, promoters, enablers for the full unexpurgated list of schemes.
Alcohol Duty: new rates and reliefs from 1 August 2023
If you are a producer, importer or reseller of alcoholic products, you should be aware of the main changes on 1 August 2023 when a new Alcohol Duty structure took effect which standardises the duty bands for all types of alcoholic products, with new duty rates based on alcohol by volume (ABV) for all products.
Small Producer Relief
- A duty relief extended to small producers of all alcoholic products under 8.5% ABV.
See Small Producer Relief (alcohol)
Reduced rates for draught products
- Also known as Draught Relief. A lower rate of duty for draught alcoholic products under 8.5% ABV, which are packaged in containers of at least 20 litres, and designed to connect to a qualifying system for dispensing individual drinks.
Temporary arrangements for producers or importers of wine
- There is a temporary method of working out duty on some wine products. This will last for 18 months, from 1 August 2023 until 1 February 2025.
Tackling non-compliance in the umbrella company market: share your views by 29 August 2023
Following concerns raised by industry and employees, the government is consulting on potential measures to regulate the umbrella company market.
- You have until 29 August 2023 to share your views.
See New proposals tackle Umbrella Company non-compliance
Income Tax Self Assessment: preparing for the new tax year basis: Overlap relief
On 11 September 2023, (previously this was to be 29 August 2023 but was delayed on 23 August) HMRC will be launching an online form for submitting requests for details about overlap relief.
General information and customer support
Anti-money laundering supervision YouTube videos to help businesses
HMRC has launched four new anti-money laundering supervision video guides to help customers get things right the first time when registering for money laundering supervision.
These are available here to share with anyone you know who may find them useful.
Helping your new employees get paid correctly
HMRC have highlighted some simple guidance that can help you collect the correct information from new employees and make sure they pay the right tax and National Insurance contributions and protect their entitlement to state benefits.
Top three tips to follow when taking on a new employee: What if a new employee does not have a form P45?
1. Use the starter checklist to find their starter declaration code and the appropriate tax code.
2. What tax code should you use if the starter checklist tells you to use starter declaration code C?
Use tax code BR. If you cannot complete the starter checklist, and your employee does not have a P45, put your them on starter declaration code C and use tax code 0T.
3. What PAYE details do you need from a new employee?
You need all the information in the starter checklist. Verify this by checking their official documents.
See PAYE: Starter checklist new employee 2023-24
The Help to Save scheme extended to April 2025
The Help to Save government savings scheme for low-income earners has been extended to April 2025.
- Savers can deposit between £1 and £50 a month into their account and will receive a 50 pence bonus for every £1 saved. The bonus payments are paid in the second and fourth years..
Time to Pay for VAT customers: self-serve
- From 30 May 2023, customers who meet certain eligibility criteria have been able to set up a Time to Pay for VAT online, without needing to call HMRC.
How to check if your seasonal or temporary staff are eligible for automatic enrolment into a pension scheme
- If you employ seasonal or temporary staff, make sure you understand who you need to put into a pension scheme.
- You will also need to assess your additional staff individually every time you pay them. This includes staff with variable hours, whether they work for you for a few days or a few months.
See Auto-enrolment: Workplace pensions
Employers that fail to comply with their pension duties could face enforcement action, including fines.
See Penalties: Auto Enrolment (Pensions) Employer Briefing
COVID helpline
Due to the COVID schemes now being closed, the COVID helpline will be closed from 18 September 2023.
External link:
Employee Bulletin: August 2023
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