Guidance

August 2023 issue of the Employer Bulletin

Updated 9 November 2023

Introduction

In this month’s edition of the Employer Bulletin there are important updates and information on:

PAYE

Tax updates and changes to guidance

General information and customer support

HMRC’s support for customers who need extra help

HMRC’s principles of support for customers who need extra help set out our commitment to support customers according to their needs and underpin the HMRC Charter.

Find out how to get help and the extra support available.

PAYE

Tax relief on employee contributions to registered pension schemes

There are 2 main methods to obtain tax relief on employee pension contributions.

HMRC has found some employers are making mistakes in their reporting, which may be because of the names given to each method by HMRC.

These methods are known as:

• net pay arrangement (NPA)
• Relief at Source (RAS) — Referred to as “contributions that are not paid under a net pay arrangement” on the Full Payment Submission (FPS)

Net pay arrangement (NPA)

For a net pay arrangement, the employer will deduct the pension contribution before operating PAYE. The employee will then get tax relief at their marginal rate of income tax without needing to make any additional claim.

Relief at Source (RAS) 

The employer will deduct an amount from pay after PAYE deductions.

The pension scheme provider will claim the basic rate tax equivalent from HMRC Pension Scheme Services (PSS) and top up the individual’s pension pot by the amount claimed.

In Relief at Source arrangements the individual will need to claim any higher or additional rate tax relief from HMRC against their tax code or Self-Assessment.

For example, a member making a relievable pension contribution of £100 actually contributes £80 via deduction by the employer from their pay after PAYE deductions. That £80 is passed on by the employer to the pension scheme provider. The pension scheme provider subsequently and separately claims the basic rate tax equivalent of £20 from HMRC PSS which is added by the provider to the pension pot of the individual.

The individual cannot choose the method of tax 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 a net pay arrangement as long as that scheme meets certain conditions. Once registered, the form of tax relief is set.

Examples of mistakes

Via Real Time Information (RTI) FPS submissions

This could be when an employer makes the mistake of reporting RAS (not under net pay) contributions through RTI in the data fields for a net pay scheme. This results in providing tax relief through payroll incorrectly, in addition to the tax relief correctly provided via the pension scheme provider and HMRC PSS. The excess relief provided is an employer payroll failure, and the employer is liable for the tax under deducted and remitted to HMRC.

Any employer that is uncertain should check with their scheme provider on how the scheme is registered. If any employer then determines that their payroll is configured so that they have reported RAS contribution in the FPS reporting field for “contributions not under net pay” they should correct this immediately.

Any errors identified from previous periods should be reported through the HMRC 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.

Salary sacrifice and pension contributions

Many businesses have adopted salary sacrifice arrangements linked to pension contributions. In such cases the employee ceases to make employee contributions, but contractually sacrifices a similar proportion of earnings in favour of an additional employer contribution to their pension. Effectively, to an outcome of relief via payroll similar to a net pay arrangement, but also reducing National Insurance contribution liabilities.

Employers provide a report of employee and employer pension contributions to their pension scheme provider. If they accidently 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, even though the employer provided an inaccurate report to the pension scheme provider, the pension scheme provider is deemed legally responsible for the over claimed relief under Reg 10(5) of registered pension schemes (Relief at Source) regulations 2005 (SI3448 of 2005).

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.

Ceasing your PAYE scheme

You can tell us 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.

You also need to:

• send your expenses and benefits returns
• enter a leaving date on each employee’s payroll record
• give your employees a P45 on their last day

Go to stop being an employer for more information.

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.

The National Minimum Wage

Live Webinars: salaried hours work and 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 webinar will cover the key points around salaried hours work, the changes that were brought about by the amendments to the legislation in April 2020 as well as tackling some long standing myths about salaried hours work.

It will look in detail at:

• the concept of salaried hours work covering the criteria that must be met for a worker to be performing salaried hours work for minimum wage purposes
• the importance of record keeping

• the calculation of the NMW for salaried hours workers

• how to put things right if mistakes have been made

The aim is that the webinar will answer the broad questions that you have around applying the salaried hours work rules.

As we are unable to go into individual circumstances, the team will not be taking live questions during the webinar, however, you do have the option to submit general questions on the topic during registration.

The webinars will be taking place throughout September 2023, we look forward to you joining us.

Register here.

There is a full suite of recorded webinars available to view at any time at National Minimum Wage webinars. These cover various topics such as elements of pay, working time and apprentices.

NMW naming — published by the Department for Business and Trade

In June 2023, over 200 employers were named by government for failing to pay their lowest paid staff the minimum wage.

The 202 employers were found to have failed to pay their workers almost £5 million in a clear breach of NMW law, leaving around 63,000 workers out of pocket. In addition to this, these employers faced penalties of nearly £7 million.

The companies named range from major high street brands to small businesses and sole traders, in a clear message from government that no employer is exempt from paying their workers the statutory minimum wage.

The investigations by HMRC concluded between 2017 and 2019.

The results showed that 39% of employers deducted pay from workers’ wages. Most deductions will reduce a worker’s pay for minimum wage purposes. This can include deductions for meals, uniform, equipment as well as many other things.

Another 39% of employers failed to pay workers correctly for their working time. For example, time spent waiting at or near the workplace, travelling or training is all working time for minimum wage purposes.

Finally, 21% of employers paid the incorrect apprentice rate. To qualify for the apprentice rate, a worker must be employed under a statutory apprenticeship agreement or a contract of apprenticeship. The minimum wage apprentice rate will apply if the apprentice is under the age of 19 or they are aged 19 or over and in the first year of their apprenticeship.

You can find out more at: National Minimum Wage Naming Scheme — Educational Bulletin.

How to avoid naming and penalties

There is a lot of information and support available to help employers get it right, including:

• a checklist for employers — this lists all of the common issues which can lead to workers being underpaid
• calculating the minimum wage

Benefits in kind — informal payrolling 2022 to 2023

If an employer has formally payrolled all of their benefits in kind for the 2022 to 2023 tax year, HMRC do not need form 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.

We only require a P11D from employers with an informal agreement for the 2022 to 2023 tax year, whereby they have started payrolling midyear. For example, an employer requested an informal arrangement to payroll benefits in kind on 1 June 2022, we 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 we do not need a P11D to cover 2 June 2022 to 5 April 2023.

Employers need to tell us 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.

You can find more information on payrolling employees: taxable benefits and expenses, this includes the link to PAYE — notification of payrolled benefits form.

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. The scheme is promoted as a tax planning option to help fund children’s education fees.

The arrangements seek to avoid tax by allowing the directors, who are also the main shareholders of a company, to divert dividend income away from themselves to their minor children. The children pay tax on the dividend received. However, due to the children’s £12,570 tax free personal allowance, £1,000 dividend allowance and their eligibility to the dividend basic tax rate, they pay much less tax than if their parents, the company owners, received the dividend.

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, that prevents this type of arrangement providing the tax advantage that is sought.

If you or anyone at your business are using the tax avoidance scheme detailed in Spotlight 62, you should follow the steps outlined within it to leave and settle your tax affairs at the earliest opportunity.

If you are aware of people selling this or any other type of tax avoidance scheme you should report it to HMRC so we can help protect you and others from the risk of tax avoidance.

Helping customers steer clear of tax avoidance schemes

HMRC is reminding contractors and agency workers that we publish details of tax avoidance schemes and their promoters to help customers steer clear of, or exit them.

We began publishing information about tax avoidance schemes in April 2022 and the list now contains the details of over 35 schemes. The list is continuously updated and we now also publish information about some of the promoters’ company officers, as well as the marketing material used.

This is not a complete list of all tax avoidance schemes currently being marketed. There may be other schemes, promoters, enablers and suppliers that HMRC cannot publish information about at this time.

We also run a ‘Tax avoidance — don’t get caught out’ campaign to help contractors spot the warning signs of tax avoidance, report suspicious companies, and get support to leave tax avoidance schemes.

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 with them our campaign messages, including published details of tax avoidance schemes, and telling them about our tools and guides.

If one of your workers thinks they may be caught up in a tax avoidance scheme, encourage them to get in touch with us as soon as possible. We can support them to get out of the scheme and back on track.

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, a new Alcohol Duty structure took effect with new rates and reliefs.

A new, simpler Alcohol Duty system

The new system 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.

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

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. These allow businesses to use an ‘assumed strength’ of 12.5% ABV when working out the duty owed on wines between 11.5% and 14.5% ABV.

How to prepare for the new Alcohol Duty

Make sure you understand what has changed for Alcohol Duty by reading the up to date guidance.

Watch a recorded webinar about the new Alcohol Duty structure and rates.

If you are a small producer of alcoholic products, you can also use the Small Producer Relief calculator to help you work out how much duty you need to pay.

Tackling non-compliance in the umbrella company market — share your views by 29 August 2023

You have until 29 August 2023 to share your views on government proposals to protect workers from non-compliant umbrella companies.

Following concerns raised by industry and employees, the government is consulting on potential measures to regulate the umbrella company market. The consultation also seeks views on measures to tackle non-compliance in the sector, including mandatory due diligence.

If you have a stake in the umbrella company market, your input could help to protect workers from surprise future tax bills, while supporting businesses and growth in the economy.

Find out more information on how to take part in the open consultation by visiting the tackling non-compliance in the umbrella company market.

Income Tax Self Assessment — preparing for the new tax year basis

Overlap relief

On 11 September 2023 HMRC will be launching an online form for submitting requests for details about overlap relief. This will provide an easier way for businesses and agents to submit requests and make sure that these are dealt with separately from general post.

HMRC will also be publishing additional accompanying guidance on overlap relief and the changes to the rules for the new tax year basis.

If you are a sole trader or partnership, have an accounting date other than 31 March or 5 April, and are affected by the move to the new tax year basis, you may need to find out the details of your overlap relief. You will need to do this ahead of submitting returns for the 2023 to 2024 transitional year. Businesses that have overlap relief which they should have used in the past but did not, may also use this in the 2023 to 2024 tax year.

Only taxpayers with an accounting date other than 31 March or 5 April are affected by this reform.

Under the new rules, from April 2024, businesses will be taxed on profits for the tax year and not, as now, the profits for the accounting year ending in a tax year. Ahead of further guidance being published, you can find out more about the new tax year basis in the Business Income Manual. Information is also available in a news article on basis period reform.

Overlap relief information can only be provided if these figures are recorded in HMRC systems, taken from information submitted by you as part of previous tax returns. If this information has not been submitted in tax returns, HMRC will not be able to provide it.

When looking at a request for overlap relief information, HMRC needs some details about your business to be able to find the correct figures to report back to you. If you want to submit a request for information ahead of the launch of the online form, HMRC asks that you provide:

• customer name

• National Insurance number or Unique Taxpayer Reference (UTR)
• either name or description of business, or both
• whether this business is a sole trader or part of a partnership
• if the business is part of a partnership, the partnership’s UTR

• date of commencement of the self-employed business, or date of commencement as a partner in a partnership (if not known, then the tax year of commencement)

• the most recent period end date up to which the business used to report its profit or loss

Further information will be made available when the form goes live.

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 first time when registering for money laundering supervision.

The 4 videos cover:

• Risk assessments for anti-money laundering supervision which explains:

  • how to identify and assess the risks to your business

  • how to implement and maintain internal controls

• How to keep records for anti-money laundering supervision? which explains:

  • how long you must keep your records for

  • what records you must keep

• Identifying and reporting suspicious activity for anti-money laundering supervision which explains:

  • what is a suspicious activity report?

  • how to submit a suspicious activity report

• Training your employees to comply with money laundering regulations which explains:

  • what training you should provide

  • what training records you should keep

The anti-money laundering supervision videos are now available to share with anyone you know who may find them useful.

Helping your new employees get paid correctly

When you have new employees starting work, we know how time consuming gathering their information can be. To make this as quick and easy as possible, we have highlighted some simple guidance that can help you collect the correct information and make sure they get paid the right amount.

This will help your employees to pay the right tax and National Insurance contributions and protect their entitlement to the state benefits they will need later in life.

Here are our top 3 tips to follow when taking on a new employee:

1. What action to take if an employee does not have a P45

If your new employee does not have a P45, use the starter checklist to find their starter declaration code and the appropriate tax code.

2. What tax code to use with starter declaration code C

If the starter checklist determines that the employee should be on 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 new employee on starter declaration code C and use tax code 0T.

3. What PAYE details you will need from a new employee

You will need all the information in the starter checklist, including their name, date of birth and National Insurance number. Check these are correct by looking at their official documents.

Getting this right will save you time and resources by avoiding having to update payroll and answer your employees’ questions about their pay.

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 government bonus, even if money has been withdrawn.

Savers will earn a 50 pence bonus for every £1 saved and the bonus payments are paid in the second and fourth years. This means that someone saving £2,400, the maximum amount they could deposit over four years, would receive a £1,200 bonus from the government paid directly into their bank account.

Setting up a Help to Save account online is quick and easy to do and takes less than 5 minutes to sign up.

Find out how individuals are eligible to apply by:

• contacting HMRC Help to Save scheme 

• using the HMRC app

Time to Pay for VAT customers — self-serve

HMRC is providing a new service to help make it easier for VAT customers to pay what they owe.

Where customers are unable to pay their VAT in full, we may be able to help by setting up a Time to Pay arrangement. This is where a customer pays what they owe in affordable monthly instalments.

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.

The eligibility criteria for this service:

• be a VAT customer
• have VAT debt which is less than 28 days old from the payment due date
• have VAT debt which is less than £20k in value
• not have any other debts or Time to Pay payment plans

• be up to date with all tax returns

• be authorised to set up a direct debit mandate

Serving customers through our digital channels reduces calls to our helpline, helping us to support more customers who need our help.

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.

Employers that fail to comply with their pension duties could face enforcement action, including fines.

Check your legal duties today.

Find out who you need to enrol, on our website:

• employers: Employing seasonal or temporary staff

• advisers: Staff employed on irregular hours or incomes

COVID helpline

Due to the COVID schemes now being closed, the COVID helpline will be closing from 18 September 2023.

Customers can still get lots of help and advice. For more information visit the guidance and support on COVID schemes.

HTML format of Employer Bulletin

Since September 2020, material published on GOV.UK or other public sector websites must meet accessibility standards. This is so they can be used by as many people as possible, this includes those with:

• impaired vision
• motor difficulties
• cognitive impairments or learning disabilities
• deafness or impaired hearing

There is now a contents page, with links, which is fully scrollable. Articles have been put into categories under a heading which is within the introduction to make it easier to find the updates and information you are interested in.

The HTML format does allow you (dependent upon your web browser):

• to print off the document should you wish to keep a paper file:
  • select the ‘Print this page’ button underneath the contents and print to your local printer
• to save the document as a PDF:
  • select the ‘Print this page’ button and using the drop-down list on the printer select ‘print to PDF’, which allows you to save as PDF and file electronically
  • on a mobile device you can select more options, then select options to be able to save as PDF

Getting more information and sending feedback

Make sure you are kept up to date with changes by signing up to receive our email alerts.

You can also follow us on Twitter @HMRCgovuk.

Send your feedback about this Employer Bulletin or articles you may wish to see, by email to mary.croghan@hmrc.gov.uk.