01 March 2019
This article was featured in the March 2019 issue of the magazine.
Samantha Mann CIPP MAAT MCIPPdip, CIPP senior policy and research officer, focuses on changes now in sight in the imminent new tax year
In some years the changes impacting the payroll profession are headline grabbing and seem to be the subject of almost every conversation – such as real time information and automatic enrolment, shared parental leave and pay and gender pay gap reporting, to name but a few. But for other years the changes are less headline grabbing but equally as impactful.
This look ahead aims to discuss a selection of subjects that will impact the working lives of many of us during 2019–20.
Historically, as we look ahead to the new fiscal year – and I readily acknowledge that you will have been doing this for some time now – we may be looking out for changes to rates and thresholds, as well as to legislation impacting employment and, increasingly, to government strategy.
...the simplicity of the past is just that – in the past ...
Tax rates, bands and thresholds
No look ahead from a payroll perspective would be complete without a nod to the tax rates and thresholds and the simplicity of the past is just that – in the past – as we now look to no less than three UK nations to see what rates and thresholds will apply for the 2019–20 tax year.
England and Northern Ireland – The rates and bands are shown in Table 1. The higher rate threshold is £50,000.
Welsh income tax – In January, the Welsh Assembly ratified the rates that would apply from 6 April. Though these will shadow those applicable to England and Northern Ireland, we may find they diverge in a later tax year.
In recent months, Welsh resident taxpayers and their employers will have been receiving tax codes that begin with ‘C’, based on the information that HM Revenue & Customs (HMRC) holds about the employee. It is more important than ever for employees to keep HMRC updated when they change their address (or any other relevant details). HMRC’s preferred method for doing this is via the personal tax account but details can still be changed via its telephone helpline service.
Scottish income tax – At the time of writing, the rates, bands and thresholds were to be debated and ratified by the Scottish Parliament in February 2019. Thus, like previous years, the rates etc proposed in the budget for Scotland (see Table 2) may be subject to change.
National minimum wage
The Low Pay Commission (LPC), which is an independent body established in 1997, annually advises the government about the national living wage (NLW) and the national minimum wage (NMW). In the 2018 autumn budget, the Chancellor accepted in full all rate recommendations from the LPC; so, for pay reference periods that begin on or after 1 April 2019, the rates are as shown in Table 3.
Charging in excess of the accommodation offset remains amongst the top ten errors made by employers. Also featuring in this list is the failure to apply the new rates as they change – both for pay reference periods from 1 April, and when an employee has a key birthday that takes them onto a new rate.
The December issue of HMRC’s Employer Bulletin provides a full ‘top ten list’ which includes the following:
Paying the apprentice rate to somebody who isn’t actually an apprentice. Recognised apprentices must have an apprenticeship contract and undergo an element of structured training.
Continuing to pay the apprentice rate for too long. The apprentice rate only applies to apprentices under the age of 19, or if aged 19 or over are within the first year of their apprenticeship.
Making wage deductions for items or expenses that are connected with the job. This could include, for example, safety clothing, uniforms, tools etc.
Making wage deductions that are deemed to be for the employer’s ‘own use or benefit’. For example, a Christmas club saving scheme. It doesn’t matter that the worker can choose to buy into the scheme and the employer doesn’t have to make a profit from it.
Not paying for all the time worked such as time spent travelling, training or downtime at the employer’s disposal.
Not paying for additional time worked such as time spent clearing security checks once a worker’s shift has finished.
Including elements of pay that don’t count towards minimum wage such as tips and the premium element of pay associated with shift premium.
Throughout 2018, the Department of Business Energy and Industrial Strategy (BEIS) regularly updated its guidance: National Minimum Wage and National Living Wage: Calculating the minimum wage (https://bit.ly/2DD9JaG). We hope to see this best practice continue in 2019/20.
...one thing we can never be accused of is working in a boring profession
Itemised pay statements
In 2016, the LPC recommended that the government should consider introducing a requirement that itemised pay statements (‘payslips’) of hourly‑paid staff clearly state the hours they are being paid. The recommendation was accepted by BEIS which then introduced the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018 (‘Order 1’) which will impact employers and their agents from 6 April 2019.
Order 1 amended section 8 of the Employment Rights Act 1996 (ERA) adding to the particulars required within the payslip to also “contain information regarding the number of hours worked by the employee for which they are being paid, but only in situations where the employee’s pay varies as a consequence of the time worked”.
The amendment provides that “where the amount of wages or salary varies by reference to time worked” the payslip is to show “the total number of hours worked in respect of the variable amount of wages or salary either as (i) a single aggregate figure, or (ii) separate figures for different types of work or different rates of pay.”
Section 8(2) of ERA already made provision for what should be shown on a payslip comprising:
the gross amount of the wages or salary
the amounts of any variable, and (subject to section 9) any fixed, deductions from that gross amount and the purposes for which they are made
the net amount of wages or salary payable, and
where different parts of the net amount are paid in different ways, the amount and method of payment of each part-payment.
In December 2018, BEIS published a brief employer guide aimed at providing examples to employers of the impact of the requirement to record hours on the payslip where pay is calculated by reference to time worked.
In addition, the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No.2) Order 2018 (‘Order 2’) provides for an additional change that extends to all workers, and not just employees who work under a contract of employment. This is the right to receive a payslip and also the associated enforcement provisions
GOV.UK informs us that key characteristics of a worker are that:
they have a contract or other arrangement to do work or services personally for a reward (their contract doesn’t have to be written)
their reward is for money or a benefit in kind, for example the promise of a contract or future work
they only have a limited right to send someone else to do the work
they have to turn up for work even if they don’t want to
their employer has to have work for them to do as long as the contract or arrangement lasts
they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client.
We know from reading the publication of the Good Work Plan (https://bit.ly/2QdPEdY) in December 2018 that further work in this space during 2019 will see government bring forward detailed proposals on how the employment status frameworks could be aligned between employment rights and tax. At the time of writing the detail has yet to be revealed.
There is as always much more that we could discuss when looking ahead to a new fiscal year – such as: lessons learned from year one of gender pay gap reporting that aided us with year two; considering how the transparency agenda continues to impact us with the requirement facing UK listed companies with more than 250 UK employees to disclose chief executive officer pay ratio information in their annual reports on remuneration; as well as pondering how the industrial strategy of the UK government is set to increase our obligations in the future
The one thing we can never be accused of is working in a boring profession.