19 August 2024

Alex Gardner, employment taxes consultant at PSTAX, details the importance of payroll compliance to businesses and offers advice on how they can stay updated


An employer’s Bacs submission deadline is surely the one deadline that everyone in the business

can agree is the most important, and therefore this places a heavy burden on the payroll professional.

Of course, there are many other reasons why payroll compliance is very important to a business. One example – in which the crime surely doesn’t warrant the punishment that could mean the loss of the entire business – is the compliance required for the continuation of a subcontractor’s Gross Payment Status (GPS) for construction industry schemes. Where a pay as you earn (PAYE) payment of £100 or more is made late to HM Revenue and Customs (HMRC), this may go unpunished for GPS compliance purposes if it’s paid within 14 days of the deadline on no more than three separate occasions. However, to be four or more times late within 14 days of the deadline will trigger a loss of GPS. Equally, so will any PAYE payment of more than £100, which breaches the 14 days rule.

I’m sure everyone at some point will have been asked to drop everything and complete an urgent task, but what happens when the task you are already working on is also urgent? It’s times like these that require a calm mind and ideally a list. I’ve found that sitting down to make a list and prioritising these tasks saves time in the long run and this, in turn, helps the worker to keep cool under pressure. Talking to the person giving the tasks is also a must, as this will help the worker to decide which task ultimately takes priority. This can also help weed out false urgent requests whereby an arbitrary deadline has been set by another department which doesn’t reflect the real deadline. Being proactive in managing your workload will ease anxiety issues when times are tough. As Alan Shearer recently stated on his England football team commentary, “Pressure, what pressure? Pressure is for tyres!”

The modern payroll professional will also need to balance the processing of payroll information with chasing departments and employees for timesheets and expense sheets. Having a clear policy on required deadlines and sticking to these will help train employees in the etiquette required for timely submissions of expenses claims and relieve deadline-day stress for the payroll team.

 

Keeping up to date

To help keep on top of the constant changes, every payroll professional would be advised to sign up for HMRC’s employer bulletin. This is a bi-monthly bulletin which gives employers thelatest information on topics which may affect them.

Government updates are always coming in thick and fast, and with the Labour party’s recent victory in the general election, there will no doubt be further legislative changes on the horizon. Indeed, Labour’s manifesto states that within the first 100 days of being in power, it plans to introduce new legislation for employee rights (a ‘New Deal for Working People’). This includes:

  • flexible working arrangements to be made available from day one if reasonably feasible
  • plans to remove the two-year qualifying period for basic rights such as unfair dismissal, sick pay and parental leave
  • plans to strengthen statutory sick pay by removing the lower earnings limit to make it available to all workers and remove the waiting period, which is currently three days
  • updating trade union legislation to remove restrictions and encourage good faith negotiations
  • a ban on exploitative zero-hours contracts by giving employees the right to have a contract that reflects the number of hours they regularly work, based on a 12-week reference period
  • ending ‘fire and rehire’ and ‘fire and replace’ practices by introducing a new strengthened code of practice
  • entering into a consultation on the creation of a single status of ‘worker’ for all those except the genuinely self-employed.

 

Apprenticeship levy reform

Also on the Labour manifesto is the potential changes to the apprenticeship levy, which Labour is planning to reform by creating a flexible ‘Growth and Skills Levy’, with Skills England consulting on eligible courses.

The proposal is for businesses to have the freedom to use up to 50% of their total levy contributions on non-apprenticeship training, with at least 50% reserved for apprenticeships. This will include modular courses that relate to their industrial strategy, including digital and green skills, social care and childcare.

 

Major future change – payrolling of benefits in kind

A change that will have a major impact on payroll professionals and how they perform their roles is the announcement that payrolling of benefits in kind will be made compulsory from 6 April 2026.

Currently, payrolling of benefits is voluntary and therefore some workers may have had firsthand experience of this. Payrolling can only be done once an agreement with HMRC has been established before the start of the tax year, therefore for the current 2024/25 tax year, you won’t be able to voluntarily payroll benefits in kind if consent wasn’t given before 6 April 2024.

We encourage everyone to apply to voluntarily payroll at least one specific benefit (e.g. medical benefit) from 6 April 2025, to provide experience and learn valuable lessons ahead of the 2026 change.

This change will massively affect payroll teams across the UK, not least because they will suddenly be in the firing line for all employees’ questions when payslips begin showing new pay components, but also because of the wide variety of issues with benefits that they may not currently be familiar with.

Therefore, payroll professionals may require further training in advance of these changes to equip them with the necessary skills required for the role. Employers will need to plan ahead for these changes, factoring in the timely nature of the training to be provided and how they will ensure compliance with the rules. 


 

This article featured in the September 2024 issue of Professional.