CWG5: guide to benefits and expenses to report on form P11D or substitute form for employers 2020-21 published

21 February 2020

The CWG5 guide has been updated for tax year 2020-21 to reflect the introduction of reporting Class 1A National Insurance Contributions (NICs) through Real Time Information (RTI) on Termination Payments and Sporting Testimonial Payments, in certain circumstances.

It is strongly advised that employers read this guidance if they:

  • Are an employer who provides benefits and pay expenses to employees
  • Provide benefits to the employees of another employer or payroll
  • From April 2020, are an employer who pays termination payments to employees
  • From April 2020 are a Sporting Testimonial committee who is organising a testimonial for a sportsman

For employers who are already familiar with this guidance, chapters nine and ten will be of most interest as they discuss the new processes for reporting Class 1A NICs on Termination Awards and Sporting Testimonials.

This is applicable to Termination Awards over a £30,000 threshold that have not already been subject to Class 1 NIC deductions. There are some useful examples to help to illustrate how Class 1A NI contributions would be calculated in these scenarios with consistent reminders that they need to be paid and reported in real-time and not via the P11D(b) process. Termination awards on which Class 1A NI contributions are due need to be reported separately from amounts classed as earnings which would be subject to Class 1 NI contributions, so from 6 April 2020 onwards, the real-time Full Payment Submission (FPS) will have separate data items for reporting each of these Class 1 and Class 1A liabilities.

The new rules also apply to non-contractual and non-customary testimonials arranged by third parties where testimonial payments exceed a £100,00 threshold. HMRC has already predicted that most sporting testimonials will remain unaffected by the new rules as the proceeds raised for sportspeople rarely breach the £100,000 threshold. The sportsperson can still make tax and NI free charitable donations from their sporting testimonial payments in events where the committee make the charitable donations through payroll giving provisions. Again, there are working examples to further aid understanding of how the new rules will work.

 


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