Coming up this year...
Pre-budget report round-up
In a controversial start for new Chancellor Alistair Darling (left), the pre-budget report confirmed previously announced policies in relation to much of the budget… raising an amused question as to whose policies they are. Credit and blame aside, the biggest surprise was probably the extra two months' notice given to payroll and software developers as we varied from the recent year’s trend of the PBR being a pre-festive tradition!
Unfortunately most of the detail impacting payroll and employment is missing… All information relating to National Insurance Contributions and Statutory Payments were not officially notified, and these will have to wait for confirmation. So what are the major impacts for Human Capital Management and especially payroll?
National Insurance changes from April 2009
The government continues its trend towards tax simplification by redesigning and "reviewing tax policies alongside fairness and sound public finance". NICs calculations are proposed to be revised from April 2009 by the complex introduction of the Upper Accruals Point (UAP) and changes in relation to Contracting-Out and on earnings-related liabilities on the State 2nd Pension (S2P). So in theory we will have the following earnings bands to contend with on the P11:
- At Lower Earnings Limit (LEL)
- LEL to Earnings Threshold (ET)
- ET to Upper Accruals Point (UAP)
- UAP to Upper Earnings Limit (UEL)
It’s actually a major rewrite of NICs calculations in the aid of simplification, with all the associated implications for Directors - aggregation cases and consideration being made with regard to Contracted Out rebates with money purchase schemes.
Income Tax
The removal of the 10% tax band and the reduction of the basic rate from 22% down to 20% announced in the spring budget had already previously been confirmed by HMRC with the issuing of the new tax calculation specification (now referred to as Series 11).
Company car vs private car
The big hit will be on our company car users who are provided with fuel for private use. The former fixed figure of £14,400 is set to drastically increase to £16,900 in an effort “to enhance the environmental incentive to drive fewer miles”. However, Employee Car Ownership Schemes (ECOS) remain untouched and will not be treated as benefits in kind. Further revisions are to be considered for the adoption of Approved Mileage Allowance Payments (AMAPs) which may currently appear to reward employees for using their own car for business use.
NI-free holiday scheme scrapped
The biggest non-surprise was, at last, the closure of the loophole being enjoyed by some fairly isolated non-construction industry employers. With 21 days' notice, any holiday paid via a third party for all sectors outside the construction industry will now find their previously enjoyed National Insurance exemption removed. This is estimated to impact on around 300,000 employees although only a limited number of employers who had been saving around £200million in NICs.
So what’s the impact on payroll? Payments from such schemes for non-construction employers will now attract NICs as well as tax as of 30 October 2007.
The Construction Holiday Schemes introduced in the 1960s were aimed at addressing problems of high mobility and turnover of staff yet ensuring entitlement to holiday leave and pay for a section of employees. Some non-construction employers have been enjoying the NICs free status by joining their own independent schemes.
For construction employers, the arrangement survives for another 5 years; for others, it ends immediately with regard to any payments of holiday. So if you haven’t taken your money out, its now too late. Any payments of holiday pay to employees, unless in the scheme as a construction industry employer, now fully attract NICs for both the employee and the employer.
And finally…
Delays to SMP extension and additional paternity leave
HMRC have confirmed that the extension of SMP to 52 weeks and the introduction of Additional Paternity Leave and Pay will not happen in relation to babies due from April 2009, but that the earliest potential point for introduction will be in relation to babies due from April 2010. This is subject to confirmation.
Your payroll advice article was contributed by Simon Parsons, MSc FIPPDip MBCS. Director of Payment, Benefits & Compliance Strategies at Ceridian, Simon also regularly contributes to the Payroll Advice section on our website.
Do you have a payroll-related question for Simon? Contact us.
Printer-friendly format
Bookmark this page
Del.icio.us
Digg
Newsvine
Reddit
Technorati
Google
Ceridian provides this information to its customers and friends for general information
purposes only. This information should not be construed as Ceridian providing legal, tax or other advice
to any specific individual or organisation. Please consult your appropriate adviser for specific advice.
© Copyright
2008 Ceridian Corporation - All rights reserved
