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FREQUENTLY ASKED QUESTIONS AND ANSWERS

This is a  ‘MUST READ’ for the Chief Officer/Chair of the Board (or anybody who has responsibility for employment of members of staff)

New penalties for errors on Inland Revenue returns and documents (Click Here to read)

The Payroll Service team at HCIL are asked many questions and here are a few of the more typical:

The Tax man cometh!

Q.      I read in a recent financial publication that Inland Revenue Inspectors have been offered a £2000 bonus if they increase their tax recovery targets by a quarter over the next 12 months.  Is this correct?

A.  Yes! It will also increase the likelihood of an ‘inspection’ by the Inland Revenue, so employers need to be extra vigilant that they are compliant with Inland Revenue legislation.  It is also worth noting that the Inland Revenue will issue penalties of £3000 each time an employer:

Fails to pay statutory payments (such as SSP, SMP, SPP)                                            
Negligently pays incorrect statutory payments                                                                 
Fails to keep and produce correct records                                                              
Negligently provides incorrect records to employees

Just pleading ignorance will not suffice!

Is the person working for me employed or self-employed?

Q.    I am a small employer with a small staff team and often use part-time and freelance personnel. They submit an invoice and are responsible for paying their own tax and national insurance (they say they are self-employed). I have been advised that the HM Revenue & Customs (Inland Revenue) is now increasingly and very closely looking at personnel payments that are not subject to PAYE (through a payroll scheme) and insisting that the employer pays the tax and National Insurance going back several years (even though the individuals may have already paid their taxes).
 

A.      You are quite right to worry about this as HMRC do indeed look closely at people paid outside the payroll and it sounds as if these people are, in fact, employees (and should, therefore, should have tax and national insurance deducted by you, the employer.  If you:

·  employ someone regularly (more than say once or twice a year);

·  tell them what to do and/or supervise them;

·  tell them what hours to work;

·  provide any equipment they use;

·  do not allow them to send a substitute to do the work

then the person is most probably (even if just some of these apply) an employee and should be paid via (PAYE) on a payroll.

Whether someone is an employee or not depends on the facts of the case – just signing to say that they will pay their own tax and national insurance is not enough.

HMRC will treat the amount you paid to them as ‘net pay’ and gross this up for tax and employee’s and employer’s national insurance which adds another two thirds to your costs.

For example, if you have paid someone £1,000 per month, HMRC will seek tax and National insurance from you of around £485.00 per month (which equates to £5820 annually!).  They have been known to refund the tax which may have already been paid over by the ‘self employed’ person back to the individual and then seek the tax and national insurance from the employer!

HMRC will establish how much tax and National insurance they believe is due in one year then multiply this by six (as they go back six years) and add interest (for paying over the amounts late) and also, if they wish, penalties of up to the same amount again.  In the example above this could equate to over £35,000!

So check the facts for each person and put everyone who should be an employee on the payroll.  This will save time and money in the long run.

Changes to Statutory Maternity Rights

Q.  I have a member of staff who has just advised me that she is pregnant and I am aware that there have been some recent changes in maternity rights.  What are they?

A.   Your employee will be entitled to 39 weeks of statutory maternity pay (SMP), an increase from 26 weeks. The first six weeks are still at 90% of her average gross weekly earnings, and the remaining 33 weeks at £112.75 (currently) gross (unless her average salary is less than that, in which case it will remain at 90%).

Notice of intention to return early from maternity leave will also change. Currently your employee only needs to give 28 days notice; under the new rules this will increase and she will be expected to notify you 56 days before wishing to return.

On the other hand, if she would like to extend her maternity leave, she is entitled to an additional 3 months unpaid leave. If a return date has previously been agreed she is free to change her mind, providing she gives you at least 56 days notice (the period of notice should end on the date she was due to return).

A new concept, Keeping in Touch Days, has also been introduced. A total of 10 days can be agreed between employer and employee when the employer may make contact with the employee (and vice-versa) while she’s on maternity leave, as long as the amount and type of contact is not unreasonable.  This can be to discuss a range of issues – e.g to discuss her plans for returning to work, or to keep her informed of important developments at the workplace. She should be informed of any relevant promotion opportunities or job vacancies that arise during maternity leave.  She can do up to 10 days’ work under her contract of employment, as long as both she and her employer have agreed for this to happen, and agree on what work is to be done and how much she will be paid for it.  These days are entirely voluntary, the employer is not required to offer them, nor can the employee be penalised if she chooses not to come in.

HMRC prosecute for non-compliance

Q.   How will the Inland Revenue find out if I do not pay national minimum wage? 

A.   H. M. Revenue and Customs (HMRC) have just undertaken the first criminal prosecution against an employer under the National Minimum Wage laws.
In the case, the owner of a nursery was fined £2,500 and £500 costs for preventing HMRC officials from accessing information about staff to see if they were being paid the minimum wage.
The judge in the case said that the owner had “demonstrated a clear and deliberate intent to obstruct officers and this was a scandalous breach of the legislation.”
The case highlights that employers will be pursued by HMRC if they are suspected of flouting the National Minimum Wage laws, and not only could employers receive a fine but also a criminal record.
You should be aware that there are 6 potential offences under the National Minimum Wage Act, each carrying a maximum £5,000 fine and a criminal record.

·        Employer refuses or wilfully neglects to pay NMW;

·        Person fails to keep or preserve records;

·        Person knowingly causes or allows false entry in records;

·        Person produces or furnishes false records or information;

·        Person delays or obstructs compliance officer;

·        Person refuses or neglects to answer any questions or produce documents for a compliance officer.

As a reminder, the new rates for the National Minimum Wage from the 1^st October 2007 are:

·        Increase from £5.35 to £5.52 per hour for adult workers;

·        Increase from £4.45 to £4.60 per hour for young workers (18 – 21 inclusive);

·        Increase from £3.30 to £3.40 per hour for 16 – 17year olds.

On-line filing

 

Q. What is on-line filing and do I have to do it?

A.  With effect from 20010/11 ALL employers will have to file their year end documents on-line.  This will eliminate much of the paperwork generated at financial year end.  HCIL currently on-line files year end documents for all of its service users and clients and also obtains incentive payments on their behalf (which the Inland Revenue pays out if organisations comply prior to the 20010/11 deadline).  For 2007/8 the incentive is £100 and for 2008/9 it is £75.

Also, with effect from April 2011 all forms P45 and P46 will also have to be filed on-line.  Paper copies will not be accepted.

Increased holiday entitlement

Q.  I have heard that the rules for statutory holiday entitlement have changed recently. Can you give me more details?

A.  With effect from October 2007, the statutory holiday entitlement has indeed changed. Entitlement increased to 4.8 weeks (24 days if you work a five day week) from 1 October 2007 and will further increase to 5.6 weeks (28 days if you work a five day week) from 1 April 2009, pro-rata for those working part-time. The holiday entitlement is inclusive of bank holidays. If you already receive paid time off for bank holidays in addition to your four week holiday entitlement your holiday entitlement has not increased.

HCIL Payroll Service can provide a comprehensive, reliable and confidential service dealing with the above any many other issues on your behalf.  If you are the Chief Officer of an organisation, your time should be spent concentrating on managing it and not whether you are compliant with Inland Revenue requirements.

Our charges vary depending on the level of service required- however a typical example for an organisation with 7 salaried employees would be as follows:

FREE initial consultation            £0

Set Up Fee – (one-off)                £30 (to allow for transfer of information)

Monthly cost – (up to 7 employees)                     £21.00 (then £2.50 for each subsequent employee)

Minimum charge (£15.00)                

End of Year Online Fee                                        £30.00

Annual Cost                                                          £282.00

Less  Online Filing Incentive 07/08

from Inland Revenue                                         (£100.00)

Total Annual Cost                                              £182.00

 

This is a costing of £15.16 per month for budget purposes

The question should be not whether your organisation can afford this service but whether it can afford not to have the service.  Do not become a statistic by falling into the trap of letting this vital function within your organisation be left to chance.  

For more information please contact one of our payroll team who will be happy to discuss a proposal which meets your needs.

Tel: 01432 353397                        
Fax: 01432 267599             

E-mail: payroll@herefordshire-cil.com

Wendy Rutter-Butcher (Payroll Service Manager)

Angela Warren (Payroll Officer)

Caroline Batley (Payroll Adviser)

Rockfield Road, Hereford, HR1 2UA

What our service users say about us…..

'As someone who is new to the world of tax codes, payroll, NI contributions and such like, I feel absolutely confident that there is someone on the end of the phone I can ask ridiculous questions to and get the right answer. I couldn’t have asked for a better service and now I couldn’t manage without them!'

Julian Reeves

Chief Executive, Herefordshire Association for the Blind.

‘The ILS has used The Payroll Service for 4 years.  Ours is a complex service, employing a team of 70 staff on varying hours, salaries and pay rates.  The Payroll Service provides us with an efficient and effective system, always adaptable and willing to find ways to meet our needs.  The team are extremely helpful and courteous to all, always willing to explain things and talk through queries with anyone. It is an excellent partnership which works.’
Ginnie Jaques
Manager, The Independent Living Service 

‘the Payroll Team are very patient and helpful – it is much appreciated’ 
Mrs J, Direct Payment Employer

‘the Payroll Team are excellent, they help and advise me and stop me from panicking’ 
Mrs H, Direct Payment Employer

‘presentation of documentation with colour coding and layout is excellent and eased my understanding’ 
Mrs P, Direct Payment Employer 

‘I am very grateful to the Payroll Team for the excellent service’ 
Mr L, Direct Payment Employer 

‘when I phone for advice or help, the Payroll Team are always very willing to help – thank you’ 
Mrs S, Direct Payment Employer

‘I have found The Payroll Service to be extraordinary.  They have lots of patience and explain everything so that I have a good understanding.  They are easy to access and very approachable in person and on the phone.  A very prompt service’
Miss P. Direct Payment employer. 

‘I have used The Payroll Service for many years and have been thankful to put my trust in a really reliable, friendly, knowledgeable, helpful and totally professional service.  I have been extremely unwell for the past 9 months and it is so reassuring not to have to worry about payroll responsibilities. I feel I can totally rely on the service and a member of the team is always at the end of the telephone to support me.’ 
Mrs M, Direct Payment Employer 

‘Thank you all very much, and long may you continue to do such a great job.’ 
Mr O, Direct Payment Employer

 

New penalties for errors on Inland Revenue returns and documents

 

To encourage better compliance by organisations and individuals, the Inland Revenue (HMRC) have introduced a ‘new regime’ of graduated penalties for inaccuracies.

 

These range from no penalty for a mistake made, despite taking reasonable care*, to 100% penalty for deliberate and concealed inaccuracies.  The penalties apply to Income Tax, PAYE and National Insurance, Corporation Tax and VAT.

 

Penalties will take effect from 1^st April 2009 in respect of returns made on or after 1^st April 2008.

 

An individual or organisation may be charged a penalty if they give HMRC an inaccurate document and, if a document contains more than one inaccuracy, a penalty will be charged for each.  There is no penalty where the person or organisation makes a mistake, despite taking reasonable care.

*HMRC explains reasonable care as follows.   “We believe it is reasonable to expect a person who encounters a transaction or other event with which they are not familiar to take care to check the correct tax treatment or to seek suitable advice. We expect people to take their tax seriously.

Reasonable steps include, for example:

• consulting with an accountant  agent or other professional to discuss the position so they can inform us
• ringing us to discuss it
• discussing it with one of our officers if there is an ongoing compliance check
• emailing, faxing or writing to an HMRC office with details”.

 

For more information on the level of penalties see HMRC website http://www.hmrc.gov.uk/about/new-penalties/faqs.htm