Payroll & Reward Brunch – March 2021
- Date: 25 March 2021
- Duration: 1 hour
- Cost: On Demand
Kevin Waller, payroll specialist, joined our own Ian Holloway to talk all things payroll following the budget and looked ahead to the new tax year.
As promised, a number of downloads for you this month:
- Webinar Slides
- Rates and Allowances – Tax Year 2021/22
- Which Student Loan Plan to Use – Tax Year 2021/22
- Useful HMRC webinars
- The Basic Earnings Assessment – Tax Year 2021/22
- Which Tax Code should I use? 2021/22
- IR35 with Kate Upcraft and Ian Holloway
Questions and answers from the end of the brunch are available below after the video.
Questions & Answers
A question was asked about more information around IR35
i-Realise have pointed to an IR35 chat between Ian Holloway and Kate Upcraft but, as a follow-up, we have included a list of HMRC videos on the topic with links.
You mentioned that the rates of tax for Welsh and rUK Taxpayers is the same for 2021/22, i.e. 20, 40 and 45%. Do you think that this will change going forward?
Well, Welsh Labour, the current governing party, only pledged not to raise Income Tax for Welsh Taxpayers during the current term, ending in May 2021. There are Welsh Senedd elections in May this year and we will have to look at what the Manifesto commitments from the parties regarding Income Tax. The Welsh Conservatives, for example, have pledged increased spending and freezes of Council Tax for 2 years. They have not said anything about Income Tax, yet any tax freeze is going to mean a tax increase over time. Plaid Cymru have talked about a ‘fair and proportionate’ taxation system.
I would think that any incoming administration is going to want to make full use of their Income Tax sharing powers. I am not a betting man, but I would think that the Welsh Rates of Income Tax will change and software providers have got to be able to accommodate this.
You said about Scottish Student Loan borrowers on Plan 1 being moved to Plan 4 from April 2021. Does this mean that software has to do a migration for any Scottish Taxpayer on Plan 1 and move them to Plan 4?
No. There is no correlation between Income Tax and Student Loans. Someone that pays Income Tax at the Scottish rates and thresholds is a Scottish Taxpayer but this does not mean that they are automatically a Scottish borrower – which is someone who applied for their Loan funding through the Students Award Agency Scotland (SAAS) when they started their course.
The action is to wait for HMRC to issue the SL1 advising a change of Plan and make sure your software can accommodate the new Loan Plan.
If we have an employee who is furloughed, can we advise that they opt out of the automatic enrolment pension scheme?
No. The Pensions Regulator is quite clear (https://www.thepensionsregulator.gov.uk/en/covid-19-coronavirus-what-you-need-to-consider/automatic-enrolment-and-pension-contributions-covid-19-guidance-for-employers) that the pensions AE and membership carries on as normal and part of this is that the employer cannot promote opting out. It may be that the individual cannot afford the contributions, in which case they can obtain an opt-out form if they are in the 6-week opt-out window. Or, the individual may choose to cease membership. Opting-out and ceasing are two different things but neither of them must be promoted by the employer.
Regarding increases to the National Living Wage, the 1st of April falls right in the middle of the week which we are paying on the following Friday (the 9th). Does the law say that we have to pro-rate the week so that days up to 31 March are paid at one rate and days on or after 01 April are paid at the new rate?
No. This is something that comes up year-after-year and is the fault of poor communication by a lot of people. What the law says is that people must be paid at the increased rate for the first full pay reference period that starts on or after 01 April. So, if 01 April falls in the middle of a pay reference period, which it does, what the law says is that they can be paid at the old rate for this pay reference period but must be at the new rate from the start of the following pay reference period. This is after 01 April. See the article that Ian Holloway wrote for AshleyKateHR at https://www.ashleykatehr.com/news-centre/the-living-wage-not-always-01-april-2021-guest-article-by-ian-holloway.
We have roles where workers are on a lower hourly rate than the NMW, but receive a regular monthly commission payment. I have been advised that this is acceptable by HR. Please can you advise where I can find a calculation to ensure we are compliant.
The National Minimum Wage Manual from HMRC (NMWM09150) confirms that commission payments count as pay that counts towards the NMW. So, in that respect, your HR department are correct. However, the issue is that commission payments frequently relate to a prior period and the NMW is all about ensuring that the worker is paid at the NMW (or NLW) in the pay reference period. See also the guidance from the Department for Business, Energy and Industrial Strategy (BEIS) where such a situation is referred to as ‘Deferred Pay’. There is also an example there about allocating pay over a number of pay reference periods, though this refs to an annual bonus.
There is good guidance in HMRC’s own manual (‘calculating a worker’s total remuneration in a pay reference period’) and this includes an example (example 2).
I know that the Gender Pay Gap Reporting deadline has been extended this year. What date is the Reporting due for private sector?
The deadline has not been formally extended, i.e., in legislation. The deadline is still 12 months after the snapshot date which was 05 April 2020. This should be reported on or before 04 April 2021 and employers are encouraged to do this, if possible.
What has been extended is the date on which the Equality and Human Rights Commission will start its non-compliance activity. They say to report on or before 04 April 2021 ‘where possible’ but they will not start their compliance activity until 05 October 2021. So, effectively, there has been an informal extension. Get it in by 05 October 2021!