Accountancy Blog

Payroll – what you need to know

A guide for employers on topical payroll issues.

Employers need to keep an eye on changes affecting payroll so all employees have the right amount of tax deducted under PAYE. This is a round-up of the latest payroll-related developments.

Dynamic coding

In July 2017, PAYE tax codes became more refined. Under the new system, known as dynamic coding, HMRC issues an updated tax code once they become aware of a change that will affect the tax an employee pays, such as a new benefit in kind.

Previously, HMRC was seldom aware of changes in benefits until the employer submitted the P11D forms. HMRC would collect the resulting underpayment through an adjustment to the employee’s tax code for the following tax year.

Under the new system, HMRC adjusts the employee’s tax code to collect the right amount of tax for the current tax year. However, HMRC needs a ’trigger’ before they change the tax code.

This trigger could be the employer submitting a full payment summary (FPS) or a P46 form, which relates to putting car benefit through payroll, or the employee updating their personal tax account.

Once HMRC is aware of the change, it will recalculate the employee’s annual tax bill and include any underpayment of tax. More…

IHT and the family home

Not everyone’s a winner with the recently-introduced residence nil-rate band.

Rising property prices have left more families being elevated to millionaire status and dealing with the inheritance tax (IHT) implications that come with it. The Treasury collected £4.6 billion from IHT in 2015/16, compared to £2.69 billion in 2010/11, to reflect a rising year-on-year trend. And that shows no signs of slowing down any time soon.

In attempt to ease the growing burden on families by making it easier to pass on the family home to direct descendants without incurring a tax charge, former chancellor George Osborne revealed plans to introduce the residence nil-rate band in his Summer Budget 2015. The family home allowance, as it’s also known, came into force in April 2017 – but the rules are far from straightforward. More…

GDPR – what you need to know

Individuals will be able to legally ask businesses to delete certain personal data under new proposals outlined in the Data Protection Bill.

The Bill forms part of the EU’s General Data Protection Regulation (GDPR), which is due to come into effect on 25 May 2018.

The legislation will allow individuals greater control over their personal data, including the right to fully close accounts or data to be erased.

Some of the proposals outlined in the Bill include:

  • making it simpler for people to withdraw consent for the use of their personal data
  • allowing people to ask for their details to be deleted
  • requiring companies to obtain ‘explicit’ consent when they process sensitive personal data
  • making it easier for people to require firms to disclose the personal data they hold on them.

More…

Hiring new staff

Recruiters are finding it difficult to hire new staff due to increasing competition for highly skilled employees, a study has found.

Of 400 recruitment agencies surveyed by IHS Markit for the Recruitment and Employment Confederation (REC), 40% found the availability of temporary staff had got worse in July 2017 compared to the previous month (35%).

In addition, 43% said it was the same for permanent staff (up from 41% in June).

This has generally resulted in permanent staff commanding better starting salaries, with earnings growth reaching a 20-month high. More…

National living wage and profits

64% of small businesses are seeing profits fall as a result of the national living wage (NLW) rise, according to research.

The NLW increased from £7.20 to £7.50 per hour on 1 April 2017.

Out of 835 businesses surveyed by the Federation of Small Business (FSB), 39% have put up prices to cope with the NLW increase.

Almost one in four (24%) firms either cancelled or downscaled investments, while 22% reduced working hours and 19% hired fewer employees.

43% of businesses increased wages in line with the NLW, suggesting the majority of owners are already paying their workers above the new rate. More…

Dealing in large amounts of cash and HMRC

Businesses accepting cash payments of €10,000 or more in exchange for goods are required to register with HMRC under money laundering regulations (MLR).

Recent changes to regulations mean that companies accepting cash payments on or above the threshold limit (or equivalent in sterling) will be classed as high value dealers.

Transactions that are considered high value payments include:

  • single cash payments of €10,000 or more for goods
  • several payments for a single transaction totalling €10,000 or more
  • payments of €10,000 or more divided into smaller amounts so they come below the high value payment limit.

More…