Oracle Cloud & PeopleSoft Day 2017

1. Important Changes
to Payroll
Presenter:
Linda Pullan,
Head of Payroll Alliance
Peoplesoft Day
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2. Agenda
• Apprenticeship levy
–avoiding the common errors
• Budget changes to Optional Remuneration
Arrangements including salary sacrifice
• Proposed changes to Termination Payments
• Off payroll working in the Public Sector
And
• The new Employment Status Tool
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3. Apprenticeship Levy
 All employers, not just large employers, are
potentially liable to pay the Apprenticeship Levy
 But only those whose pay bills
exceed £3million over the year will pay
 This is because there is an Apprenticeship
Allowance which is offset against the Levy of
£15,000 per annum
 However, if your Apprenticeship Levy is
less than £15,000 you cannot claim
the rest of the Allowance in cash
 Less than 2% of UK companies will be liable
to pay the Levy this year
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4. Apprenticeship Levy
Commencement date April 2017
- first AL calculations made on tax week/month 1’s
pay bill
First payment to HMRC was due 19th/22nd May 2017
with monthly PAYE remittance
Apprenticeship Levy is calculated each payday
the AL allowance is set as an annual figure
divided into 12 equal amounts across the tax year.
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5. Apprenticeship Levy
What is the Pay bill?
 The total annual earnings that attract Class 1(secondary) NIC:
- Salary/Wages/Bonuses/Commission and Allowances
Plus:
 All BIKs that attract Class 1 (secondary) NICs
Exclude:
 All BIKs that attract Class 1A NIC
 PSA’s (Class1B NIC)
Fluctuating Earnings throughout the tax year could mean employers
become subject to AL payments i.e. bonuses, overtime, pay increases etc.
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6. The Pay Bill
Income tax? Class 1 Employer (Secondary)
NICs?
Pay/salary/wages Yes Yes
Bonus/commission Yes Yes
Employer pension contributions No No
Employee pension contributions Tax relief can be claimed subject to limits Yes - they are paid on gross pay,
before deductions
Benefits in kind (e.g. provision of a car,
private healthcare etc.)
Yes, unless one of the limited exemptions applies Yes – if they attract Class 1
Secondary NICs
No – If they attract class 1A NICS
instead
Apprentices under 25 and
Employees under 21
Yes Yes – as all earnings attract Class 1
Secondary NI. Even though no Er’s
NIC is payable until the UST is
exceeded
Termination payments Yes over £30,000 No
What is NI’able Pay?
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7. Peoplesoft Day
Apprenticeship Levy
 A new group Apprenticeship Levy has been added
to the EPS.
 These fields should only be completed
when an AL payment is due.
oData item 187 – Apprenticeship Levy due year to date (net)
oData item 188 – Tax month
oData item 189 – Annual Apprenticeship Levy allowance
amount allocated to that PAYE scheme.
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8. Apprenticeship
Levy
- Common Errors
Under 21 year old’s and apprentices under 25
in the calculationExcluding
Overseas employees who are subject
to Class 1 NICsExcluding
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9. Apprenticeship
Levy - Common
Errors
Employees based in Scotland!Excluding
For Allowance for each connected companyClaiming
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10. Apprenticeship Levy – Calculation
Example 1
• Month 1 pay bill of £500,000
• The calculation and sum due will be:
• AL sum: 0.5% x £500,000 = £2,500
• Offset - £1,250
o APL payment
• £2,500 - £1,250 = £1,250
o EPS Reporting
• Data item 187 – Apprenticeship Levy due year to date - £1,250
• Data item 188 – Tax month – 1
• Data item 189 – Annual Apprenticeship Levy Allowance £15,000.
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11. Apprenticeship Levy – Calculation
Example 1
• Month 2 pay bill of £400,000
• The calculation and sum due will be:
• AL sum: 0.5% x £900,000 (M1 + M2) = £4,500
• Offset - £2,500 (2 months)
o APL payment
• £4,500 - £2,500 – £1,250 (M1 payment) = £750
o EPS Reporting
• Data item 187 – Apprenticeship Levy due year to date - £2,000
• Data item 188 – Tax month – 2
• Data item 189 – Annual Apprenticeship Levy allowance amount £15,000.
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12. Apprenticeship Levy – Calculation
Example 1
• Month 3 pay bill of £800,000
• The calculation and sum due will be:
• AL sum: 0.5% x £1,700,000 (M1 to M3) = £8,500
• Offset - £3,750 (3 months)
o APL payment
• £8,500 - £3,750 – £2,000 (M1 & M2 payments) = £2,750
o EPS Reporting
• Data item 187 – Apprenticeship Levy due year to date - £4,750
• Data item 188 – Tax month – 3
• Data item 189 – Annual Apprenticeship Levy allowance amount £15,000.
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13. Apprenticeship Levy – Calculation
Example1
• Month 1 pay bill of £200,000
• The calculation and sum due will be:
• AL sum: 0.5% x £200,000 = £1,000
• Offset - £1,250
o APL payment
• £1,000 - £1,250 = £0
o EPS Reporting
• Data item 187 – Nothing to report
• Data item 188 – Tax month – 1
• Data item 189 – Nothing to report.
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14. Apprenticeship Levy – Calculation
Example 2
• Month 2 pay bill of £200,000
• The calculation and sum due will be:
• AL sum: 0.5% x £400,000 (M1 + M2) = £2,000
• Offset - £2,500 (2 months)
o APL payment
• £2,000 - £2,500 – £0
o EPS Reporting
• Data item 187 – Nothing to report
• Data item 188 – Tax month – 2
• Data item 189 – Nothing to Report.
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15. Apprenticeship Levy – Calculation
Example 2
• Month 3 pay bill of £800,000 (including annual bonus)
• The calculation and sum due will be:
• AL sum: 0.5% x £1,200,000 (M1 to M3) = £6,000
• Offset - £3,750 (3 months)
o APL payment
• £6,000 - £3,750 – £0 (M1 to M2 payments) = £2,250
o EPS Reporting
• Data item 187 – Apprenticeship Levy due year to date - £2,250
• Data item 188 – Tax month – 3
• Data item 189 – Annual Apprenticeship Levy allowance amount £15,000.
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16. HMRC Official
Guidance
• HMRC has published their own
internal manual on Apprenticeship
Levy at:
https://www.gov.uk/hmrc-internal-
manuals/apprenticeship-levy
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17. The Apprenticeship Service (formerly DAS)
• Registration for Digital Bank Account commenced January 2017
• April 2018 full roll out to all companies in England
whether levy paid or not
• Apprenticeships commencing May 2017 will be funded
by this scheme.
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18. Devolved UK Arrangements
A funding deal for the apprenticeship levy for Scotland, Wales
and Northern Ireland has been agreed
• Based on a population share of the levy
• UK government will manage difference between
levy forecast and levy revenues
• The agreement is in line with the general approach
to sharing UK wide revenues
• Levy expected to be embedded by 2019-2020
• Each administration will decide
how to allocate their own funding.
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19. Off Payroll
Working
in the
Public Sector
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20. Off Payroll Working in the Public Sector
• Public sector, agencies & third parties supplying workers
to public sector are affected by new rules from 6 April 2017
• The new measure will apply to contracts entered into
prior to 6 April 2017
• Where applicable workers will be paid net of tax & NI
via engager’s payroll
• Services provided via an intermediary (Personal Service Co.)
are affected. If the worker had contracted directly with the client,
the worker would have been an employee
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21. Off Payroll Working in the Public Sector
Where the worker is paid via the engager’s payroll it will
not be necessary for the engager to:
• Pay statutory payments
• Auto enrol the worker
• Deduct a student loan
• Or provide a payslip
– but must provide a statement of payment and deductions
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22. Off Payroll Working in the Public Sector
• The new rules will not impact on direct hiring via agencies
(where worker is employed by an agency or umbrella and
in PAYE & NIC)
• The new rules do not apply if under IR35 rules the contract
would come out as self employed
• Does not impact on Managed Service Companies
Or
• Where whole service is contracted out
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23. Off Payroll Working in the Public Sector
• The new rules apply to work completed prior to 6 April 2017
where payment is made after 6 April 2017
• They also take precedence over CIS
• Updated guidance:
https://www.gov.uk/guidance/off-payroll-working-in-the-public-
sector-reform-of-intermediaries-legislation
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24. HMRC Online Employment Status Tool
• HMRC launched the new Employment Status Service in March 2017
• It provides users with HMRC’s view of employment status
• The new Employment Status Tool will deal with all types of workers
not just public sector
• Users are encouraged to go into the Status Tool several times
if necessary during a period of 30 days
• The outcome can be saved as a PDF and customised
• New online Employment Status Service
https://www.gov.uk/guidance/check-employment-status-for-tax
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25. Salary Sacrifice
and
Flexible Benefits
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26. Salary Sacrifice and Flexible Benefits
• Many tax/ employer NI savings removed from
6 April 2017
• Exempted benefits:
o Pensions and pension advice
o Childcare
o Cycle to work
o Ultra-low emission cars
• Schemes in place prior to April 2017 protected
………until April 2018
• Cars, accommodation, school fees protected
………until April 2021
• Unless there is a change or renewal of the arrangement
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27. Peoplesoft Day
Salary Sacrifice and Flexible Benefits
Schemes no longer in scope:
1. Salary sacrifice / exchange
2. Flexible benefits where an employee can choose
between a tangible benefit or cash
3. Where the employer provides benefits over
and above their salary and offers a cash alternative
Where employees are offer a benefit or cash alternative,
the employee must be taxed on the higher of the two
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28. Peoplesoft Day
Salary Sacrifice and Flexible Benefits
 Schemes in scope:
1. Pensions including pension’s advice
2. Childcare voucher or workplace nurseries
3. Directly employer contracted childcare
4. Cycle to work including accessories
5. Cars with emissions at or under 75 CO2/km
 Flexible Benefits where intangible benefits can be purchased,
such as:
 Annual Leave
 Flexible working.
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29. Termination
Payments
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30. Termination
Payments
Post Budget 2016 Press Release:
From April 2018
 Clarification of, and tightening the rules
about the taxation of termination payments
- All payments in lieu of notice and certain
damages payments are taxable and NI’able
as earnings
- Removing foreign service relief
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31. Termination
Payments
Post Budget 2016 Press Release:
 Aligning the employer NICs and tax
treatments
of termination payments
 Employers to pay NICs on the elements of
termination payments that exceed £30,000.
 It is expected to be Class 1A liability
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32. Peoplesoft Day
The General
Election
Effect
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33. General Election effect
 As a result of the ‘snap’ General Election the Finance Bill 2017
had to be reduced
 The “slimmed down” bill had to be enacted on the 27th April
 The reduction meant;
 72 of 135 clauses were removed
 18 of 29 schedules were removed
 The final act dropped from 762 to 148 pages!
 Allows Parliament to review removed items in detail
through more debates after the election.
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34. General Election effect
Some of the clauses removed, temporarily
 Making Tax Digital
 Highly contentious – possibly pushed back
to April 2018 at the earliest
 Pensions Advice tax free limit due to be
increased to £500
- Employers may have offered advice
expecting the increase
 Changes to the taxation of termination payments
- Tax and NI on PILON, Class 1A on Payments
over £30k.
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35. Example 1
• Jack has been working for the company for 20 years
• He is being made redundant but will be working his 12 weeks’ notice
Contractually he is entitled to:
• Statutory redundancy £13,891
• Salary £30,000 per annum
• He is also being paid compensation for loss of office of £25,000
• Total termination payment £38, 891
• Tax due on £8,891
• Potentially under new rules his employer is liable to NI at 13.8% on £8,891
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36. Example 2
• Jean’s employment has been terminated with immediate effect
• Her employer will pay her Pay in Lieu of Notice of £25,000
(non contractual)
• And a payment for loss of office of £35,000
• The PILON is tax free and she will be taxed on £5,000 of her compensation
for loss of office as it exceeds £30K
• Under proposed new rules the PILON would be taxable and NI’able
regardless of whether or not it is contractual or custom and practice
• And her employer would pay secondary NI contributions on £5,000 as well
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37. Thank you for listening
Any questions?
www.payrollalliance.co.uk
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