SafeGuard World International’s UK and ROI payroll executive, Len Walker, looks at some common payroll questions that he receives in the global arena, from tax benefits to auto-enrolment measures.
What are the common issues that you receive queries on throughout the month?
One event that always results in queries is when an individual receives a large sum, such as a bonus or commission payment, that causes the employee to fall into the higher rate 40 per cent tax bracket (£31,866 for 2014/15 tax year). In this circumstance, assuming the individuals’ earning drops down to the previous levels in the following pay periods, they will receive tax rebates until their cumulative taxable income once again falls below the 40 per cent threshold.
Do my employees have to pay tax on their expenses in the UK?
As a rule, if an expense is related to an employee performing his job it will not be liable for personal income tax. However, expenses such as the reimbursement of college or study fees are viewed by HMRC as a ‘benefit in kind’ and are liable for income tax deductions. For example, if an employee is paid a gross taxable income of £30,000 and is reimbursed a course fee of £5,000, he would be liable to pay 40 per cent tax on the £3,134 that falls within the higher rate tax bracket.
The same practice is true when an employee receives shares. If the employer would like to compensate for the additional tax payment incurred by the individual, they can make a one-time payment to the employee in which the result sees the net payment offset the additional tax incurred.
Can you share with us any UK tax benefits that employers may not be aware of?
All employers are eligible to reclaim 92 per cent of all statutory payments. For example, in the UK, fathers are entitled to two week’s paternity leave, which is treated as a statutory benefit and paid at the statutory rate (currently £138.18 for the 2014/15 tax year), regardless of what employers provide as an additional benefit either during or beyond these two weeks. Additionally, fathers can also now claim any paid maternity leave not utilised by the mother, again paid at the statutory rate, with the 92 per cent also recoverable by the employer. Over the course of a number of years and with a several thousand strong workforce this can total quite a substantial amount.
More recently, qualifying companies were granted, by the government, an ‘employment allowance’ of £2,000 to be offset against employer’s national insurance liability. If not already received, this allowance must be claimed in the 2014/2015 tax year.
What are the main highlights of the pension auto-enrolment (AE) scheme that recently came into effect in the UK?
Qualifying employees must be auto-enrolled into an AE qualifying pension scheme depending on the individual company staging date (subject to an optional three month deferment period), which is set by the pensions regulator. At this point, every employee, if not already a member of a qualifying scheme, must be assessed for the AE pension scheme and if necessary, automatically enrolled..
Any worker earning in excess of the income tax threshold (£10,000 for 2014/15 tax year) and between the ages of 22 and 65 must be autoenrolled. The employee can opt out if they wish, but regulations state the employer must not influence their decision making process. At present, the minimum contribution for the employee and employer is set at one per cent of annual salary, and is currently set to rise on 1 October 2017.
Len Walker, SafeGuard World International’s UK and ROI payroll executive
SafeGuard World International’s UK and ROI payroll executive, Len Walker, looks at some common payroll questions that he receives in the global arena, from tax benefits to auto-enrolment measures.
What are the common issues that you receive queries on throughout the month?
One event that always results in queries is when an individual receives a large sum, such as a bonus or commission payment, that causes the employee to fall into the higher rate 40 per cent tax bracket (£31,866 for 2014/15 tax year). In this circumstance, assuming the individuals’ earning drops down to the previous levels in the following pay periods, they will receive tax rebates until their cumulative taxable income once again falls below the 40 per cent threshold.
Do my employees have to pay tax on their expenses in the UK?
As a rule, if an expense is related to an employee performing his job it will not be liable for personal income tax. However, expenses such as the reimbursement of college or study fees are viewed by HMRC as a ‘benefit in kind’ and are liable for income tax deductions. For example, if an employee is paid a gross taxable income of £30,000 and is reimbursed a course fee of £5,000, he would be liable to pay 40 per cent tax on the £3,134 that falls within the higher rate tax bracket.
The same practice is true when an employee receives shares. If the employer would like to compensate for the additional tax payment incurred by the individual, they can make a one-time payment to the employee in which the result sees the net payment offset the additional tax incurred.
Can you share with us any UK tax benefits that employers may not be aware of?
All employers are eligible to reclaim 92 per cent of all statutory payments. For example, in the UK, fathers are entitled to two week’s paternity leave, which is treated as a statutory benefit and paid at the statutory rate (currently £138.18 for the 2014/15 tax year), regardless of what employers provide as an additional benefit either during or beyond these two weeks. Additionally, fathers can also now claim any paid maternity leave not utilised by the mother, again paid at the statutory rate, with the 92 per cent also recoverable by the employer. Over the course of a number of years and with a several thousand strong workforce this can total quite a substantial amount.
More recently, qualifying companies were granted, by the government, an ‘employment allowance’ of £2,000 to be offset against employer’s national insurance liability. If not already received, this allowance must be claimed in the 2014/2015 tax year.
What are the main highlights of the pension auto-enrolment (AE) scheme that recently came into effect in the UK?
Qualifying employees must be auto-enrolled into an AE qualifying pension scheme depending on the individual company staging date (subject to an optional three month deferment period), which is set by the pensions regulator. At this point, every employee, if not already a member of a qualifying scheme, must be assessed for the AE pension scheme and if necessary, automatically enrolled..
Any worker earning in excess of the income tax threshold (£10,000 for 2014/15 tax year) and between the ages of 22 and 65 must be autoenrolled. The employee can opt out if they wish, but regulations state the employer must not influence their decision making process. At present, the minimum contribution for the employee and employer is set at one per cent of annual salary, and is currently set to rise on 1 October 2017.
Len Walker, SafeGuard World International’s UK and ROI payroll executive
