Employers' Briefing September 2011 - Crowe Horwath International

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Employers' Briefing September 2011 - Crowe Horwath International

Crowe Clark WhitehillConsultation on draftregulations for automaticenrolmentDraft regulations to cement workplace pension saving reformshave been published which will underpin automatic enrolment.The regulations have been drafted to include changes tomake it easier for employers to understand and operate theirnew duties.The consultation period will run for 12 weeks, ending on11 October and includes:►►►►amendments to existing legislation to reflect policychanges arising from the making automatic enrolmentwork review, including measures to manage the burdenson business, such as allowing employers to apply waitingperiods in respect of eligible jobholdersa series of minor amendments intended to clarify thepolicy and remove legislative obstaclesdraft guidance for persons certifying money purchase,personal pension and certain hybrid schemesit is proposed that these regulations will come into forcein early 2012.http://www.dwp.gov.uk/consultations/2011/workplacepension-reform-2011.shtmlIntegrating NICs with PAYE:HMRC call for evidenceThe government has issued a call for evidence as part of itsconsideration of the integration of the operation of the incometax and National Insurance Contributions systems, announcedat Budget 2011. The deadline is 19 September 2011.This is a preliminary stage of consultation, and aims to build astrong evidence base on the burdens to employers of havingto operate two different systems. Responses to this call forevidence will inform the government’s proposals for reform, onwhich it will consult in the autumn.Approaching deadlines19 September 2011 19 October 2011Deadline for paying yourMonth 5 remittance to theAccounts Office(or 22 September if you payelectronically).Deadline for contractors tosubmit their CIS300 return forMonth 5.Deadline for responses to ‘callfor evidence’ – intergrating taxand NICs.Deadline for paying the tax andClass 1B NICs due in respectof your PAYE SettlementAgreement (21 October if youpay electronically).Deadline for paying yourMonth 6 remittance to theAccounts Office (or 21 Octoberif you pay electronically).Deadline for contractors tosubmit their CIS300 return forMonth 6.Advisory fuel rates from1 September 2011These rates apply to all journeys on or after 1 September 2011until further notice. For one month from the date of change,employers may use either the previous or new current rates,as they choose. Employers may therefore make or requiresupplementary payments if they so wish, but are under noobligation to do either.Engine size Petrol LPG1400cc or less 15p 11p1401 to 2000cc 18p 12pOver 2000cc 26p 18pEngine sizeDiesel1600cc or less 12p1601 to 2000cc 15pOver 2000cc18pPetrol hybrid cards are treated as petrol cards for this purpose.While Real Time Information (RTI) will reduce the administrativeburdens of operating payroll, the differences between thetax and NICs structure outlined within the call for evidencecontinue to place administrative burdens on the employer.This call for evidence seeks to gain a greater understandingand fuller evidence base regarding these burdens.Integrating the operation of income tax and National InsuranceContributions: a call for evidence (PDF 284KB).Cover sheet for responses (PDF 32KB).


Employer’s Briefing September 2011Total People(now CheshireEmployer and SkillsDevelopment Limited)v HM Revenue &Customs – updateThe Upper Tribunal have over turned aFirst-tier Tribunal decision that businessmotoring allowances paid to staffwere exempt from National InsuranceContributions (NIC).The Upper Tribunal held that it wasnot enough that the paymentsrepresent, or were intended torepresent, reimbursement of motoringexpenditure; they must be of ‘relevantmotoring expenditure’ within themeaning of reg 22A(3), which in turnrequires that the payment is a ‘mileageallowance payment’ as defined by s229(2) of ITEPA.The definition of a mileage allowancepayment is ‘amounts ... paid to anemployee for expenses related tothe employee’s use of ... a vehicle forbusiness travel’. The essence of thedefinition is clearly the link between thepayment and the use of the vehicle.The tribunal concluded that carallowances paid were correctlysubjected to NIC and as such, norefund is due. We expect a furtherappeal to be made.What should employers do now?If you have already submitted a claim,you should consider reviewing it in lightof these findings. Your claim may stillbe feasible or the claim may need toremain open if the case is appealed.If you have not submitted a claim, youmay still wish to do so. The potentialsuccess will depend on the underlyingstructure and allowances paid.For those employers who want tobenefit going forward, they shouldconsider implementation of a structuredapproach to any car allowance andmileage payments. Such a solutioncan take into account tax and NICand minimise administration, deliveringincome tax relief for those not alreadysubmitting claims or a timing advanceto those that do and NIC savings forboth employee and employer.www.tribunals.gov.uk/financeandtax/Documents/decisions/HMRC_v_TotalPeopleLtd.pdfCase updateGerard McCann v HMRCIn this case the taxpayer was arguing that a surcharge on late paid tax should not be dueas his employer should have deducted 40% tax at source from his termination paymentand not basic rate the appeal was dismissed.Prior to 6 April 2011, an employer was only required to deduct tax at the basic rate usingcode BR from a payment to a departed employee if the P45 form had already been issued(now it is code 0T which has to be applied, which means no allowances and any taxablepayment to be charged at marginal rates).Marlen Ltd v HMRCEngineering contractor Gary Hughes won his IR35 case after the tribunal found that a)no mutuality of obligation existed and b) that the degree of control needed to establish acontract of employment did not exist.The key points to take from this case are, that contractors should keep records of thedifferences in terms for employees and themselves. The areas highlighted as being in thetaxpayers favour were: two contracts were terminated early, one by the client, JCB, and one by Mr Hughes client employees had to take their holidays at shutdown times, whereas Mr Hughesworked over the shutdown employees had to work fixed hours but Mr Hughes more or less came and went ashe pleased when the client’s IT systems went down, Mr Hughes was not paid but the employeeswere.All these issues, together with a strong lack of control as to the manner in which the workwas done, were enough to put the case outside the scope of IR35. HMRC had arguedthat Mr Hughes was in effect a senior employee at JCB.Primary Path Ltd v HMRC [2011] UKFTT 454 (TC)The First-tier tribunal has held that the contract between a personal services companyproviding the services of a computer systems design specialist did not have thecharacteristics of a contract of employment. A key factor of the ruling was ‘the presence ofwhat could be described as a pay-as-you-go relationship’ between Winfield and his client,pharmaceuticals giant GSK.It was partly because he was paid by the hour; in the same way many professionalservice firms bill clients, which led the tribunal to rule that Winfield’s relationship with GSKwas ‘one of an independent and self-employed contractor and not that of employer andemployee’.Williamson & Soden Solicitors v Briars UKEAT/0611/10The recent EAT decision in Williamson & Soden Solicitors v Briars considered theemployment status of a partner. A solicitor had previously been made a salaried partnerof his firm on the understanding that although he may be a partner in name, he was toremain an employee of the firm.Later, new arrangements were agreed between the claimant and the firm. He wouldinstead be paid what was described as a guaranteed profit share of £55,000, togetherwith one third of one-sixth (one eighteenth, in effect) of the net profits of the firm. He had no risk of losses. He had no capital stake. The firm subjected him to the requirement that he meet targets and he waschallenged when those were not achieved. He was not consulted about significant events in the life of the firm, such as animpending audit by the Solicitors Regulation Authority, before they occurred.The EAT found him to be an employee.Autowest Ltd v HMRCThis case, which centred on Class 1A NIC, was broadly about whether a director used acompany car for private purposes. He claimed he did not, even though he did not have aprivate vehicle for his use. The tribunal sided with HMRC in not believing the director hadnever used the company’s vehicles to get to and from work or for other private purposes.


Crowe Clark WhitehillShould the worker you engage be subject to PAYE?Whether an individual is an employee or self-employed in a particular situation is a question of fact depending on the terms underwhich he or she works. When you engage someone to do work for you, you have to decide whether or not to apply the PAYErules. It is up to you as the engager to get it right or you could suffer a request from HMRC for the tax/NIC lost (and in worse casescenarios interest and penalties).Over the years, HMRC has placed emphasis on reclassifying individuals claiming to be self-employed, being keen to ensure thatonly those genuinely in business on their own account receive the commensurate tax savings. This is because self-employedworkers – be they sole traders, in partnerships or directors and shareholders of their own limited companies – generally pay lesstax in exchange for the greater risk they take for not being in employment.What questions should you ask?It should be noted that no single factor will normally be considered decisive and the authorities will consider all the relevant facts.The main criteria used in assessing whether a relationship is employment or self-employment for taxation purposes are as follows:Questions A Tick Questions B TickDoes the worker have to do the job themselves?Can the worker send a substitute from their businessor company (i.e. a sub-contractor)?Can you tell the worker where/when/how to workand what to do?Can you move the worker from one task to thenext depending on operational needs?Does the worker work a set number of hourseach week or month and/or does a pattern exist?Is the worker paid a regular amount or is theworker paid by the hour?Can the worker claim for any overtime,allowances or expenses?Is the worker responsible for managing anyoneelse who is an employee?Are the materials to complete the work providedby the engager?Is the worker seeking payment for workundertaken on behalf of themselves individually?Is the engager’s premises likely to be the mainplace of work for the worker?Is there an obligation on the worker to take anddo the work offered by the engager and is theengager obliged to provide work to the worker?Does the worker have any benefits provided bythe engager?Does the worker decide where, when and how toprovide the service, and what to do?Is the worker contracted for a pre-defined and specifictask only and will not be asked to do other thingswithout a new agreement?Is the worker free to choose the hours and patterns ofwork in order to get the job completed?Does the worker simply claim a fee when theassignment is completed, there are no patterns as towhen this may occur, and the fee is one-off in nature?Are all costs associated with the work covered byinvoice presented?Does the worker have no managerial responsibility forany employee of the engager?Does the worker provide the equipment/tools andmaterials in the main required to complete the work?Is the worker invoicing the engager via a registeredlimited company or a VAT registered business?Does the worker have a number of other clients, arethey in business in their own right and is the engagerjust one of many clients with whom the worker has aprofessional relationship?There is no obligation for the worker to take workoffered or for the engager to offer work?Does the worker make their own provision andmanage their own benefits and conditions of service?After completing the tick chart, you should be able to see a pattern towards questions in column (A) or in column (B). If the patternis towards column (A) then the worker is likely to be an employee. If the pattern is towards column (B) the worker is unlikely to bean employee.If no pattern emerges or if there is only a minor bias towards one of the columns, then you should consider undertaking furtherwork to establish the workers status, it is also possible that you might have a worker.Notes The description given to the relationship in the contract or other documentation will carry little weight in determining therelationship which exists.continued on next page...


Employers’ Briefing September 2011Forthcoming eventsEmployment seminarThis free seminar brings together three leading advisers,and two guest speakers, to keep you up to date with newopportunities and new potential pitfalls in employment matters.Speakers:Pam Loch – Loch Associates Employment LawyersJulian Hanrahan – Crowe Clark Whitehill Financial Planning LtdDr Glen Fox – Occupational Psychology ServicesSimon Warne – Crowe Clark WhitehillAnna Daniels – Daniels Fitness GroupDate: Tuesday 27 September 2011Time: 8.30am – 11.00amVenue: Speyside Glenlivet Room, Hotel du Vin,Crescent Road, Tunbridge Wells TN1 2LYRSVP: Emily Rushton by calling 01892 700200 or emailingemily.rushton@crowecw.co.uk.Employment tax and independent schools update seminarYou are invited to our free update seminar, where we will covera number of ‘hot’ topics currently affecting schools. We willhighlight potential tax risks and suggest ways to eliminate anyexposure.This seminar will specifically discuss, living accommodation,peripatetic teachers and voluntary disclosure.Date: Thursday 29 September 2011Time:8.30am – 10.30amVenue: Crowe Clark Whitehill, St Bride’s House,10 Salisbury Square, London EC4Y 8EHRSVP:Judy Vincent by calling 020 7842 7319 or emailingjudy.vincent@crowecw.co.uk.Employment tax and independent schools update seminarEmployment tax issues are continually being revised andupdated and this can significantly affect an academy’s planningand budgeting.With this in mind, you are invited to our free update seminar,where we will cover a number of ‘hot’ topics currently affectingschools. We will highlight potential tax risks and suggest ways toeliminate any exposure.This seminar will specifically discuss, living accommodation,peripatetic teachers and voluntary disclosure.Date: Tuesday 11 October 2011Time: 3.15pm – 4.30pmVenue: Crowe Clark Whitehill, Aquis House,49-51 Blagrave Street, Reading RG1 1PLRSVP: Tonya Fisher by calling 0118 959 7222 or emailingtonya.fisher@crowecw.co.uk.Employment tax and academies update seminarEmployment tax issues are continually being revised andupdated and this can significantly affect an academy’s planningand budgeting.With this in mind, you are invited to our free update seminar,where we will cover a number of ‘hot’ topics currently affectingschools. We will highlight potential tax risks and suggest ways toeliminate any exposure.This seminar will specifically discuss peripatetic teachers andvoluntary disclosure.Date: Thursday 20 October 2011Time:10.45am – 12.00pmVenue: Crowe Clark Whitehill, Aquis House,49-51 Blagrave Street, Reading RG1 1PLRSVP:Tonya Fisher by calling 0118 959 7222 or emailingtonya.fisher@crowecw.co.uk.We hope you find this newsletter of interest. If you have any questions about any of the topicscovered, please call your regular Crowe Clark Whitehill contact or:LondonDavid Daly020 7842 7364david.daly@crowecw.co.ukSusan Ball020 7842 7238susan.ball@crowecw.co.ukBrian Robson020 7842 7147brian.robson@crowecw.co.ukCheltenhamKaren Goodwin01242 234421karen.goodwin@crowecw.co.ukKentSimon Warne01622 767676simon.warne@crowecw.co.ukMidlandsPaul Edwards0121 543 1900paul.edwards@crowecw.co.ukManchesterSteve Livingston0161 214 7500steve.livingston@crowecw.co.ukThames ValleyStuart Weekes0118 959 7222stuart.weekes@crowecw.co.ukAssociate member ofCrowe Clark Whitehill UKIsle of Man01624 627335The office in the Isle of Man is Crowe ClarkWhitehill LLC. It is a separate, independentfirm and not part of Crowe Clark WhitehillLLP. Accordingly, neither firm can be heldliable for the acts or omissions of the other.Crowe Clark Whitehill LLP is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legalentity. Crowe Clark Whitehill LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specificallydisclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member. © 2011 Crowe Clark Whitehill LLPThis information is published without the responsibility on our part for loss occasioned to any person acting or refraining from acting as a result of any information published herein.

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