Working out tax liabilities for teaching staff

“The best way to help business is by lowering the burden of tax”, said the Chancellor during his Autumn Statement speech on 5 December. Lowering taxes to reduce direct cost to business is only to be commended but from an employer’s perspective it is the administration of these ‘reductions’ that is still most certainly a burden. However, for individuals and businesses alike it was encouraging to hear that the fuel duty increase that was due to be implemented in September 2014 has been cancelled and there will be no further increase in the current Parliament. And after 93 years paper road discs are to be a thing of the past; an electronic system is to be introduced from October 2014. Here are the key points and highlights of what was revealed for employers.

National insurance contributions
From April 2015 employer NICs will be abolished for employees under the age of 21 earning under the Upper Earnings Limit. This will apply to both existing and new employees and no individual’s state pension entitlement will be affected by the measure.
As part of the government’s drive to reduce the burden of employer NICs, it was confirmed that a £2,000 Employment Allowance will be introduced from April 2014, however at the time of writing, guidance has still not yet been published on the detail of how this saving is to be administered.

State Pensions
A scheme is to be introduced to allow current pensioners, and those who reach State Pension age before the introduction of the new single tier pension in April 2016, an option to top up their Additional State Pension record through a new class of voluntary National Insurance contributions, to be known as Class 3A.The scheme will be introduced in October 2015 and will be time limited. As it is voluntary the employer will not be required to administer these contributions.
The basic State Pension will be increased in line with the triple lock in April 2014; the higher of average earnings growth, inflation or 2.5 per cent. This is a cash increase of £2.95 per week for the full basic State Pension. The government has already announced that they will be bringing forward the rise in the State Pension age to 66 from 2026 to 2020, and introducing legislation to bring forward the rise to 67 from 2036 to 2028.
The State Pension age will be reviewed every Parliament based on the principle that people should expect to spend on average, up to one third of their adult life in receipt of the State Pension. The increase to age 68 is likely to come forward from the current date of 2046 to the mid-2030s and likely to increase further to 69 by the late 2040s.

From April 2015, a spouse or civil partner who is not liable to income tax or not liable above the basic rate for a tax year, will be entitled to transfer £1,000 of their personal allowance to their spouse or civil partner provided that the recipient of the transfer is not liable to income tax above the basic rate. The transferor’s personal allowance will be reduced by £1,000. The spouse or civil partner receiving the transferred allowance will be entitled to a reduced liability of up to £200.

For Share Incentive Plans (SIPs)  the individual limits on the ‘free’ shares companies can award to employees for 2014/15 will be increased from £3,000 to £3,600 per year and the individual limits on the ‘partnership’ shares employees can purchase will be increased from £1,500 to £1,800 per year (or 10 per cent of an employee’s annual salary)
For Save as You Earn (SAYE), the amount that employees can save and apply towards the purchase of share for 2014/15 will be increased from £250 to £500 per month
With Annual Individual Savings Account (ISA) the subscription limit for 2014/15 will be £11,880, of which £5,940 can be invested in cash
The annual subscription limit for Junior ISA and Child Trust Fund (CTF) for 2014/15 will increase from £3,720 to £3,840.
There will also be an annual exemption from income tax on bonuses or equivalent payments up to an amount of £3,600 paid to employees of companies that are indirectly employee owned

The government will reform apprenticeship funding and introduce a system which will enable employers to receive funding for the training costs of apprentices directly through an HMRC-led system and ensure that employers contribute. The lack of detail in this announcement leaves us to speculate somewhat and our thinking is that the ‘HMRC‑led’ system is going to be where employers receive funding through the PAYE system. This was in a consultation last year and the payroll profession were not in agreement with this option.

This will have to go via real time reporting returns and whilst RTI has been successful for many employers there are still issues surrounding the reconciliation of accounts so imagine now putting something into the mix that isn’t in fact earnings; potential for further confusion. The CIPP will be part of any future discussions on how this initiative will be implemented.

Offshore employment
The issue of ensuring that the correct income tax and NICs are paid by employees and employers when offshore employment intermediaries are used was addressed. Further action will be taken to prevent employers using employment intermediaries to disguise employment as self-employment and thus avoid employment taxes and deny employment rights to their workforce. The government will legislate to prevent employment intermediaries from being able to use contrived contracts to disguise the employment of workers.

Personal service companies
A select committee of the House of Lords is currently conducting a call for evidence into the use of Personal Service Companies and IR35 legislation. The CIPP and the AAT have been working jointly to obtain views from their members working within payroll, tax and accountancy and will continue to be involved in consultation.

Help for small businesses
Last year HMRC published their commitments to make tax easier to understand and make ‘doing tax’ simpler and quicker. This year they are publishing an update which showcases the improvements and new products HMRC has developed. Small businesses told them an online document would be more useful for them, so this year HMRC has developed an online interactive format which includes lots of links to services and products for small businesses, helping them to get their tax right, first time. The guide has been structured around a number of themes, so businesses can dip in and out of the sections that are of most interest to them.
The themes include improving support  – setting out what support and help is available to small businesses, including apps and products like business tax dashboard. Another section looks at delivering simpler tax rules including the new employment allowance of £2000, available from April, as well as tax reliefs and incentives. Reducing tax burdens to small businesses and service improvement with regard to transactions are also covered.
Upcoming changes
HMRC has also described what’s coming up in the next 18 months or so – especially their new personalised online account service which will allow small businesses to deal with their business tax affairs in one place, simply and easily.  The guide can be accessed on the HMRC website.

Further information

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