For many businesses employing people is one of their biggest costs. Managing a payroll and associated PAYE and tax related issues can equally be a significant challenge and burden. This is often against a background of increasing investigations, penalties and compliance from HMRC.
The starting point - a PAYE Check
Initially it is recommended that you have a review of your PAYE practices and treatment of benefits in kind. This exercise can help to identify anomalies and look to provide you with a clean bill of health. Such an approach can certainly ensure, should HMRC have any enquiry, you are better placed to deal with it.
Dispensations and Exemptions
You don’t have to report some routine expenses to HMRC if they are covered by an exemption. Exemptions have replaced dispensations. If you have had a dispensation this no longer applies but the expenses covered by it should now be covered by exemptions.
Examples of items covered include business travel, phone bills, business entertainment and uniform. To qualify you must either be paying a flat rate to your employee as part of their earnings or paying back actual costs. You don’t need to apply for an exemption if you are paying HMRC’s benchmark rates, but will need to if you want to pay bespoke rates.
It is important to have a system in place to check payments made at benchmark rates. Your employees aren’t allowed to check their own expenses, so you need someone to within your company to make sure they are legitimate and employees should keep proof of their expenses.
How about a PAYE Settlement Agreement?
A PAYE Settlement Agreement is a voluntary agreement between you and HMRC in which you agree to meet the tax on the provision of certain expenses and benefits in kind on behalf of your employees. They are extremely useful for cases where you have rewarded an employee but don’t want them to have to suffer tax or national insurance on the value.
Self employed or employed?
In some cases it can be a costly confusion as to whether someone is self employed or actually deemed to be employed. This is a favourite topic for HMRC as they can reap significant amounts of tax and national insurance from any employer who has got it wrong. It is essential that the correct contracts are in place for such individuals and that these are reviewed regularly.
Salary sacrifice for childcare savings and pension contributions
It is possible to save tax and national insurance by asking an employer to pay fees directly to your childcare provider in return for a reduced salary. We can review your salary and benefit packages for other opportunities for tax efficiency. Similarly it is not unusual for pension contributions to be structured in such a way that, although effective for tax purposes, are not minimising the national insurance liability.
Employee share ownership schemes
The government is keen to promote share ownership by employees. A number of schemes are available which in broad terms are aimed at helping businesses to retain key staff, improve employee motivation and productivity as well as to reduce the tax.
Streets dedicated team of advisers are here to help you
At Streets our dedicated team of employment/PAYE tax advisers provide full and comprehensive tax advice in respect of employing people. The team is led by an ex HMRC compliance officer who knows how HMRC work and operate and understands what you need to do to limit your exposure to enquiries and to identify key saving areas.
In almost every business employment costs, and in particular PAYE and National Insurance, will represent one of the highest costs of the business. Taking time out with a PAYE Tax adviser, whether you employ a handful of people or a large workforce, could help to safeguard the impact of an HMRC enquiry, look to reduce the administrative burden of PAYE and possibly enhance the reward for your staff both now and in the future.
For further information on how to save tax on employing people, please email tax@streetsweb.co.uk
