Umesh Modi: PAYE - The Basics

Umesh Modi of Silver Levene/Modiplus+If you have employees you are required to operate a Pay-As-You-Earn scheme, to deduct income tax and national insurance contributions from their salary and to pay it over to H M Revenue & Customs (HMRC). 

The tax is calculated according to the amount of tax-free income available to the employee and this is notified to the employer in a tax code, which is issued to each employee by HMRC according to his or her circumstances. National Insurance contributions are calculated by reference to published tables.

PAYE must be operated if the employee’s salary reaches the national insurance lower earnings limit - £102, per week, £442 per month or £5,304 per year for 2011/12.

Getting started

To operate PAYE you will need to register as an employer – this can be done online or by calling the New Employer Helpline (0845 60 70 143) and once registered you will receive a scheme reference.

Operating a payroll

Whether you use payroll software or keep records manually, the following forms will be relevant to you:

• Forms P9T, P9X and P7X – notices of coding: HMRC will issue each employee with a tax code, at the start of the tax year and during the year if circumstances change. Income tax is calculated in accordance with the tax code.

• Form P11 – employee deductions sheet: each time you pay an employee you  record the pay and deductions here.

Each time you pay your employees you must give them a pay statement – such as a payslip – showing the gross pay, the deductions and the net pay.

What payments does PAYE apply to?

PAYE is applied to all payments received by an employee including:

• Salary
• Overtime, shift pay and tips
• Bonuses and commission
• Expense allowances paid in cash
• Statutory Sick Pay and Statutory Maternity (Paternity or Adoption) Pay
• Payments on termination of employment (unless exempt from tax)
• Certain non-cash items such as vouchers.

Paying HMRC

Amounts deducted each month must be paid over to HMRC by the 19^th of the following month or by the 22^nd if you make electronic payment, although small schemes are able to pay quarterly.

At the end of the tax year

At the end of each tax year, you are required to:

• Submit a form P14 for each employee showing the deductions for each employee in the year
• Submit a form P35 – employer’s annual return: this shows the total deductions in the year and is submitted to HMRC by 19^th May after the end of the tax year. Most employers are now required to complete this online, in which case the online submission of the P14s generates the P35.
• Give all employees a form P60 for their records by 1^st June following the end of the tax year – this must be in paper format

If an employee has received any expense payments or benefits in kind during a tax year, then you must submit a form P11D (or P9D if the employee earns less than £8,500 per annum), showing the value of the expenses and benefits received. The form must be submitted by 6^th July following the end of the tax year. Class 1A national insurance contributions are payable on the value of certain benefits and payment is due on the same date.

Leavers/joiners

When you take on a new employee, who has had a previous job (or who has been on benefits), he or she should provide you with a form P45, which will show the tax code and earnings since the previous 6 April. This enables you to operate the correct code when you pay the employee.

If the employee has no P45, then you must complete a form P46 for the employee to establish the correct code.

When an employee leaves, then you in turn provide a form P45 with the employee’s details which is then given to a new employer.

Forms P45 and P46 are now generally completed and submitted online.

Forms and guidance is available at www.hmrc.gov.uk/paye. 

Krystyna Knight, of Silver Levene provided research for this article.

Disclaimer: This article is written for general guidance only and should not be relied upon by any person without the written consent of Silver Levene. Always take specific advice before committing to any particular action or actions.

Umesh Modi BA ACA, is a Chartered Accountant and Tax Advisor, and a partner at Silver Levene (Incorporating Modiplus+). He can be contacted on 020 7383 3200 or umesh.modi@silverlevene.co.uk.

Small businesses missing out through online marketing overload

Small businesses are being overwhelmed by the number of digital marketing channels now available to them writes Benjamin Hammond, Pharmacy Expert Editor. In a recent survey, 79% of respondents felt that they weren’t making full use of the online marketing channels available to them. 

With customer attention becoming ever more fragmented, it’s harder than ever for small businesses to make the best use of the different online channels with the limited resources they have available.

In the last few years the choice of digital direct marketing channels has exploded, with Facebook, Twitter, LinkedIn, SMS, mobile and email marketing all having a role to play, not to many more niche channels that are now available.

Different customers prefer different channels and different messages suit different mediums - but managing such a large range of options demands more time from business owners, leaving many unable to benefit from the full potential that an integrated marketing approach can provide.

Sign-Up.to, who carried out the survey and research, provide an online marketing platform which enables business owners to manage email, mobile, Facebook and Twitter marketing from a single login.

Matt McNeill, CEO of Sign-Up.to said: "We’ve seen the opportunities for businesses to engage with their customers online grow dramatically in the last few years, but this has demanded more time and resources from marketers - something that’s often hard to find in the current economic climate. We wanted to make it easy for small businesses to be able to reap the benefits from using multiple online marketing channels in an integrated way, so we’ve invested heavily in producing what we think is the simplest, most accountable way for them to do that."

You can find more details about the service and sign up for a free 14 day trial of the service by following this link.

Guidance on the National Minimum Wage and work experience

For more information contact Benjamin Hammond, Pharmacy Expert EditorEarlier this year, the Low Pay Commission reported that there was continuing evidence of breaches of the National Minimum Wage (NMW) Regulations with regard to young people doing work experience. It recommended that the Government take steps to promote a better understanding of when a legitimate unpaid work experience opportunity becomes a work placement that should be paid at least the NMW and that stronger enforcement action should be taken when the rules are broken.

The Government has now issued guidance for employers on the payment of the NMW for interns and for those on work placements or carrying out work experience. Whether or not someone is a worker and is therefore entitled to be paid the NMW will depend on the particular arrangements in place. The guidance, which can be found at www.businesslink.gov.uk/nmw, includes a new worker checklist and examples of case studies to help determine the person’s employment status.

Employers are reminded that new rates for the NMW come into force on 1 October 2011.

The revised rates are as follows:

The adult hourly rate of the NMW will increase from £5.93 to £6.08;

The development rate (which covers workers aged 18-20 years) will increase from £4.92 to £4.98; and

The rate for workers aged 16 and 17 will increase from £3.64 to £3.68.

The apprentice rate, for apprentices under 19 or those aged 19 or over and in the first year of their apprenticeship, will increase from £2.50 to £2.60 per hour.

From 1 October 2011, the accommodation offset will rise from £4.61 per day to £4.73.

New regime for reporting Health and Safety incidents

For more information contact Benjamin Hammond, Pharmacy Expert EditorA new system for reporting workplace health and safety incidents came into effect this week.

In future, only fatal and major injuries and incidents should be reported by telephone to the Health and Saf ety Executive (HSE). All other work-related injuries and incidents reportable under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR) must be notified using one of seven online forms available on the HSE website.

In addition, the HSE’s Infoline telephone service, which currently provides a basic information service to callers, will end on 30 September. After that date, those seeking information and official guidance on health and safety issues will be directed to the HSE website. This contains a large amount of free information on health and safety as well as resources and interactive web tools that can be downloaded free of charge.

Further information on the changes can be found at http://www.hse.gov.uk/press/2011/hse-iccqa.htm.

There is no change to the system for making a complaint about health and safety in the workplace. Information on how to do this can be found at http://www.hse.gov.uk/contact/workplace-complaints.htm.

Locum Focus: Agency Workers Regulations? ‘Never heard of them’ say 51% of contractors

There’s less than a month to go before the Agency Workers Regulations (AWR) come into force on 1 October 2011, yet over half of contractors admit they’ve never heard of them writes Benjamin Hammond, Pharmacy Expert Editor. This is according to a recent survey, which also reveals that a shocking 88% of contractors who work via an agency have not been told about AWR.

“Considering the impact that AWR could have on a contractor’s career and livelihood, this lack of knowledge is worrying,” says Dave Chaplin, CEO of ContractorCalculator. “We also found that 32% of contractors intend to carry on as before post-1 October because they believe the regulations won’t apply to them, which for many simply won’t be the case.” According to government guidance, genuine limited company contractors are not intended to be the targets of AWR but umbrella company contractors are considered to be automatically in-scope.

“The lack of engagement by clients and recruiters is also cause for concern, particularly for umbrella company contractors,” continues Chaplin. “93% per cent of umbrella contractors participating in the survey contract via an agency and of these 89% say their agent has not broached the topic of AWR. With clients, the figure rises to 97%: only three in a hundred clients have engaged with their umbrella contractors about AWR.”

But despite over half of them claiming no knowledge of the regulations, many contractors are planning to take action. Chaplin explains: “We asked contractors if they planned to find out more about AWR and 84% said ‘yes’.”

These good intentions notwithstanding, Chaplin is concerned about the lack of agency and client information. In response for the survey’s request for any further thoughts, one contractor’s words were: “My client … seems completely oblivious to the implications of AWR. My agency has still not offered any guidance and told me since our contract is ‘IR35-friendly’, I don’t need to worry.”

“Keeping quiet could be a deliberate tactic by recruiters and clients because contractors unaware of their rights under AWR won’t be making claims for them,” warns Chaplin. “Alternatively, recruiters and clients might be making the right call waiting to see what the courts say about who is in scope once the regulations come into force.”

If you are a locum who finds work through an agency, then the AWR may affect you. If you need to ask a question then send us an e-mail.