Useful Payroll Information

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 How to apply for National Insurance deferment

In order to apply for NI deferment you must be either:

If this is the case, you can apply for a deferment to prevent overpaying NI. A deferment can only be issued one tax year at a time. If the deferment is granted, you will still have to pay NIC Class 1 at 1% on all earnings above the earnings threshold on all deferred employments.

To apply for a NI deferment you will need to fill out a different form depending on whether you are deferring NIC Class 1 or Class 2/Class 4. Send the completed form to the HM Revenue and Customs Deferment Services as soon as possible before the start of the tax year you want to defer payments on.

If you do not make a deferment and as a result make an overpayment (in excess of the annual maximum), you can apply for a refund. Write to:


HM Revenue & Customs
National Insurance Contributions Office
Refunds Group
Longbenton
Newcastle Upon Tyne
NE98 1ZZ

Remember to include your National Insurance number and details of your overpayment.

For forms and further guidance, please click the link below:
http://www.hmrc.gov.uk/nic/deferment.htm
  

Cycle to Work Scheme


In order to promote a healthier lifestyle and help reduce environmental pollution, the Cycle to Work scheme was introduced. An employer can benefit from annual tax exemption, in accordance with the Finance Act (1999), as they can loan bikes and safety equipment to employees as a tax-free benefit.

Who is eligible?
Any company, big or small, in public, private or voluntary sectors, are eligible for the scheme. The broader the participation throughout the company, the more a company can benefit. To qualify for tax exemption, bikes and safety equipment must be available to employees generally and not be limited to directors or those working in certain departments for example.

What equipment is included under the scheme?
The tax exemption defines a bike as: ‘a bicycle, a tricycle, or a cycle having four or more wheels, not being in any case a motor vehicle’ (192[1] of Road Traffic Act 1988 [c.52])
 
The safety equipment includes:
 


It is an employer’s choice as to what safety equipment is included, but it is best to confirm with the tax inspector. There is no limit on the total value of safety equipment, including the bike.

It is possible to loan two bikes per employee e.g. if the employee requires a bike for either end of their train journey. In order to encourage participation in the scheme, consider providing facilities at work such as cycle racks, lockers and showers.

Scope of Tax Exemption
To qualify for tax exemption, the scheme must meet certain conditions:

Setting up a scheme
To take advantage of tax exemption and Class A NIC exemption, an employer can buy a bike and relevant safety equipment, reclaim VAT, use capital allowances and loan the bike and its equipment to an employee for qualifying journeys to work. This way, the employee’s salary arrangements are unaffected.

However, if an employer wants to recover the costs of the bike etc, this can be done through salary sacrifice.

Can an employee keep the bike at the end of the loan period?
An employee has no automatic right to keep the bike, unless it is otherwise stated in the original agreement between the employer and the employee.

However, an employer can give the option for the employee to purchase the bike and equipment. Typically, the price is lower than the original value, but to prevent taxable benefit in kind because of the change in ownership, the price must be the fair market value.

Alternatively, an employer can let the employee use the equipment and bike after the loan period ends, as long as the conditions continue to be met. In this case, the ownership of the bike and equipment is not transferred.

Mileage Allowances
An employee who is considering joining the Cycle To Work scheme, but wants to use their own bike, can claim 20p per mile, tax free, for business miles, as opposed to having a bike loaned to them.

An employee who has had a bike loaned to them CANNOT claim mileage allowances.

For more information: http://www.dft.gov.uk/pgr/sustainable/cycling/cycletoworkschemeimplementat5732?page=1

or

http://www.dft.gov.uk/pgr/sustainable/cycling/coll_cycletoworkschemeimplementa/etoworkschemeimplementat5733.pdf (opens a PDF document)

Applying for an National Insurance number

If you are a British citizen, an NI number will automatically be issued to you before your 16th birthday. However, if you have moved to the UK you will need to apply for an NI number.

You need to apply for an NI number if:

You will also need one if you are claiming benefits. If this is the case, you can apply for one via the claims process.

To apply for an NI number, call 0845 600 0643 (Mon-Fri, 8am-6pm). Jobcentre Plus will check if you need an NI number or if you already have an NI number.

They will then arrange an Evidence of Identity interview. This will involve checking who you are, your eligibility to work in the UK, why you want an NI number and your background and circumstances. You will need to bring along documents to prove your identity. At the end of the interview, you will be asked to sign an NI number form.

Following the interview, you will be contacted and informed as to whether you have been successful or not.

If you have lost your NI number:

Look at your P60, payslip, annual tax return or any other official correspondence from the Revenue. Your NI number should be present on any of this documents.

Remember, your NI number always remains the same throughout your life.

If you cannot find it, contact your local jobcentre or the HMRC NIC office and they will be able to help you on what to do next or your employer can send an NI Number tracing form to HMRC.

If you have lost your NI card:

Inform your Jobcentre immediately. They will tell you to fill out an application form for a replacement. You will only be allowed ONE replacement card. 

Childcare Vouchers

What are childcare vouchers?

Childcare vouchers are an employee benefit and are part of the government’s work-life balance scheme, supported by HM Revenue & Customs. The vouchers pay for a variety of childcare, such as nannies, au pairs, crèches and nurseries, out of school clubs, holiday clubs, activity clubs and qualifying childcare offered by schools.

Who is eligible for the vouchers?

The vouchers are available for all eligible working parents, providing that the employer registers with a childcare voucher scheme. The parents can only claim vouchers for a child until the 1st September following the child’s 15th birthday or until 1st September following the child’s 16th birthday if the child is disabled.

Who pays for them?

There are two ways in which childcare vouchers are paid for. An employer may offer the vouchers on top of an employee’s salary. This will be exempt from tax and National Insurance as long as certain conditions are met. No tax or NI will be deducted from the first £55 per week or £243 per month.

The other way, in which they are paid for, is that an employee will take a reduction in pay, known as a salary sacrifice. The maximum the salary sacrifice can be is £243 per month. This can affect any tax credits and/or benefits that an employee may receive. However, if the employee is on SMP, they cannot receive vouchers through salary sacrifice.

An employer can save up to £373 per employee, per year via reduced NIC if they offer childcare vouchers on top of an employee’s salary.

How are childcare vouchers issued?

The vouchers are issued by a childcare voucher provider. A childcare voucher provider is usually who a company sets up their childcare scheme with. The vouchers can be either issued in paper form or electronically.

The vouchers do not have to be used immediately. Many working parents save them and use them to pay for childcare during the holidays when it becomes more expensive.

The vouchers cannot be backdated and therefore, only a month’s worth of vouchers can be processed each month.

What information does the employer need?

In order to meet tax and NI exemptions, the following information may be needed:

For more information: http://www.hmrc.gov.uk/childcare/ and http://www.direct.gov.uk/en/Parents/Childcare/DG_4016029

Claiming a Tax Refund

There are different procedures depending whether you are claiming for the current tax year or previous tax years.

Current Tax Year
Firstly, you need to explain to your employer’s tax office why you think that you qualify for a tax refund, e.g. you are a student or you no longer work in the UK. They may ask for relevant documents to be sent to them. If the refund is approved, you may get a new tax code and the refund will be included with your wages.

Previous Tax Years
Write to your tax office, explaining why you think you qualify for a tax refund and include documents relevant to your earnings in that tax year such as your P60 or P45. It is also useful to have your employer’s PAYE reference and your National Insurance number ready when you contact the tax office.

The tax office will look into your query, work out how much you are owed and refund you via post.

IMPORTANT:
You have until 31 January, FIVE YEARS after the end of the tax year in which the overpayment was made, e.g. A claim for tax year 2003/2004, in which the tax year ended on 5th April 2004, needs to be claimed by 31st January 2010.

Useful Tips:


Source: http://www.hmrc.gov.uk/incometax/overpaid-thro-job.htm

 

What does "Week 1/Month 1 basis" mean on a tax code?

If your tax code is on a week1/month1 basis it means that when your pay is calculated, any previous pay you have received and any tax you have paid are not taken into consideration.

Normally, tax is calculated on a "Cumulative basis" which means that each month/week you receive an extra month/weeks worth of freepay and 20% tax bracket allowances and these are added to all all the previous allowances you have received for each pay run since the beginning of the tax year on 6th April. All your pay is added together from that date too and the tax due is then calculated. Then the tax that you have already paid is deducted and what is outstanding is then taken from the current payroll. This means that the tax is always correcting itself to make sure you don't over or under pay tax by the end of the financial year.

This does not happen on a week1/month1 basis. This could be for many reasons, one being that you have underpaid tax earlier in the financial year and HMRC have increased you code to allow for this. The week1/month1 basis will prevent you paying back the underpayment in one lump and allow you to spread it over the remaining payrolls for that financial year.