Taxes raised by HMRC relating to employment account for over half the revenue generated by HMRC each year, so it is vital to ensure that your authority is not exposed to any unwelcome surprises. At the same time you should be aware of opportunities to reduce costs.
Whether you are undergoing an employer compliance review by HMRC’s Public Bodies Group or need advice on minimising your risk/reducing costs, we can help through our employment taxes helpline and advisory support.
As well as general PAYE/NIC and benefit in kind reporting, the following issues are typical areas of risk for local authorities:
- Employment status – where workers are paid on a self-employed basis, great care should be taken to ensure that they are neither office holders nor effectively acting as employees and, therefore, subject to potential HMRC challenge. In addition, some IR35 changes are in the pipeline with employers potentially facing new and onerous obligations in relation to their contractual arrangements with personal service companies.
- Termination payments – if an authority makes a payment to an employee on termination of employment, which is free of tax/NIC (in whole or in part), it is important to ensure that the relevant exemptions are correctly applied. Again, legislative changes are on their way, so employers will need to keep informed.
- Salary sacrifice schemes – most local authorities operate salary sacrifice arrangements, e.g. childcare vouchers, cycle to work, etc. However, these are not always implemented correctly and can be subject to challenge. Where dealt with correctly, salary sacrifice schemes also present a great opportunity for local authorities and public bodies to reduce costs.
- Aggregation of earnings – where employees within an authority have more than one job regulations exist that require the employer to aggregate payments for each job for National Insurance purposes. These rules are not always correctly followed which potentially exposes the employer to substantial arrears of NIC.
- Employee expenses – HMRC has very specific rules regarding the claiming of employee expenses and it is important that the relevant rules are applied correctly. The main area of difficulty relates to travel and subsistence expenses. There is a consultation process on-going in this area with legislative changes considered very likely.
- Construction Industry Scheme (CIS) – local authorities and other public bodies are required to operate CIS where their average construction expenditure per annum exceeds £1,000,000. Therefore, authorities need to be aware of all the relevant procedures to avoid any pitfalls.
Employment Taxes team and approach
PSTAX has an ‘all-taxes’ approach to its helpline and advisory services. As a result, all queries and matters requiring a resolution will be considered from an employment taxes perspective. Our highly experienced team of consultants work closely with VAT colleagues to ensure a rounded approach. We work in an open, collaborative and productive manner, while providing an independent and impartial service. Our aim is always to provide value for money.
Employment Tax Forum
We are pleased to announce that Employment Taxes forums will be offered at all locations during 2017/18. Please see our forum page for details of the events planned.
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