The key points from HMRC's December 2021 bulletin

The calendar year may be drawing to a close, but things never truly wind down in the world of payroll! Over the festive period and into the New Year, there are many things that employers need to be aware of; updates are still released thick and fast from the Government and HMRC.

One regular occurrence that continues through the holidays is HMRC’s employer bulletin. As we did with the August edition, our experts have gone through the update with a fine-tooth comb and highlighted all of the vital information you should know.

PAYE

National Insurance contribution increase (Health and Social Care Levy)

As we announced in our blog post “New Health and Social Care Levy set to increase National Insurance Contributions", on 7 September 2021, a 1.25% increase to National Insurance Contributions(NICs) was announced by the Government. Dubbed the "Health and Social Care Levy", this temporary measure will be introduced from April 2022 in a bid to aid the NHS and social care system.

From April 2022, the increase will apply to working-age employees, employers and self-employed people's contributions. Additionally, from April 2023, the Levy will be separated from NICs and apply to earnings of all individuals, including those over State Pension Age. From here, NICs will return to 2021-2022 rates.

What is now clear based on the HMRC December 2021 Employer Bulletin is that employers will be required to include a message on all employees payslips between 6 April 2022 and 5 April 2023 that explains what the funds are being used for. HMRC stipulates that the message should state '1.25% uplift in NICs funds NHS, health & social care.'

For Dataplan clients, we are already aware of this requirement, and the necessary updates are underway to ensure that payslips will be compliant.

National Insurance holiday for employers of veterans

In a previous edition, HMRC advised that from 6 April 2021, employers who employ former members of the UK regular armed forces during the first year of their civilian employment would be eligible for a zero rate of secondary NICs for up to 12 months. This would mean a potential £5,000 saving for the employer.

Additionally, earnings of qualifying veterans will be eligible for NIC relief retrospectively if they were employed from 6 April 2021. The way that this works in practice is that employers must continue to pay their NICs as usual until the new tax year from April 2022. From here, they will be able to claim qualifying contributions relief through a revised Full Payment Submission (FPS) which will show the newly introduced NI category letter 'V'.

Dataplan is pleased to confirm that we will process the relief claims on behalf of our payroll clients. For employers using another provider or software, if this functionality is not supported, HMRC advises that you write to them. From the 2022 to 2023 tax year onwards, relief will be applicable through Real Time Information (RTI) as usual with the 'V' category letter.

It is important to note that employers are obliged to keep records that prove a qualifying veteran has been hired, such as their veteran's ID card or discharge papers, as this may be required at a later date.

A reminder about reporting benefits and expenses in real-time

A reminder has been issued to register for payrolling before the deadline of 6 April 2022 for the 2022 to 2023 tax year. By signing up for payrolling, employees can pay the tax due on their benefits and expenses they receive in their pay. You will then be able to show each employee how much tax they have paid for these benefits and expenses; additionally, P11D returns will not be required to be submitted for almost all Benefits in Kind (BIKs).

Again, Dataplan is pleased to handle this process on behalf of our clients who choose to take advantage of it.

Employers using category M National Insurance and nominal data

Issues have been identified around using the 'M' category letter and nominal data being used. HMRC have issued a reminder that category M no longer applies once an employee reaches the age of 21, and it is their age at the time of payment, not over the whole tax month, that determines this.

Additionally, it has been highlighted that many employers use 'nominal' dates of birth rather than actual dates of birth. We have commonly encountered this at Dataplan when a new employee has started, and DOB hasn't been confirmed yet, and then it is never updated. Having the wrong DOB on record can cause problems with the payroll.

It is advised that employers review DOB information now to ensure there are no errors. For Dataplan clients, we request that errors be reported to your payroll contacts as soon as possible to be rectified.

Electronic payment deadline falls on a weekend

Another important reminder issued in the update is that in January 2022, the electronic payment deadline of the 22nd will fall on a weekend (Saturday). Therefore, to ensure that payments reach HMRC in time, funds must have cleared into their bank account by 21 January, except in circumstances where you can arrange a Faster Payment.

Late payments may incur a penalty charge, so it is important to check with your bank what date payment would need to be sent to meet the deadline. For Dataplan clients, please liaise with your payroll contacts to ensure payments are approved and sent in good time.

Reporting PAYE information in real-time when payments are made early at Christmas

Many employers choose to pay their staff early over the Christmas period. Therefore, HMRC has issued a reminder to report your regular (or contractual) payday as the payment date on your FPS, which should also be submitted before this date.

In practical terms, this means that if you planned to pay your employees on 17 December 2021, but your normal pay date would have been 31 December 2021, you should still report the pay date as 31 December on the FPS and make the submission on or before 31 December.

This is important, as reporting the payday wrong can impact employees' benefit entitlements.

Tax updates and changes to guidance

Employment status guidance for Associate Dentists to be withdrawn with effect from 6 April 2023

HMRC has given notification that from 6 April 2023, the Employment Status Manual (ESM) will be updated. As a result, specific guidance for Associate Dentists will be removed (ESM4030).

This means that where a contract runs from or over 6 April 2023, Associate Dentists and their engagers will not be able to rely on ESM4030 to check employment status for tax and NIC for that contract. HMRC states that updates to their general Employment Status Manual and the recently released Check Employment Status for Tax (CEST) tool mean traditional guidance is no longer needed.

Whilst the rules have not changed, it is now being advised to use the CEST tool to determine employment status for tax and NIC. ESM4030 can still be used until 6 April 2023.

General information and customer support

HMRC’s support for customers who need extra help

Whilst regular updates are released, there is sometimes still a requirement for extra support. HMRC’s principles of support for customers who need extra help state their commitment to supporting customers and underpin their HMRC charter.

Information on how to access help available can be found on the gov.UK website.