The Institute of Pension and Payroll Management (IPPM) has a saying developed and used by its members: “We do not simply do payroll, because payroll is not simple”. Recent the Inland Revenue has introduced major changes which affect payroll and include legislation covering extended maternity leave, new paternity leave and payment rules, student loan repayments and many more.
Any company offering Stakeholder Pensions to its employees needs to be aware of the rules governing the application of pension through payroll.
Payroll becomes a juggle of paying employees, understanding the legislation and how to apply it and then ensuring compliance with the PAYE and National Insurance audit groups.
Over the next few years there will continue to be changes in legislation applicable through payroll. The IPPM and other organizations constantly lobby the government departments to ensure that new laws do not make the job of the payroll managers more and more difficult. The IR is in the process of introducing electronic filing which should make a big difference at the end of the tax year, especially to large organizations, but also throughout the year when form will be downloaded and returned electronically. All organizations will be expected to file paperwork and to pay the Inland Revenue electronically. This will be phased in with large organizations initially and smaller ones by 2008.
One major change recently has been the increase of National Insurance contributions. Not only has the percentage increased but the upper limit 1% has replied in most people paying more NI. National Insurance does not only apply to the gross pay provided for employees but also to many employee benefits. A number of companies have been taken out by this change because it complicates the completion of P11Ds, often produced along payroll.
It sometimes seems that the Inland Revenue takes delight in finding ways to compleate tax and benefit legislation and there are some of these that catch out smaller companies.
The problem is that any of these should be picked up in a PAYE or National Insurance Audit, the company is liable for payment, rather than the employee.
Here are some examples: –
o Any amount of money paid to the employee, except where it is expressly for business expenditure, is liable for tax and national insurance and should be paid through the salary.
o If the company gifts an employee with virtually anything, the value is liable for tax and national insurance.
o Unfortunately paying the costs of employee's business mobile phone is no longer seen as a benefit but any home phone paid by the company is a benefit in kind.
o Any fuel for private mileage paid by the company is a benefit and is liable for Tax and National Insurance.
All businesses need to ensure that the payroll and benefits are handled by a competent person, or otherwise outsourced to the accountant or a payroll bureau. Payroll bureaus can be expensive, but they do not need to be so it is best to shop around. It is no longer necessary to do a manual payroll although surprisingly large numbers of companies do just that. There is excellent and reasonably priced software, both for payroll and P11ds but in buying software, do ensure that the Inland Revenue has approved it and that it is supported, improved and updated every year. Administrative or payroll staff who have some knowledge of the PAYE and NI legislation are invaluable to an organization.
Payroll is seldom simple but it is vital to every business. Ask the employees! If the payroll is a day late everyone knows about it!