UK: August HMRC Updates

Coronavirus Job Retention Scheme (CJRS)

The deadline for CJRS claims for July is Monday 16th August 2021. The UK Government will pay 70% of employees’ normal wages for hours not worked in July, up to a limit of £2,187.50. In August and September, this reduces to 60% of employees’ normal wages up to a limit of £1,875. Employers need to pay the difference, so that they can continue to pay furloughed employees at least 80% of their normal wages for the hours they do not work, up to a limit of £2,500 a month.

To make it simpler for employers to add employee details to the CJRS claims, templates are available from HMRC if an employer is claiming for between 16 to 99 employees, or for 100 or more employees. Please note, the template file types have changed. Templates must now be submitted as .xlsx or .csv files. Using another file type will result in an error message and the file will not be accepted.

Find everything needed to help make a claim here, including the updated templates.

Coronavirus and Social Security Coordination With the EU

If an employer has employees who normally work in the UK, the EU, or both, and their work location has changed temporarily because of COVID-19 related travel restrictions, HMRC can consider their individual circumstances, including where they normally work, to decide whether National Insurance contributions are due in the UK.

If employers or their employees need proof that they have to pay UK National Insurance contributions, they should apply for a certificate using one of the appropriate forms, providing details of the COVID-19 related restrictions that apply. These forms can be found here.

Arrangements with the EU, which allow HMRC to disregard changes to individuals’ work locations caused solely by COVID-19 related restrictions, will end no later than the end of December 2021. HMRC will continue to review this approach in light of COVID-19 developments and provide an update earlier if necessary.

Student Loan Types

Following changes introduced in April 2021, there are now four types of student loans collected through Pay As You Earn and the Self-Assessment System:

• Plan 1
• Plan 2
• Plan 4 (introduced from April 2021, more information can be found here)
• Postgraduate loans

Each loan and plan type have different thresholds and, in some instances, rates for calculating student loan deductions. If an employer applies the wrong student and/or postgraduate loan type this will impact the employee’s take home pay and could result in the employee paying more interest to the Student Loans Company.

It is important that employers:

• Check their online account for either student loan or postgraduate loan, or both, start and stop notices
• Let HMRC know immediately if their email or correspondence address has changed
• Take the correct action to start student and/or postgraduate loan deductions as soon as possible
• Record the deductions correctly on their Full Payment Submission

In doing so, this will ensure that their employee does not pay any more or less than necessary. More information can be found here.

Informal Payrolling of Benefits in Kind

HMRC will only accept new informal payrolling arrangements for benefits in kind during the 2021 to 2022 tax year. Businesses who previously had an informal payrolling arrangement are expected to register for formal payrolling before April 2022 for the 2022 to 2023 tax year. This is because informal arrangements can only be in place for a maximum of one tax year.

Off-Payroll Working Rules (IR35) Support

Since the off-payroll working rules changed on 6th April 2021, HMRC have been continuing to provide new resources to help employers understand and comply with the rules.

Building on HMRC’s previous Employer Bulletin, the below highlights some further resources that employers may find useful:

• A new YouTube video outlining the changes for client organisations
• A new webinar on their free, digital, Check Employment Status for Tax (CEST) tool — live webinars have now finished but you can see a recording of the webinar here
• Links directly from certain questions in the CEST tool to their new webchat so employers can talk to an advisor if they are having difficulty answering a question
• Social media to signpost customers to their support, including a post summarising their support available on international supply chains, which includes links to flow charts for organisations and contractors who need to understand the offshore aspects of the rules

Off-Payroll (IR35) Contracted Out Services

The off-payroll working rules (commonly known as IR35) changed on 6th April 2021. You can find more information about these changes, including who the rules apply to, here.

In some instances, arrangements are being put in place that mean some client organisations would no longer be responsible for considering the off-payroll working rules. These may be labelled as ‘contracted out services’ or ‘statement of works’. It is important that employers fully consider any arrangements they enter into in response to the off-payroll working rules changing. Be especially cautious of any that claim you do not need to consider the off-payroll working rules.

Are You the Client Organisation Responsible for Considering the Off-Payroll Rules?

Employers must consider the off-payroll working rules for all workers (contractors) they engage who work through their own limited company (often known as a personal service company) or other intermediary, if they are a:

• medium or large sized client organisation outside of the public sector
• client organisation of any size inside the public sector

The client is the person who the worker (or contractor) performs services for. In most supply chains it will be obvious who the client is. In some cases, organisations may decide to contract out activities to another organisation, often called a ‘service provider’.

Where an employer enters into a contract for a genuine service or ‘fully’ contracted out service, they will not be the client for the purposes of the off-payroll working rules. Instead, the client will be the service provider because they are the person the worker is providing their services to — it will likely be the party most akin to the worker’s employer.

Whether a contract is for a fully contracted out service is a question of fact, based upon the commercial reality of the arrangements. Where there is uncertainty as to who the true client is, consideration should be given to the nature of the relevant contracts and working practices.

Employers must make sure that they understand what constitutes a fully contracted out service if they believe you may not be the client responsible for considering the off-payroll working rules, or if they are being asked to agree to these arrangements.

As a first step, HMRC recommend looking critically at the services required, and if it is a supply of labour then it is highly unlikely that the contract represents a fully contracted out service. They would then remain the client for the purposes of the off-payroll working rules. More information can be found here. If the true nature of the service being provided is a supply of labour, then any written terms will not change this fact.

If You Are the Service Provider

If you are a service provider, you should discuss with your customers the scope of the service you provide.

If you are providing a fully contracted out service, then you will be the client for the purposes of the off-payroll working rules unless you are a small organisation outside of the public sector. You must consider the employment status for tax of any workers you supply who work through their own limited company or other intermediary. Your customers may wish to seek assurances from you about how you are applying the rules.

If you are not providing a fully contracted out service, then your customer will be the client for the purposes of the off-payroll working rules. You should inform your customer which of your workers will be providing their services through their own limited company or other intermediary. You should expect to receive a status determination statement for those workers who operate this way if the client finds they are ‘inside the rules’ and, if you pay these workers’ limited company or other intermediary yourself, you will be responsible for operating PAYE. This means you are responsible for deducting Income Tax and employee National Insurance contributions, and paying employer National Insurance contributions and Apprenticeship Levy, if applicable, for any workers that your customer decides are employed for tax purposes for this work.

For more on Covid-19 support for employers and employees, browse the activpayroll latest news page.

If you are interested in doing business in the United Kingdom, find out everything you need to know about payroll, tax, social security, employee benefits, work permits, employment law and more in the activpayroll Guide to Doing Business in the United Kingdom. This is available as a free PDF to download.