Happy New (Tax) Year!

How will the start of tax year 2017 affect organisational payroll and legislative change?

The start of a new tax year has come around again, and we can all look forward to the challenges the new year presents.

This time around, Apprenticeship Levy will be the main focus for many employers. However the changes to Salary Sacrifice (or Optional Remuneration as HMRC insist on calling it) will often be more problematic, especially for employers making extensive use of such arrangements.

Once set up, the Apprenticeship Levy will in the main be handled automatically by payroll systems (certainly in the case of our iTrent users). You will need to decide whether you’re entitled to the £15,000 allowance, though, and how to apportion it if you have multiple PAYE schemes.

Salary Sacrifice (or Optional Remuneration, if you prefer) will be a problem if you use these arrangements for benefits other than those which HMRC have left alone (pensions and pensions advice, employer-supported childcare, cycle to work schemes and Ultra Low Emission cars). The effect of the change is that when it comes to non-exempt benefits, the tax advantages are removed from employees, and employers lose the NI advantages.

The changes affect new entrants into salary sacrifice immediately, but there’s a transitional period for those in existing arrangements. The length of which depends on the nature of the benefit you’re providing. In theory you ought to have prepared for this in advance, but the fact that HMRC didn’t issue any guidance until the 20th of March might have made this somewhat difficult!

If you’re in the public sector you also have to cope with the changes to “off-payroll working” (another new phrase to get used to), which means you have to treat certain contractors as though they were employees for tax and NI purposes. The main difficulty here is deciding who’s affected, though HMRC have made an online tool available to help with this decision.