Employment Taxes Round Robin

Jamie Roberts and Campbell Thomas of Deloitte provided an interesting and relevant breakout session which gave a risk-led update on the hot topics in employment taxes:

1. HMRC are continuing to prioritise on-site compliance visits, focusing on process and systems. This can be time-consuming but, it transpires, not uniformly followed through by HMRC to a satisfactory conclusion. Some HEIs have been asked to provide written confirmation at Director level that they are compliant for employment taxes; others have had to complete 50-question ‘fishing exercise’ letters, covering all taxes.
2. Changes to Business Risk Reviews have been piloted, with an expected implementation date of October 2019. There will be a new template, and a risk level awarded for each tax regime. There will now be four risk ratings: Low, Moderate, Moderate-High and High.
3. Compliance with National Minimum Wage legislation continues to be an HMRC priority, with a £27.4m enforcement budget facilitating a comprehensive programme of reviews. Failure to comply with NMW attracts 200% penalties, reduced to 100% if settled within 14 days. Clearly the value of the reputational damage for HEIs is also high, albeit less quantifiable, in this ‘name and shame’ culture (though see Caroline’s article for a recent update on ‘naming and shaming’). The prominence of recent worker status tribunals in also significant.
4. New rules on termination payments will come into effect on 6 April 2020, the most noticeable being the imposition of Class 1A NICs on payments over £30K, in addition to income tax. This is seen as an area in which employers often make errors. Deloitte recommended that Finance departments should lead in educating the business, in particular HR, and making sure the systems are updated to ensure compliance. (Though of course, in some universities, the payroll team sits within HR rather than Finance).
5. There was an update on the EU Posted Workers Directive notification obligations to be met by employers. Deloitte has seen an increase in audit activity in various member states, with four countries imposing financial penalties: Austria, Bulgaria, Italy and Slovakia.
6. IR35 and Employment Status.  There was a warning that the current rules for public sector organisations are likely to be updated in due course when new rules are introduced for the private sector from 1 April 2020.  HMRC’s CEST Tool Version 2 is expected in 2020, to aid determining employment status (which will be complemented by BUFDG’s new weighted flowchart).  Deloitte recommended all organisations compile and maintain a list of all non-payroll agreements for engagements.
7. We were reminded that any changes to PAYE Settlement Agreements (PSAs) need to be filed with HMRC by 5 July. Whilst not mandatory, HMRC would expect most HEIs to have a PSA to deal with the tax implications of the myriad minor, irregular and generally awkward payments made to individuals.