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Institute of Payroll and Pensions Management

The payroll function is long established, but as a profession, payroll is still relatively young. Very much like the development of personnel administration in the 1980s into a strategic function called Human Resources, payroll is moving from a substantially administrative function into a higher order organisational role.

Much of this shift is attributed to the ever increasing and complex tax legislation, coupled with government moving the burden of collection onto the employer. The Institute of Payroll and Pensions Management (IPPM) has been working closely with key government departments for a number of years, representing its members' interests and influencing how new legislation is best applied from employers' perspectives.

Here are some forthcoming changes, which your payroll function will be implementing in the near future:

HMRC to make life easier for business

The Chancellor announced in his 2006 budget that he has asked Sir David Varney, Chairman HM Revenue and Customs, to head up a new initiative to improve relationships with businesses. Sir David has since set up an Administrative Burden Advisory Board; this Board will oversee the work and help identify the processes. IPPM has been invited to work with HMRC on this new forum.

New targets have been set for HMRC to:

• Reduce the administrative burden on business of dealing with HMRC forms and returns by at least 10 per cent over a five year period;
• Reduce the administrative burden on business dealing with HMRC's audits and inspections by a further 10 per cent over three years and at least 15 per cent over five years.

The longer-term vision is that business will:

• Only provide information once;
• Spend less time on inspections;
• Have a single point of contact with HMRC;
• Have a range of flexible payment options;
• Benefit from clear and targeted support, education, and guidance at the time they need it most.

Working with the new Advisory Board and in consultation more widely, HMRC will identify priority areas of the tax system for streamlining and modernisation.

The full report can be found at: http://www.hmrc.gov.uk/budget2006/new-relationship.pdf

PAYE and NICs alignment

The Chancellor announced in his budget speech that a consultation would take place later in the year to discuss the complexities of national insurance compared to the legislation surrounding income tax.

Payroll professionals have reported many times in the past that national insurance is far more complex to administer than income tax. Together with the British Chambers of Commerce, IPPM has been lobbying strongly for this consultation and hopes to be invited to participate in future forums.

This is a very important announcement as it could lead the way to major changes in tax and national insurance legislation.

Lord Carter report

Lord Carter has recommended that all UK businesses that are “IT literate” should be corresponding with HMRC electronically by 2012.

In his previous report it was made mandatory for large employers to file their PAYE year-end returns electronically from 6th April 2005, and medium employers from 6th April 2006. However, it doesn't stop there; Lord Carter's latest report also makes mandatory in-year filing to be phased in for employers from 2008. In-year filing is operations such as tax code information, which includes P45s and P46s.

Lord Carter has stated that these measures will only be implemented providing sufficient time has been allowed for testing, and that HMRC can assure businesses that their systems are robust.

VAT & Mileage EU ruling

After yet another EU ruling, legislation now makes mandatory the requirement for businesses to have receipts for fuel purchased by an employee, in order that they can reclaim VAT on mileage payments. HMRC recognise that the receipt is unlikely to match the payment made to the employee and therefore will take this into consideration should a receipt be requested during a VAT inspection.

The legislation does not stipulate how or where receipts should be stored by business; therefore, they would not necessarily have to be kept with the claim. Bearing in mind that VAT receipts will not have registration numbers attached, employers might well consider that date order is the most acceptable method of storage.

HMRC has published an information sheet on this subject, which can be found at: http://customs.hmrc.gov.uk/ channelsPortalWebApp/channelsPortal WebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&propertyType =document&columns=1&id=HMCE_P ROD1_024938

Low Pay Commission report (LPC)

The Chancellor has accepted the LPC report which can be found on the above website address.

New National Minimum Wage (NMW) rates have been announced which will come into force on 1st October 2006. Details can be found at: http://www.dti.gov.uk/er/nmw/.

The LPC has reported that they do not recommend salary sacrifice schemes to be offset with NMW. This means that employers will not be able to permit anyone to a salary sacrifice scheme where the amount sacrificed will take him or her below the NMW.

The tax and NICs relief for childcare vouchers have been increased from £50 per week to £55 per week from 6th April 2006.

Further information can be found at: http://www.lowpay.gov.uk/lowpay/report/pdf/2006_Min_Wage.pdf

Mobile phones

The budget report also states that tax exemption on mobile phones is refocused to deliver on the objectives; only one tax-free mobile phone per employee is allowed for private use. It has been confirmed that Blackberries and PDAs will be viewed as computer equipment rather than as mobile phones, unless the device is some years old and was bought primarily as a mobile phone.

 

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