| Devolution can have unexpected results and this has been demonstrated over the last few weeks with the problem that has emerged in relation to the changes to Council Tax Attachment of Earnings Orders (CTAEOs) that take effect in April. In 1998, the last time changes were made to the tables of earnings bands that determine deductions for council tax orders, joint regulations were issued covering England and Wales, allowing one table to cover both. This time regulations to amend the Council Tax (Administration and Enforcement) Regulations 1992 were laid, but just relating to England, raising the prospect of employers having to ascertain if the order was Welsh or English and select the correct table to use. However, draft regulations have now been published by the Welsh Assembly (The Council Tax (Administration and Enforcement) (Amendment) (Wales) Regulations 2007), that will also come into force on 1 April 2007 and relate to all new orders made after that date. So all is well you might say… it would be if there hadn’t been a typing error relating to the deductions for weekly earnings in the English regulations. This means we are back to the original position of potentially having two tables in use from 1 April, one for England and one for Wales. The Department of Communities and Local Government, who are responsible for the English rules, hope to lay amending regulations in time to bring the two back in line. As most payroll software developers will have worked to the draft tables that were error free we sincerely hope for all parties that they do! | | Maybe it's just a matter of perception, but the reduction in the advisory fuel rates announced by HM Revenue & Customs (HMRC), which take effect from 1 February, seems to have happened much faster than the corresponding increase that took effect last July. The new rates are as follows:
| Engine size | Petrol | Diesel | LPG | | 1400cc or less | 9p | 9p | 6p | | 1401cc - 2000cc | 11p | 9p | 7p | | Over 2000cc | 16p | 12p | 10p | Advisory fuel rates, allow employers which use them certainty about the tax and NICs impact of adopting such amounts when:
• reimbursing employees for business travel in company cars; and
• setting reimbursement rates for the cost of company fuel used by employees for private travel. However, the advisory rates cannot be used by employees as a basis to claim tax relief if their employer pays them less than these rates. Tax relief claims must be based on actual costs incurred by the driver. | Back to top | As the pension crisis continues employers are constantly looking for ways to reduce their ongoing liabilities, particular in relation to final salary (defined benefit) pension schemes. As a result employees have been offered inducements to forego some of their promised benefits or to agree to the transfer to a money purchase (defined contribution) schemes. HMRC have not been consistent in their advice to employers as to the tax and National Insurance treatment of such inducements, but have now published new guidance following further legal advice. There are two types of inducement to consider: • The enhancement to a transfer value when a fund is moved between schemes.
• A cash sum paid to the scheme member. Enhanced transfer values simply count as an employer’s contribution to a registered pension scheme in respect of tax and NI, but cash payments to scheme members are now to be treated as earnings and will be subject to both tax and Class 1 NICs. Payments made before the 24 January (the date of announcement) or agreed with HMRC as tax and NI free and in the process of being paid, do not need to be reviewed, but going forward the correct treatment should be applied. For further information see www.hmrc.gov.uk/pensionschemes/draft-announcement.htm | Back to top | From April this year Retirement Annuity Contracts (RACs), essentially individual pension arrangements that preceded stakeholder and personal pensions, will be taxed through PAYE. Although no new RACs could be taken out after 1988 you can still pay into them and the income that is paid out has, until now, not been subject to PAYE in the same way as a company or stakeholder pension. The current scheme deducts basic rate from payments, which means that many pensioners are over taxed and have to seek refunds.
Over the last year HM Revenue & Customs (HMRC) have been in touch with RAC providers to gather data on annuitants to match with their own records to try to get their PAYE coding right. These codes are now going out from a central unit in Leicester.
There has been some feedback that the early codes that have been issued may not be correct and given that those receiving the code and accompanying information may be elderly they may struggle to understand the make up of the code.
HMRC have set up a helpline based in Leicester on 0845 366 7868 which, as you can imagine, is very busy at present. Therefore you may well get queries from your own company penisoners who are looking for assistance in deciphering their new code. If they prefer to write to query their coding the address is: RACS, Leics and Northants LPO, Saxon House, 1 Causeway Lane, Leicester LE1 4AE. | Back to top | The default fund could be the perfect way to improve the investment choices in defined contribution schemes, experts have advised Engaged Investor magazine. Improving DC investments has been a hot topic recently, as many more DC schemes are opened, but few yet match the generous level of provision defined benefit arrangements offer. Many have suggested DC providers should start looking at alternative investments, such as hedge funds, or extending the range of equity funds they offer to include emerging market funds. But research suggests too much choice is a turn-off and leaves many members making no choice at all. Ian Richards, head of DC at Legal & General Investment Management, believes it is time to make the most of what you have. “The default fund in a DC scheme is often maligned but if this is the fund where most go, especially those that are reluctant to make important investment decisions, then why not take a fresh look at how the default fund is structured?” he says. “Rather than confuse members with complex investment options, widen the range the default fund offers. This could be a good starting place to improving DC investments," he suggests. | Back to top | Softworld HR & Payroll Solutions gives payrollers access to many software providers and all under one roof. The exhibition also includes a seminar programme, with speakers covering topics such as e-HR, employment law and local government payroll. The event takes place at the Novatel, Hammersmith, London, on 21 and 22 February. To register for free go to www.softworld.co.uk/hrp | Back to top | | | |
