Opera 3 Release 2.70.00

HMRC has recently clarified requirements for software vendors to include fraud-prevention details in the VAT Return.

Opera 3 (2.70.00) and Pegasus Scheduler (2.20.20) includes the fraud-prevention changes required by HMRC.

The Employment Allowance is currently claimed by employers to reduce their employers secondary Class 1 NICs bill by up to £3,000.

From 6 April 2020, extra checks are needed to ascertain eligibility. Employers can claim the allowance if their secondary Class 1 NICs liability was less than £100,000 in the prior tax year. Employers whose secondary Class 1 NICs liability was £100,000 or more will not be eligible to claim the allowance.

Because of the change, from the 2020-21 tax year the Employment Allowance is considered to be a type of de minimis state aid because it advantages some businesses over others, which could potentially distort competition and trade within the European Union. This will not apply if the business does not engage in economic activity by putting goods or services on the market.

Businesses must ensure that the £3000 allowance when added to other de minimis state aid received or allocated in the claim year plus the previous two tax years does not exceed the de minimis state aid threshold for the trade sector.

Employers need to reapply for the de minimis state aid Employment Allowance at the start of each tax year.

HMRC will be responsible for ensuring compliance with the de minimis state aid rules.

The Employer Payment Summary (EPS) is used to claim the Employment Allowance.

One of these options on the EPS screen in Payroll must be selected:

• Can't claim

• Stop claiming

• Starting to claim or already claiming for 2020-21.

The trade sector that the de minimis state aid applies to must also be selected (Industrial, Road Transport, Agriculture, Fisheries and aquaculture).

Trade sectors have different de minimis state aid thresholds. An employer can only claim the Employment Allowance if they have at least £3,000 of their de minimis state aid limit for their trade sector remaining. HMRC will offset the allowance claimed against the Employer Class 1 NICs due. Employers must reduce their payment by the amount of allowance they are claiming.

The State aid rules don't apply option must be selected if state aid rules are not relevant to the business.

The Include claim status in EPS option must be selected for the state aid details to be included in the submission. By default the option is not selected.

For details about the Employment Allowance, visit www.gov.uk/employment-allowance.

From 6 April 2020, additional details need to be recorded for company cars:

• The date the car was first registered. This is mandatory from April 2020.

• The zero-emission miles before exhaust emissions start. This is required from April 2020 only if the car has between 1g/km to 50g/km of CO2 emissions.

• For each employee with a company car you can now record the date the car was first registered, and if relevant the zero emissions mileage on the Payroll Company Car Benefits screen.

• The Full Payment Submission to HMRC will always include the car registration date. The zero emissions mileage is included only if the car has CO2 emissions between 1g/km to 50g/km (which classes the car as 'zero emissions').

• The new details are included in the Company Car Benefits report.

For details about payrolling car benefits, visit www.gov.uk/guidance/payrolling-tax-employees-benefits-and-expenses-through-your-payroll.

From 6 April 2020, the number of weeks that must be used to calculate average weekly earnings for holiday pay - the 'Holiday Pay Reference Period' - increases from 12 weeks to 52 weeks.

This change is designed to even out seasonal variations in pay for workers in seasonal occupations without fixed hours or pay.

• Holiday pay averages are calculated in Opera 3 for weekly paid employees.

• The existing Weeks for Holiday Pay Average option on the Set Options screen in Payroll now allows 52 weeks to be recorded. Previously only 12 weeks were allowed.  

• Previously the number of days in a working week in Payroll was set to '5' and could not be changed. Now a new option called Days for Holiday Pay Average has been added to the Set Options screen in Payroll so that the relevant number of days is used in the calculation of the daily average for holiday pay for weekly paid employees. This new option defaults to '5' so only needs to be changed if the number of days in a working week is different.

  The number of days in a working week can also be defined on the Employee Profile screen - which is used for all employee records linked to the profile, and on the Details & Bank screen for employee records - which is used only for the relevant employee.
  
  This new setting is used in the calculations in the Holiday Pay Average report.

• The Holiday Payment screen for each employee calculates the average holiday pay for the number of weeks holiday being recorded and updates the holiday payments on the employee's record. This now includes 52 weeks earnings when calculating the average earnings using the Weeks for Holiday Pay Average option on the Set Options screen.

For details about holiday pay guidance, visit www.gov.uk.

Before 6 April 2020, the termination awards and sporting testimonials were subject to different rules for Income Tax and National Insurance contributions.

From 6 April 2020, the rules are more closely aligned.

• Termination payments over a £30,000 threshold, which have not already incurred a Class 1 NICs liability, are subject to Class 1A Employers NICs.  

• Sporting testimonials over a £100,000 threshold, which have not already incurred a Class 1 NICs liability, are also subject to Class 1A Employers NICs.

Before 6 April 2020

From 6 April 2020

*The Class 1A NIC charge is 13.8%.

• A new option has been added to the Payment Profile screen in Payroll.  The Class 1A NI'able option controls whether payments associated with the profile are included in the calculation of Employers Class 1A National Insurance contributions.
  
  This option should only be selected for payments that are more than the tax and National Insurance threshold for termination payments or sporting testimonial awards.
  
  After creating the Payment Profile it should be included on the employee's Payment & Deduction screen with the relevant payment value before running a Payroll calculation.

• The Employers Class 1A National Insurance contributions are recorded on the Employee To-Date Details and Employee History screens.

• The thresholds are recorded on the NI ER's page of the PAYE/NI & Statutory Payments screen in Payroll. They are updated automatically when the other rates and thresholds are updated.

An employee is made redundant after 6 April 2020 and given a termination award payment of £50,000.

In Opera 3 the employer creates two Payment Profiles:

• The first payment profile for the amount that is exempt from Income Tax and National Insurance - with the 'Taxable', 'NI’able' and 'Class 1A NI’able' options cleared.

• The second payment profile for the amount that is liable for Income Tax and Class 1A Employers National Insurance - with the 'Taxable' and 'Class 1A NI’able' options selected.

The termination payment will be split into two payments using the first payment profile (for £30,000 - the termination payment threshold) and the second payment profile (£20,000).

The Payroll calculation will calculate Income Tax and the Class 1A Employer National Insurance (13.8%) on £20,000. The Class 1A Employer National Insurance will be included in the employee's FPS submission for the pay period.

• No Income Tax, or Employee or Class 1A Employer National Insurance will be applied to the £30,000.

• Employee National Insurance will not be applied to the £20,000 amount.

When the employee's termination payment is up to £30,000, only one Payment Profile is required.

For details about Class 1A NICs on termination payments & sporting testimonials, visit www.gov.uk/government/publications/national-insurance-contributions-termination-awards-and-sporting-testimonials-bill/national-insurance-contributions-termination-awards-and-sporting-testimonials-bill.

The rules for off-payroll working in the private sector (IR35) change on 6 April 2020.

These rules changes affect the following:

• workers who provide services through an intermediary

• clients who receive services from a worker through their intermediary

• agencies that provide workers services through an intermediary.

Before 6 April 2020, public sector clients must decide their off-payroll workers' status and inform them of the decision. The public authority is required to deduct relevant Income Tax and NI before making payments to workers. Private sector employers should leave that decision to the off-payroll workers' intermediary.

From 6 April 2020, as well as public sector clients, private medium and large sized employers must also decide their off-payroll workers' status. And so both public authorities and medium and large sized employers are required to deduct relevant Income Tax and NI before making payments to workers.

Small companies however can still leave that decision to the off-payroll workers' intermediary.

Small incorporated companies meet two of these criteria:

• fewer than 50 employees

• annual turnover of less than £10.2m

• balance sheet assets below £5.1m.

Small unincorporated companies must have an annual turnover of less than £10.2m.

The portion of the fee subject to tax and NI is referred to as the 'deemed direct payment'.

The deemed direct payment is calculated as the value of the payment to a worker's intermediary:

• less any VAT

• less the direct cost of materials used in providing the service

• less expenses that would also be deductible from taxable earnings if the worker was an employee.

Deemed direct payments for off-payroll workers must be included in the calculation of the Apprenticeship Levy.

For details of the changes to off-payroll working for clients from April 2020: www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-clients.

To understand off-payroll working (IR35): www.gov.uk/guidance/understanding-off-payroll-working-ir35.

To check employment status for tax: www.gov.uk/guidance/check-employment-status-for-tax.

The Statutory Parental Bereavement Pay and Leave (SPBP) allowance and leave entitlement for primary carers who have lost a child is being introduced from 6 April 2020. Primary carers include parents, adopters, foster parents and guardians.

The payment follows the same administration process as other statutory payments such as paternity pay. Payments will be paid out by employers and claimed back through payroll processes.

Payments will be treated as earnings for tax and National Insurance Contributions purposes, as per all other Statutory Payments.

Primary carers are entitled to two weeks leave following the death of a child under 18 or a stillbirth after 24 weeks of pregnancy. The leave is paid at the statutory rate if the employees has 26 weeks continuous service. Employees with less than 26 weeks continuous service can request two weeks unpaid leave.

Opera 3 Payroll manages SPBP payments by the use of a Payment Profile type.

The PAYE, NI & Statutory Payments form includes fields to record the earnings related percentage rate and the standard rate for SPBP. These are updated automatically along with the other statutory payment rates.

The FPS and EPS submissions also include details for SPBP.

If an employee is entitled to leave without payment because they don't have 26 weeks continuous service, that leave can be recorded using the Absence form in the Personnel application.

For details about Statutory Parental Bereavement Pay, visit www.gov.uk/government/news/uk-first-parents-who-lose-a-child-entitled-to-bereavement-leave.

These new details are included in the FPS in the 2020-21 tax year:

• An indicator for off-payroll workers.

• Statutory Parental Bereavement Pay (SPBP) paid to an employee in the tax year to date.

• Class 1A Employer National Insurance paid for employees who received termination awards over £30,000 or sporting testimonials over £100,000.

• The date company cars were first registered, and zero emissions mileage if relevant.

These new details are included in the EPS in the 2020-21 tax year:

• An indicator that the Employment Allowance is either being claimed for the 2020-21 tax year, cannot be claimed or is no longer being claimed, and the relevant trade sector.

• SPBP recovered and SPBP NICs compensation in the tax year to date.