Statutory payroll changes for the 2020-21
tax year are updates for the Employment Allowance, payrolling
company cars, calculating holiday pay averages, Employer Class
1A NICs on termination payments & sporting testimonials, off-payroll
workers in the private sector, changes to the FPS and EPS submissions
to HMRC, and new NI, PAYE and statutory payments rates and bands.
Statutory Parental Bereavement Pay is also introduced in the
2020-21 tax
year. This is a new workplace right to paid leave for bereaved
parents.
The Payroll Update process, which completes the current pay
period ready for the next pay period, has been converted to a
Data Intensive Process. This runs on the server rather than on
the workstation PC.
Payroll : Statutory changes
Employment Allowance
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.
Software changes
Payroll Calculation
When running a calculation for a pay period end date
after 31 March 2021, the Calculation Audit Report now reports any employees
who are turning 23 years old during that pay period.
PAYE/NI/Stat. Payments
A new checkbox has been added to the PAYE/NI/Stat. Payments
form to ensure, when selected, that the new National Minimum and Living
Wage bands are used from 1st April 2021.
Employee Age List
The Payroll - Misc. Reports - Employee Age List report
has been amended to show where an employee is 23 years old.
Note: Both
variants of the report including the Excel outputs have been changed.
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.
Software changes
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').
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.
Software changes
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.
Applies to
Weekly paid employees.
Effective
From From 6 April 2021.
More information
For details about holiday pay guidance, visit www.gov.uk.
Employer Class 1A NICs on termination payments & sporting testimonials
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
Termination payments and sporting testimonials
Income Tax?
Employee NI?
Employer NI?
Below the thresholds
No
No
No
Above the thresholds
Yes
No
No
From
6 April 2020
Termination payments and sporting testimonials
Income Tax?
Employee NI?
Employer NI?
Below the thresholds
No
No
No
Above the thresholds
Yes
No
Yes*
*The Class 1A NIC charge is 13.8%.
Software changes
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 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.
Applies to
Employers paying termination awards or sporting testimonials.
Effective
From From 6 April 2021.
Example
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.
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.
Software changes
A new option has been
added to the Set Options
screen in Payroll. The Allow
Off-Payroll Workers option controls whether off-payroll
workers can be maintained in Payroll.
If the new option
is used, employee records can be recorded as off-payroll workers
by selecting the Off-Payroll
Worker option on the Employee
Details & Bank screen.
A new off-payroll worker is assigned 'Start Declaration C' status for
the P45, and their tax code is set to 'BR Cumulative'.
For off-payroll workers, fees charged to clients (known as 'deemed direct
payments') must be subject to tax and NI deductions, and employer NI must
be paid.
Off-payroll workers are processed in Payroll in the 2020-21 tax year
as any other employees, with these differences:
Off-payroll workers are responsible
for managing any student loans, postgraduate loan deductions and pensions,
so these areas of Payroll do not apply to them.
In the FPS file sent to HMRC
for each pay period, these workers are indicated in the submission
as off-payroll workers.
For the employer, these differences apply:
Employers cannot offset the
Employment Allowance against Employer NI paid for off-payroll workers.
The Employment Allowance form
in P32 Processing excludes
Employer NI paid for off-payroll workers.
Employers are not responsible
for student loans or postgraduate loan deductions for off-payroll
workers.
Employers are not required
to pay statutory payments to off-payroll workers.
Employers are not required
to enrol off-payroll workers into pensions.
Applies to
It is the responsibility of the client/employer to determine
whether any of their workers are affected by the new rules for
off-payroll working.
Deemed direct payment
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.
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.
Software changes
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.
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.
Applies to
FPS and EPS submissions sent to HMRC for each pay period.
A new Tax Year History
view has been added to the Action menu of the Payroll
Processing form.
This new view displays year-end pay details by tax year for the employee.
The details displayed in this view are recorded at the end of each tax
year when the End
of Year Cleardown is run in Payroll.
This feature is available from the start of the 2020-21 tax year and
so the first year's pay history that can be viewed is for the 2019-20
tax year. Pay history for later years will be recorded at the end of each
tax year. A new option called Keep ...
Tax Year History on the Set
Options form in Payroll controls the number of years of tax year history
that are saved, up to a maximum of 20 years.
New Tax year
History view
The NI Code Values view displays
all the employee's NI codes in a tax year alongside the pay period when
they changed. This view is useful if the employee has more than one NI
code during a tax year.
The existing History
view has been renamed to Pay Period History.
This view still displays a period-by-period summary of the currently selected
employee's payroll history.
Payroll Update server-side process
The Payroll
Update process completes the pay period ready for the next pay period.
In this release of Opera 3 SQL SE,
this data intensive process has been converted to a server-side process.
Heavy duty ‘Data Intensive Processeses’
are run from the PC workstations but all the processing work is done on
the Opera 3 SQL SE server.
As well as minimising the impact on your IT network, this means that your
workstations are not used at all for the intensive work that a heavy-duty
process is doing. Instead they are available for other tasks. These Data Intensive Processeses are included
in all the applications in Opera 3 SQL SE.
Benefits of running processes on the Opera 3 SQL SE
server
There are many benefits of running data intensive processes on the server
rather than on the workstation PCs.
Feature
Benefit
Data intensive ‘heavy duty’ processing is completed on the
server.
This means that your network is not burdened by unnecessary
network traffic so your other work won’t be affected. Also, the
PC workstations don’t do the work so you can use them for other
tasks whilst the server side processes are working.
Scheduling is built in with desktop notifications or email
with attachments.
Scheduling your heavy-duty processes for outside of work
hours is a major benefit. This means your other tasks are not
affected, and you are given notifications when you get in to work
in the morning. If you use groups in Payroll, you can also schedule
the Update to run for different groups one after the other.
Scheduling is built in so no additional cost is incurred
to use the feature.
Heavy-duty processes can be run in the background.
Some processes are suited to be run in the background so
that the workstation PCs are released to run other processes in
Opera 3 SQL SE.
The user menu access feature can be used to control whether
tasks can be run later or run in the background.
You can use the menu access feature to control whether users
can schedule tasks to be run outside of office hours or in the
background, .
MTD for VAT fraud-prevention
The fraud-prevention changes were also included with Opera 3 SQL SE (2.63.00).
HMRC has recently clarified
requirements for software vendors to include fraud-prevention details
in the VAT Return.
Fraud-prevention changes for MTD VAT Returns are included in this release
of Opera 3 SQL SE.
HMRC has not clarified exactly when they will start
to reject VAT Returns without these fraud-prevention changes. However,
customers who send MTD VAT Returns must upgrade their software to avoid
VAT Returns being rejected by HMRC.
User guides
Opera 3 guides are available in the User Guides section at docs.pegasus.co.uk.
This guide lists the editions of Microsoft Office, Microsoft
SQL Server, Microsoft Windows Server, Microsoft Windows desktop,
web browsers and Microsoft .NET supported for Opera 3.
This guide explains the licensing options for different
editions of Microsoft SQL Server. It explains how to calculate
the number of CALs (Client Access Licences) required for Pegasus
products that use Microsoft SQL Server for the datastore.
