NMW the answer you have all been waiting for!
NMW the answer you have all been waiting for!
THE OPPORTUNITY TO OFFER NATIONAL MINIMUM WAGE WORKERS TAX RELIEF THROUGH THEIR PAYROLL STILL EXISTS AND HAS LED TO EXCITING POTENTIAL FOR BACKOFFICE LIMITED
ROBUST PRODUCT ALLOWS US TO SIEZE THE OPPORTUNITY
Backoffice Limited now have a solution for low-paid employees to enjoy the benefits of receiving tax-relief on expenses which are incurred wholly, exclusively and necessarily in the performance of their duties of employment without breaching National Minimum Wage Regulations, taxes acts or the Social Security Regulations.
With Backoffices arrangement (which does not involve a salary sacrifice or a payment of expenses by the employer), it means that low-paid employees who incur and meet expenses incurred in the performance of their duties of employment will receive a significant increase in take-home pay. There is also a reduction of National Insurance Contributions (NIC) payable by the employer.
Jonathan Tipper, Managing Director stated, We are so confident that our method is robust that we have secured an underwritten status and can offer our clients and their employees and contractors both tax enquiry and tax liability insurance. Not only will professional assistance be given in the event of HMRC challenging this method, in the unlikely event that it is shown to fail, any award, fine or penalty will be covered by tax liability insurance. For the first time, you cannot lose and for the first time a solution that is not just a 'knee jerk' reaction without any thought to the consequences, but a real solution with real guarantee..
Under this arrangement, the employer is allowing employees who incur the cost of qualifying business related expenses to make a claim for tax relief. Jonathan Tipper also stated that In our opinion, it is beyond doubt that the taxes acts and Social Security Regulations allow such expenses to be disregarded from Pay As You Earn (PAYE) and NICs.
It should be stressed that the employer is not making a payment of or a reimbursement of expenses and the gross pay remains to be calculated as the hourly rate (at least the NMW) multiplied by the number of hours worked.
The relief "is calculated on a weekly/monthly basis as an alternative to an employee having to make a formal claim under self-assessment procedures direct to Her Majestys Revenue and Customs (HMRC) at the end of the year. This avoids administration costs for HMRC, the employee in making a claim and provides a reduction of NICs for the employer.
The key aims are as follows:
To provide a mechanism whereby low-paid employees are able to claim expenses earlier than they would have been able to do so via HMRC at the end of the tax year.
To ensure that potential exploitation of such employees is avoided through the use of unfair salary sacrifice schemes which retain part of the sacrifice as highlighted in a recent judicial review hearing.
To ensure that employees are fully informed of what types of expense can be claimed as a business related expense.
To ensure that employees tax affairs are maintained through a clear and unambiguous supply of information.
To ease the burden on HMRC in processing expenses claims via self-assessment.
To embrace proposals put forward by Government on the simplification of PAYE into a real-time system.
Backoffice have tested the legitimacy of this arrangement and have recently undertaken a detailed technical analysis of the legislation which supports their payroll model including reference to legislation and internal HMRC guidance manuals, the detail of this can be made available to any of our clients on request.
OFF WE GO
Based on Backoffices technical interpretation of current legislation, the proposed structure will not fail to be caught by the amendment to the National Minimum Wage Regulations (Regulation 31(1)(j)) as inserted with effect from 1 January and is fully supported by the taxes acts and Social Security Regulations.
There are a number of specialists from HMRC that have been examining the technical aspects of this payroll calculation since January 2011 and have yet to provide a technical analysis as to why such a payroll calculation cannot be effective in granting relief in this way. Backoffice take the view, as do our underwriters that if HMRC cannot defend an argument as to why a particular model will not work, then by default it must work and even comments from the Revenue that Judge Kenneth Parker did not mean what he stated in his judgement in the recent judicial review of the salary sacrifice position for low paid workers fail to impress us.
Backoffice also know of correspondence between HMRC and the GLA in which it is clear that it is their intention to use the change in the NMW Regulations to deny the same low paid employees a deduction for expenses which qualify under s338 ITEPA 2003 in the relevant pay period for both tax and NIC purposes. This standpoint is irrational, unfair and discriminatory. Indeed, as HM Treasury stated in the original consultation document on salary sacrifice schemes, This approach has no effect on the tax and NIC rules.
If you wish to keep up to date with developments go to www.backoffice4u.co.uk or call us on 0121 703 6300 Option 1 for sales.