Guidance

December 2023 issue of the Employer Bulletin

Published 6 December 2023

Introduction   

On 22 November 2023, the Chancellor of the Exchequer, the Rt Hon Jeremy Hunt MP, made his Autumn Statement announcements.  

The headline tax measure relevant for employers was:  

National Insurance Contributions (NICs) rates  

The government has announced a cut to the main rate of Class 1 employee NICs from 12% to 10% from 6 January 2024 and a cut to the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024.  It has also announced that no one will be required to pay Class 2 self-employed NICs from 6 April 2024. Details of this change are: 

• from 6 April 2024, self-employed people with profits above £12,570 will no longer be required to pay Class 2 NICs but will continue to receive access to contributory benefits including the State Pension 
• those with profits between £6,725 and £12,570 will continue to get access to contributory benefits including the State Pension through a National Insurance credit without paying NICs as they do currently    
• those with profits under £6,725 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension, will continue to be able to do so 

The government will set out next steps on Class 2 reform next year. 

We ask that you take steps now to start work with your payroll software provider, and where applicable IT delivery partners, to get ready to implement the change to Class 1 employee NICs that comes into effect from 6 January 2024. HMRC’s Basic PAYE Tools product will be updated to reflect this change.  

Information on all the measures announced can be found in Autumn Statement 2023. For an overview of all the tax legislation and rates announced, read the Autumn Statement 2023: Overview of tax legislation and rates (OOTLAR).

Also, in this month’s edition of the Employer Bulletin there are important updates and information on:

PAYE   

Tax updates and changes to guidance 

General information and customer support  

PAYE 

National Minimum Wage, Geographical Compliance Approach — support for employers 

As part of our compliance approach we are contacting employers, based on geographical location rather than business type. This enables us to provide support across a whole range of businesses in a specific area. Our aim is to raise awareness and increase knowledge of the complexities of the National Minimum Wage (NMW) legislation and support employers to get things right, reducing the risk of non-compliance. We have visited 10 locations so far with many more planned.   

What does this support look like  

We provide employers with education and guidance on common NMW issues, encouraging them to review their pay arrangements to make sure they are complying with the law. Some employers will also be offered a free call with one of our NMW experts to talk about any business practices that can lead to NMW underpayments. If any potential issues are identified, we will give them the opportunity to correct them with no sanctions being applied, for example no penalties or public naming. 

What to do if you receive a letter 

If you, or your agent (if they are your registered business address) receive a letter from us, take action to review your workforce to check that they are all being paid at least the minimum wage. We recognise that mistakes are easy to make, and you may not always be aware if something has gone wrong. Although paying the correct rate of pay is important, it is not always that simple and there are lots of ways workers who are paid at or even above the National Minimum Wage or National Living Wage, can be underpaid. Examples include: 

• deductions from pay for items in connection with the job 

• unpaid working time, including travelling and training   

If you receive a letter inviting you to take part in a free support call with one of our experts, we strongly encourage you to take us up on the offer. Feedback from the circa 2500 businesses that have taken part in a call so far has been extremely positive.  

Businesses in the selected area that choose not to take action, or participate in the call when offered, do run the risk of HMRC’s NMW team undertaking an official full review of their business. The usual sanctions would apply if any underpayment of workers is identified.  

More information on calculating and enforcing the minimum wage is available.  

The NMW team also have a suite of recorded webinars available on how to avoid common mistakes, record keeping and what to expect from a HMRC check. 

Relevant Motoring Expenditure — impact of recent Upper Tribunal decision on National Insurance contributions 

When employees use their own car for work, relief from income tax and an equivalent disregard from Class 1 National Insurance contributions can be due based on business miles driven. For National Insurance, payments made in respect of the use of the vehicle must be classed as Relevant Motoring Expenditure for the disregard to be available. The rate used for the disregard is based on the highest applicable Approved Mileage Allowance Payment rate for tax. The disregard is not available on amounts over and above Relevant Motoring Expenditure amounts. 

HMRC’s loss in the recent Upper Tribunal in the case of Wilmott Dixon and Laing O’Rourke has determined that the types of payments that can fall within the definition of Relevant Motoring Expenditure is wider than HMRC’s previous application. The tribunal ruled that it is not just payments relating to actual use, but also potential and anticipated use of the vehicle. This will affect those who receive fixed sum car allowance payments where those payments are made in anticipation or potential use of a qualifying vehicle. Where car allowance payments have been or will be made for use of a qualifying vehicle, they may now benefit from a higher amount of disregard because the amounts classed as Relevant Motoring Expenditure could be higher. Further guidance on qualifying vehicles is available. 

Where car allowance payments have been made and National Insurance contributions have been paid on these amounts for previous periods which are no longer due, a refund of overpaid contributions may be claimed. For a claim to be successful all the existing rules still apply. The disregard is based on quantified and evidenced business miles driven. Claims will not be successful if evidence cannot be provided. No disregard is available on payments made that are within the definition of Relevant Motoring Expenditure if salary is sacrificed from an individual’s pay. 

HMRC guidance is being updated to reflect this outcome and further communications will be made to signal when these changes have been made. 

How to claim a refund — employers 

Businesses with a similar fact pattern to the Upper Tribunal cases will be able to correct any overpayment. Where Real Time Information (RTI) is used to correct, these claims will need to be substantiated on a pay-period-by-pay-period basis with the following evidence: 

• a list of the employees, with their National Insurance numbers included in the claim 
• evidence of the number of business miles undertaken by each employee 
• the amount of Car Allowance payments that these employees received 
• details of any other Relevant Motoring Expenditure payments that the employees have received (for example, if they have received mileage payments at less than the HMRC approved rate) 
• the primary and secondary Class 1 National Insurance contributions that are being reclaimed 

RTI returns are subject to potential enquiry so businesses must make sure the relevant evidence is held and retained. 

For employers within HMRC’s Large Business population, claims should be made through your Customer Compliance Managers. 

Where employers are unable to amend their RTI returns they can make written claims. If making a written claim, in addition to all the same evidence above, the following information must be provided: 

• the reference “Relevant Motoring Expenditure” must be used 
• the reason the amendment cannot be made through RTI 

More guidance for employers on fixing problems with running payroll is available. 

How to claim a refund — employees 

Where employees believe they are due a refund they must contact their employer first. If an employer has made a refund claim, they should repay any overpaid National Insurance contributions due to their employees. If the employer has not applied for a refund, employees will have to provide on a pay period-by-pay-period basis: 

• evidence of the number of business miles 
• the amount of Car Allowance payments they have received 
• details of any other Relevant Motoring Expenditure payments they have received (for example they have received mileage payments at less than the HMRC approved rate) 
• the primary Class 1 National Insurance contributions that is being reclaimed 
• the reason their employer is not applying for this refund on their behalf 

HMRC’s usual process for claiming National Insurance refunds will apply. Further guidance on claiming a National Insurance refund is available. 

Payrolling expenses and benefits for the 2024 to 2025 tax year 

You can register now to payroll your benefits from 6 April 2024.  

Using the online service for payrolling benefits and expenses means that you will not have to submit a form P11D. You must tell HMRC which benefits you want to payroll during the registration process. 

The tax codes for all employees receiving these benefits will be amended unless you exclude any employees that you do not want to payroll benefits for in the online service.  

You can find out more on payrolling and reporting expenses and benefits in kind. 

Informal payrolling  

If you have had an informal arrangement in place, you must register now to payroll your benefits.  

HMRC will no longer accept new informal arrangements, except in exceptional circumstances. 

Tax updates and changes to guidance 

Umbrella company guidance for employment businesses and workers 

Working with HM Treasury and the Department for Business and Trade, HMRC has published new guidance for employment businesses who use umbrella companies to employ workers. 

This guidance will help employment businesses understand their legal responsibilities, protect their business from bad actors in their supply chain and support umbrella company workers. Reading the guidance could help employment businesses reduce their risk of non-compliance.   

HMRC has also published updated guidance for umbrella company workers. The guidance now includes advice on how workers can protect themselves from the actions of fraudulent umbrella companies.  

These guidance updates follow a recent government consultation on potential approaches to bringing umbrella companies within the scope of government regulation and options to tackle tax non-compliance in the sector. The government is considering the responses it has received as it looks to further support workers and businesses in the umbrella company market and will publish a response in due course.   

Off-payroll working rules (IR35) — opportunity to pause settlement

As announced at the Autumn Statement on 22 November 2023, the government is introducing a change in policy that may affect organisations with an open compliance check as part of the reformed off-payroll working rules (IR35).   

What is the change

Currently, when HMRC find that a client has made a mistake in applying the off-payroll working rules, we assess how much the deemed employer owes in Income Tax and National Insurance contributions. 

From 6 April 2024, HMRC will be able to take into account, or ‘set-off’, the taxes the worker or their intermediary have already paid against the amount the deemed employer owes.  

The policy applies to Income Tax and National Insurance contributions we assess on or after 6 April 2024, from off-payroll working errors in payments since 6 April 2017.   

What this could mean for you 

Organisations may be able to pause the settlement of their open off-payroll working compliance check until after 6 April 2024.    

We would only consider a pause if:  

• the compliance check has reached settlement, and:  

  • the organisation has acknowledged in writing an error in applying the off-payroll working rules 

  • the deemed employer’s gross liability, including any penalty, has been agreed  

• the organisation gives us the information we need to work out a set-off. This is:  

  • the name of the Personal Service Company and Company Registration Number  

  • the worker’s full name or National Insurance number  

What happens next 

For organisations with open off-payroll working compliance checks, we will carry on with our compliance check as normal.   

If an organisation meets the above conditions when we are ready to agree a settlement, we will ask the organisation if they want to pause. If we agree to pause, we will contact organisations again after 6 April 2024 to settle the compliance check.  

Organisations do not have to pause their settlement if they do not want to. If organisations choose to pause, we would advise organisations to make a payment on account for the full amount, to stop statutory interest building up.  

Further information on policy change is available. 

Guidelines for Compliance — help to comply with the reformed off-payroll working rules (IR35)

HMRC has just published new Guidelines for Compliance — help to comply with the reformed off-payroll working rules (IR35). 

If you engage or supply contractors, we encourage you to read these guidelines to help you operate the off-payroll working rules correctly.  

These Guidelines for Compliance set out practical steps for you to follow:  

• including best practice and examples of good systems and processes which you can adapt for your own organisation  
• to help you reduce the risk of making an error when determining a worker’s status for tax purposes  

Guidelines for Compliance are part of HMRC’s ongoing commitment to publishing practical guidance to support customers. The guidelines can help you better understand what HMRC considers to be good practice and clarify our view in complex, widely misunderstood or new areas of the tax system. Guidelines for Compliance provide further information, including other publications. 

Over the coming months we will be updating the Employment Status Manual to provide more detailed guidance in certain areas, such as appeals and disagreements for off-payroll workers.   

If you are a representative body and know of particular sectors or customer groups who would benefit from further education or support, contact offpayrollworking.legislation@hmrc.gov.uk.

Basis period reform

The rules HMRC uses to calculate sole traders’ and partners’ profits for Income Tax in a Self Assessment return are changing for many businesses for 2023 to 2024 onwards. This change may affect the return that taxpayers must submit by 31 January 2025 and subsequent returns. 

HMRC plans to release a YouTube video in February 2024, giving a brief overview of the changes introduced by basis period reform. The YouTube video will be an educational tool, particularly for small businesses and unrepresented customers, to help them understand the changes in the transition year and onwards. 

Further information on basis period reform is available. 

Help to check if work qualifies for Research and Development tax relief

HMRC has published Guidelines for Compliance to help companies see if work qualifies as Research and Development (R&D) for tax purposes. Only companies can claim R&D reliefs. 

The guidelines are designed to help avoid common errors while identifying and submitting claims to Research and Development relief by aiding businesses to: 

• find out if work may qualify as R&D for tax purposes 
• understand HMRC expectations of those making claims 
• understand HMRC’s view of who is a competent professional, able to judge if a project is seeking an advance in science or technology 
• understand the meaning of ‘scientific or technological advance’ for tax purposes 
• decide where the project begins and ends for the purposes of an R&D claim 
• understand the evidence of a qualifying project HMRC may want to see 

General information and customer support 

Important information for customers using ‘pay by bank account’ to pay HMRC

Feedback has indicated that a small minority of customers are unsure about using ‘pay by bank account’ when paying HMRC because they notice their payment has gone through the HMRC Shipley bank account, when they are historically used to paying HMRC Cumbernauld. 

Customers should be reassured this is not a scam, that ‘pay by bank account’ is still the preferred method for paying HMRC and this will not affect payments going to the correct customer record or the time taken to update it. 

‘Pay by bank account’ was introduced in March 2021. A large proportion of our customers regularly use this method, which prepopulates all payment details when they log in to their HMRC online account, making the process quicker and easier. 

Help your contractors steer clear of tax avoidance schemes

Help us protect your contractors by telling them about our ‘Tax avoidance - don’t get caught out’ campaign.  

We are helping contractors spot the warning signs of tax avoidance, get support to leave schemes and report suspicious companies.  

Support the campaign by sharing our resources with any contractors you work with, these include:  

• personal stories from contractors who want to help others learn from their mistakes  
• a payslip guide to help contractors understand why the money paid into their bank account should match the net pay on their payslip  
• an interactive risk checker tool to spot if contracts could involve tax avoidance  

We have also published details of tax avoidance schemes and their promoters to steer clear of.  

This is not a complete list of all tax avoidance schemes currently being marketed. There may be other schemes and promoters out there which HMRC cannot currently publish information about. If an avoidance scheme or promoter is not shown, this does not mean they are in any way approved by HMRC. We do not approve tax avoidance schemes for use.  

Play your part by spreading the word and sharing or liking HMRC’s posts on Facebook, LinkedIn and X (Twitter). 

The Administrative Burden Advisory Board Annual Report 2023  

The Administrative Burden Advisory Board (ABAB) will publish their Annual Report 2023 on GOV.UK on 12 December 2023. 

The Annual Report details ABAB’s progress against the priority areas identified in the previous report, which included Making Tax Digital for Business, next steps for UK Border and Customs and the impact on small businesses and customer experience. The report also shares ABAB’s priorities for the forthcoming year. 

ABAB is passionate about listening to and understanding the needs of the small business community. Board members come from a range of businesses and professions, and their goal is to support HMRC to make the tax system quicker and simpler for small businesses.  

We encourage you to share the report with colleagues. If you would like to comment on the report, or help ABAB with their work, please contact advisoryboard.adminburden@hmrc.gov.uk. 

Make sure you stay on top of your workplace pension duties

The Pensions Regulator (TPR) monitors all employers, big and small, to make sure staff receive the pensions they are due. Employers should make sure they stay on top of their workplace pension duties. If they do not, TPR can find out and may take enforcement action. 

Automatic enrolment is a continuous responsibility. As well as monitoring the ages and earnings of staff and paying contributions, employers must also carry out re-enrolment duties including the duty to re-declare, every three years. 

Employers should read TPR’s ongoing duties guidance on The Pensions Regulator website, and those supporting employers with their duties should look at TPR’s information for advisers. 

Correction to the Apprenticeship Levy Manual

In July 2023, we updated the content of page ALM07000 of the Apprenticeship Levy Manual.   

The update was made to correct a previous error and now sets out the correct legislative provision that ‘pay bill’ is based on the total amount of earnings on which an employer is liable to pay Class 1 secondary National Insurance contributions.  

This includes earnings below the Lower Earnings Limit (LEL) and the Secondary Threshold (ST) and in particular earnings below the LEL and the ST are included in the pay bill even when the total earnings for the employee in that pay period do not exceed the ST. 

Childcare Choices — helping families to juggle work and life

Thousands of families could be saving money on their childcare costs but might not know the support they are eligible for.  

The Childcare Choices website brings together the existing childcare offers in one place, so parents can get the help that fits their family. This could be Tax-Free Childcare, 30 Hours Childcare, or Universal Credit for Childcare. Some families might be eligible to use more than one childcare offer together and get the most out of it.   

Depending on eligibility criteria, support could also be used for: 

• breakfast clubs 
• after-schools clubs 
• activity clubs 
• holiday clubs 
• home care workers 
• play schemes 

Over the next couple of years the support available for parents will continue to expand.  

From April 2024, eligible working parents in England with children aged 2 will have access to 15 hours childcare.   

From September 2024, the 15 hours childcare offer will be expanded to eligible working parents in England with children between 9 and 23 months old.   

In addition, parents are expected to see an expansion in the availability of childcare in their local area before and after school, between 8am and 6pm. This is also known as ‘wraparound care’ for primary-school aged children.  

From September 2025, eligible working parents in England with children between 9 months up to school age (4 or 5 years of age) will have access to 30 hours childcare.  

The Childcare Choices website allows parents to find out what they will be eligible for and when to apply. They will also be able to sign up to a newsletter which will give them further information as the expansion is rolled out.   

We have put together an information toolkit and resources to help you promote the range of childcare offers to your relevant networks and encourage them to visit the Childcare Choices website to find out what they are eligible for.  

HTML format of Employer Bulletin 

Since September 2020, material published on GOV.UK or other public sector websites must meet accessibility standards. This is so they can be used by as many people as possible, this includes those with:  

• impaired vision  

• motor difficulties  

• cognitive impairments or learning disabilities  

• deafness or impaired hearing  

There is now a contents page, with links, which is fully scrollable. Articles have been put into categories under a heading which is within the introduction to make it easier to find the updates and information you are interested in.  

The HTML format does allow you (dependent upon your web browser):  

• to print off the document should you wish to keep a paper file:  

  • select the ‘Print this page’ button underneath the contents and print to your local printer  

• to save the document as a PDF:  

  • select the ‘Print this page’ button and using the drop-down list on the printer select ‘print to PDF’, which allows you to save as PDF and file electronically  

  • on a mobile device you can select more options, then select options to be able to save as PDF  

Getting more information and sending feedback 

Make sure you are kept up to date with changes by signing up to receive our email alerts.  

You can also follow us on Twitter @HMRCgovuk.  

Send your feedback about this Employer Bulletin or articles you may wish to see, by email to mary.croghan@hmrc.gov.uk.