Newsletter Archive - Issue 1 2000

Working Families Tax Credit

Action Needed Now

Fact Finding

Find out how many of your employees are likely to be eligible so that you can assess the impact on your business.

Payroll System

You may need to consider changes to your system so that you can:

- add the WFTC due to net pay
- show the WFTC separately on the employees' payslips
- keep a running total of WFTC paid in the tax year so that the totals can be entered on year end forms

Cash Flow

Employers will be able to deduct any WFTC paid to employees from the PAYE/NIC due at the end of each month/quarter. However, there will be adverse cash flow effects - at least part of the PAYE/NIC that was previously retained for a month before being paid to the Revenue will have to be paid out sooner as part of wages. Employers with a significant number of staff entitled to the WFTC may find a negative cash flow effect - in such cases application should be made to the Revenue for funding to meet the shortfall.

Personal Service Companies

Q: I am a computer consultant selling services through my one man company. I have one major customer for whom I work most of the time. Will I be caught by the new rules?

A: Almost certainly YES - the new rules will apply to any contract or engagement where, for tax purposes, you would have been treated as an employee of your customer if your one man company had not existed.

Q: I operate a limited company through which I run my plumbing business. I have a large customer base ( some householders/ some businesses) and never work for any one customer for more than a day or two. Will I be caught?

A: NO - you would not have been treated as an employee of any of your customers if you had worked for them directly. The new rules will not have any impact on you or your business.

Q: If I am caught by the new rules - what is the effect?

A: The income received by your company (net of certain expenses) will be treated as paid to you as salary and therefore liable to Income Tax under PAYE and Class 1 NIC.

If you require further advice or information on this topic, please complete the form on our Questions and Comments page.

NIC on Employee Benefits

Already, certain benefits provided by employers to employees which give rise to a tax charge also incur an employer's NIC charge - eg. cars, fuel, vouchers and tradeable assets.

However, many taxable benefits - eg. medical insurance and beneficial loans gave rise to no NIC charge.

From 6th April 2000, most taxable benefits (there will be a few minor exceptions) will give rise to a 12.2% employers' NIC charge (employees' NIC's will not be extended). Broadly, the new rules will operate by extending the scope of Class 1A NICs to cover most benefits appearing on the P11D. The costs may be significant - eg. an employer providing medical insurance cover for 40 employees at a cost of £500 per employee will have to pay nearly £2500 of additional NICs under the new rules.

Employers Diary Dates 2000

19th April 2000
Any 1999/00 PAYE/NIC deductions not paid over will result in interest on the overdue amounts.

19th May 2000
Employers' year end returns (P35/P14/P38) due for submission. There is a penalty for late or incorrect returns.

31st May 2000
The P60 (certificate of pay and tax deducted) should be provided to each employee.

6th July 2000
Submission of P11D's and P9D's which show details of benefits and expenses paid to employees and directors. There is a penalty for submission of late or incorrect returns. Employees must also be given a copy of their P9D/P11D by this date.

19th July 2000
Class 1A NICs on company cars and fuel should be paid over by making the appropriate entries on the deduction working sheets for the month ended 5th July 2000. An application to make a direct payment which removes the need to make deduction working sheet entries can be made.

19th October 2000
Payments under PAYE settlement agreements must be made including Class 1B NIC.