Are we there yet? Reflection of 2016’s Payroll Services
The year 2016 has been a fairly strange one; the UK voted to leave the European Union, David Cameron resigned, we had our second female prime minister, many ministerial heads shuffled, the pound crashed, stock markets went up at their highest and Lynn Homer of HMRC retired! There is much to do to progress Britain into prosperity for the future…
Reflection of 2016…
With 30 years of payroll service development experience, times are interesting and very unusual. Much has been thrown at both the payroll industry, software and service providers impacting and expanding the knowledge and multitude of skills in ensuring the success of payroll.
With a change of government and direction the impacted public departments are covering a whole plethora of change proposals which will impact to some degree or another.
Ruth Owen of HMRC faced some questions in relation to the lateness of information from the parliamentary committee. HMRC assured that information was provided on time – the industry disagrees.
At the Annual Stakeholder Meeting (stated at the meeting by HMRC officials as the HMRC AGM), questions were raised by attendees on the knowledge drain within HMRC as a result of departmental slim down, personnel moving on or retired. Assurance were given by the HMRC heads of duty that all was well and adequately covered.
BCS (the Chartered Institute for IT), IReeN (the electronic exchange with government) and BASDA (Business Applications Software Development Association), the constituent parts of what is termed BIB have over previous years had a strong and productive consultation grouping with various government departments, but much of that appears to have shrunk with the government leads gone. The pleading from software and service development is for adequate notice of change – normally 18 months – but at least notification of technical specification for July prior to the tax year of application for significant change. For many years this has been met enabling compliant ready software to be developed, tested and delivered in time for the new tax year payrolls. However, this is now under serious threat and software developers are concerned. A number of government initiatives and obligations applying from next April are proposed, there is some technical definition of some file format fields, but little to no precise detail to enable an accurate judgement of requirements and obligations on either software, service or business operations and impact.
HMRC were heavily criticised in 2016 for the very late notification on guidance in relation to voluntary payrolling which they denied, information finally being published in February 2016 for an April 2016 tax year start. Is the same tardiness of detail being repeated? Are there serious risks to payroll service development as a result? ‘Are we nearly there yet’ with the production of any meaningful guidance? 2017/2018 is heading for a very difficult change year. Plethora of major software development groups are getting very nervous. As the chair of BCS Payroll I have made my pleas, Alex Rowson of BASDA has also made representation to HMRC to receive adequate information to enable good planning of software change. And then of course, the considerations for change in business process.
So what exactly are we talking of that is late?
The Apprenticeship Levy, the information on the basis of allocation of the offset allowance and calculation is late. Employers are confused on the separation between levy and funding. There is much debate around devolved nations and how funding is shared between Scotland, Wales and Northern Ireland – to the extent that the Scottish Parliament consultation is critical of the non-inclusion by the London Parliament in development of the legislation. The levy is assessed on Secondary NI earnings, however, those are not reported to HMRC on the RTI FPS submissions, so how the allocation to devolved nations occur is confused and not based on anything the employer would expect it to be. So attempts by some employers to match levy to funding are potentially pointless – however, the funding allocated to an employer has up to 2 years to be spent. But equally, funding allocated at the start may well find itself being withdrawn if earnings on the cumulative principle end up reducing the levy overall.
Payrolling Benefits in Kind (PBiK) – although the expansion to credit vouchers is welcome (there is little to no change to accommodate – why was it not there this year?), the guidance on the new company car reporting is scant at best and different. How will either software, service or the employer business process be able to be changed in time for April 2017 with the tardy delivery of information? Although HMRC committed to having this information for software for July 2016, this target has been significantly missed. A bunch of fields on a file is not sufficient, there needs to be explicit information of what, when and why in relation to company car reporting requirements.
The list goes on…
And then of course we have Mandatory Pay Gap Reporting from the Government Equalities Office. Indications are being hinted that the defined requirements will not be known until maybe even March next year, the definition of earnings is so wide in interpretation as being the ONS value used for the ASHE survey, so not taxable or NIable earnings then, and the timing point confused in definition from being pay in the month of April to potentially be just the pay period that includes 5th April annually. What involvement will the payroll have in creating the base data for the employer to meets its new legal obligations. Has the horse already bolted as accumulation of bonus would already need to be taking place. Are the employers (those with over 250 employees or in the public sector) considering their obligation’s and then there’s the consideration of devolved administration.
And what of the Autumn statement and the recent plethora of HMRC consultations. What will be announced about Salary Sacrifice removal and how will this impact business process in employer, their service and software, and also the PBiK operation if the employer already undertakes. Is it the end of flexible benefit schemes? If the proposals proceed as stated, then Company Car scheme will be majority impacted where there is a choice of Car or Cash.
And then the implications of Class 1A assessment on Redundancy payments, will this require change to payroll. Is there a new NI category for Class 1A (letter Y has already been taken)? Although the format of RTI report may well take the information, no notification of change has yet been given if this is impacting soon.
And then, of course, we need to await the Scottish Budget to see if the calculation of the Scottish Rate of Income Tax will drastically change. Has software been readied for the potential change in tax bands and tax rates with these new devolved powers.
Software still demises the lost of the HMRC Notes for Software Developers issued by the former Margaret Knights OBE, the trickle of information following the autumn statement all used to be provided in one concise document for process compliant development, although the SDS Team do a tremendous job, we have a position of trickle information during a time critical development stage. Will the HMRC, DWP etc. cooperate with each other so that changes to Tax, NICs, Statutory Payments etc. all be announced appropriately
This is probably the first in my 30 year history of payroll software and service delivery where so little is known with so much to do. Much of the former HMRC experience is gone, the industry through groups such as BIB are able and willing to support change, yet the discussion are not evidently taking place. The planning and appropriate, proper, meaningful consultation needs to return to its former days of exploring how these can work, else much of this government change is under serious threat of failure and especially late delivery.
So the software, service and employer plea to government on the much needed detail of the requirement is ‘are we nearly there yet’?
Requirement for government change for April 2017 is later:
- Apprenticeship Levy confusion reins
- Limited detail on Company Car reporting
- Mandatory Pay Gap requirements are confused
- Salary Sacrifice is under threat
- Other changes will impact payroll in the Chancellors Autumn statement.