Apprentices, Scottish rate of income tax, PAYE penalties

As we head into a new tax year there are two payroll issues to address; the new NIC rate for apprentices and the Scottish rate of income tax. We also have a heartening story about PAYE penalties that shows you can win against HMRC if you read the legislation really carefully. 

This is an
extract from our topical tax tips newsletter dated 10 March 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Apprentices 
This week (14 – 18 March) is National Apprentice week, and it is also Budget week, so you may well be having conversations with your clients or sending them newsletters. The employment of apprentices is promoted by Government but it is surrounded with misunderstandings. 
  
Apprentices are employees who must be paid the NMW, but there is a special lower NMW rate for apprentices who are aged under 19 or in the first year of their apprenticeship. There is no age limit for an apprentice, but Government grants are normally only available for those aged 16 to 18. When the individual is aged 19 to 24 the adult NMW must be paid, and when they reach age 25 the living wage rate must be paid for pay periods starting on or after 1 April 2016. 
  
Where the apprentice is aged under 25, and is paid less than £43,000 per year, a zero rate of employer’s class 1 NI will be due from 6 April 2016. An employer can’t designate all his employees who are under 25 as “apprentices”, to qualify for the zero rate of class 1 NIC, the employee must be enrolled in a statutory apprenticeship. Note that the rules for statutory apprenticeships are different in England, Scotland, Wales and Northern Ireland, as it is a devolved issue. 
  
If you like the idea of taking on a young apprentice in your own practice, there is help and guidance available through Associate of Tax Technicians (ATT) – see link below. 
  
The Apprenticeship levy will add an extra 0.5% to the employer’s payroll costs with effect from 6 April 2017. The levy will be relieved by a £15,000 allowance per employer, which will work much like the current employment allowance. Where the total payroll cost is less than £3 million the effect should be that no apprenticeship levy is paid. 
  
However, where the employer runs several payroll schemes or is part of a group, only one £15,000 allowance will be given, so some levy will end up being paid. Groups of companies may have to reorganise their payrolls so that all employees across the group are paid through one company. You have a year to sort out that little problem.

This is an
extract from our topical tax tips newsletter dated
10 March 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>