Electric charging of company cars and vans at residential properties
HMRC has published amended guidance on EIM23900 – Car benefit: special cases: issues relating to electric cars and NIM06440 – Class 1 NICs: Expenses and allowances: Electric Vehicles: Charging Company Electric Vehicles at Employee’s Home about a change in interpretation regarding home charging of electric company cars. Section 239 ITEPA 2003 provides an exemption on payments and benefits provided in connection with company cars and vans at Income Tax (Earnings and Pensions) Act 2003 This legislative provision therefore exempts aspects such as vehicle repairs, insurance, and Vehicle Excise Duty.
HMRC previously maintained that the reimbursement of costs in relation to charging a company car or van at a residential property was not caught by this exemption.
Following a review of their position, HMRC now accepts reimbursing part of a domestic energy bill, which is used to charge a company car or van, will fall within the exemption provided by section 239 ITEPA 2003.
This means that no separate charge to tax under the benefits code will arise where an employer reimburses the employee for the cost of electricity to charge their company car or van at home. The exemption will however only apply providing it can be demonstrated that the electricity was used to charge the company car or van. Employers will need to make sure that any reimbursement made towards the cost of electricity relates solely to the charging of their company car or van.
Electronic payment deadline falls on a weekend
In October 2023 the electronic payment deadline falls on Sunday 22 October. To make sure your payment for the month reaches HMRC on time, you need to have funds cleared into HMRC’s account by 20 October 2023, unless you are able to arrange a Faster Payment.
It is your and your client’s responsibility to make sure your payments are made on time and if payment is late, you and / or your client may be charged a penalty.
Check your bank or building society’s single transaction daily value limits and cut-off times well in advance of making your payment. Make sure you know when to initiate your payment, so it reaches HMRC on time.
For more information visit Pay employers’ PAYE: Overview – GOV.UK (www.gov.uk)
Paying your PAYE Settlement Agreement
A PAYE Settlement Agreement (PSA) allows you to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for your employees.
Any electronic payments for a PSA for the tax year ended 5 April 2023 must clear into HMRC’s account by 22 October 2023. If your payment is received late you may have to pay interest and a late payment penalty.
To pay, you will need to use the PSA reference number, for example — XA123456789012, from the payslip HMRC sent to you. If you do not have this, contact HMRC’s go to Employers: general enquiries for advice.
Do not use your PAYE Accounts Office reference, for example — 123PA12345678, to make your PSA payment. Payments received with your PAYE Accounts Office reference are allocated to your normal PAYE account and you will continue to receive reminders for the PSA even though you have paid.
Correcting payroll mistakes for an earlier tax year
From April 2019 HMRC changed the way in which employers can correct payroll mistakes for an earlier tax year.
If you reported the wrong pay or deductions
To correct a mistake made in the current tax year, update the year to date figures in your next regular Full Payment Submission (FPS).
Submit another FPS with the correct year to date figures if you reported the wrong pay or deductions for the following tax years:
-
- 2020 to 2021
- 2021 to 2022
- 2022 to 2023
If you reported the wrong pay or deductions in the 2018 to 2019 and 2019 to 2020 tax year, you can correct this by submitting an Earlier Year Update (EYU) or a further FPS with the correct year to date figures.
If you reported the wrong pay or deductions in the 2017 to 2018 send an EYU showing the difference between what you originally reported and the correct figure. You can only use an EYU for tax years when you were reporting online in real time.
If your payroll software cannot send an EYU, you can go to Download HMRC’s Basic PAYE Tools.
The rules are different if you find a mistake in your final FPS of the year at Payroll: annual reporting and tasks: Send your final payroll report.
Correct an employee’s student loan repayments
What you need to do depends on when you made the mistake. Information on errors deducting student loan or postgraduate loan repayments is available at Student loan and postgraduate loan repayment guidance for employers.Correct an employee’s National Insurance deductions
What you need to do depends on when you made the mistake.
If the mistake was in the 2023 to 2024 tax year
Repay or deduct the balance from your employee. Update the year-to-date figures to the corrected amount in your next regular Full Payment Submission (FPS) or send an additional FPS.
If you deducted too little, you cannot recover more than the employee’s National Insurance contribution due that month.
Example
You deducted £100 too little in January. In February, your software calculates an £80 National Insurance deduction, which means you can recover up to £80 towards the underpayment that month (a £160 deduction in total). Recover the remaining £20 in another month.
If the mistake was in the tax years between 6 April 2020 and 5 April 2023
Send an FPS with the amount you should have deducted if the mistake was in the following tax years:
- 2020 to 2021
- 2021 to 2022
- 2022 to 2023
You will need to write to HMRC if both the following apply:
- the difference is negative because you deducted or reported too much National Insurance
- you still owe your employee a refund, for example, because they have left your employment
In the letter you will need to include:
- the reference ‘Overpaid NI contributions’
- your employee’s name, date of birth and National Insurance number
- why you overpaid National Insurance contributions
- which tax years you overpaid in
- how much National Insurance you overpaid
- why you are unable to make the payment to the employee
For a claim for one employee, send the letter to:
HM Revenue and Customs
National Insurance Contributions and Employer Office
BX9 1AN
For a claim for more than one employee, send the letter to:
HM Revenue and Customs
National Insurance Contributions and Employer Office
BX9 1BX
If the mistake was in the 2018 to 2019 and 2019 to 2020 tax years
Send an FPS with the correct year to date National Insurance if:
- your payroll software will let you submit an FPS
- you can pay any National Insurance refunds you owe
If you cannot use an FPS, send an Earlier Year Update (EYU) with the difference between:
- the amount of National Insurance you originally deducted
- the correct amount you should have deducted
If the difference is negative (because you deducted or reported too much National Insurance), you also need to set the ‘NIC refund indicator’ to:
- ‘Yes’ if you have refunded your employee or no refund was due
- ‘No’ if you still owe your employee a refund (for example, because they have left your employment)
If the mistake was in the 2017 to 2018 tax year
Send an EYU with the difference between:
- the amount of National Insurance you originally deducted
- the correct amount you should have deducted
If the difference is negative (because you deducted or reported too much National Insurance), you also need to set the ‘NIC refund indicator’ to:
- ‘Yes’ if you have refunded your employee or no refund was due
- ‘No’ if you still owe your employee a refund (for example, because they have left your employment)
If there is an underpayment
If you deducted too little National Insurance, pay HMRC the underpayment straight away. You can then recover the amount from your employee by making deductions from their pay.
You cannot recover more than the amount of National Insurance the employee owes in a month (so the employee pays no more than double their normal contribution). Carry over the difference to later months — you can only make deductions in the tax year when you made the mistake and the year after.
Guidance on what to do if Fix problems with running payroll: You made a mistake in your FPS or EPS has recently been updated.
Reporting PAYE information in real time when payments are made early at Christmas
In 2019 HMRC introduced a permanent easement on reporting PAYE information in real time. HMRC are aware some employers pay their employees earlier than usual over the Christmas period. This can be for a number of reasons, for example, during the Christmas period the business may close, meaning workers need to be paid earlier than normal.
If you do pay early over the Christmas period, please report your normal or contractual payday as the payment date on your Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.
For example, if you pay on Friday 15 December 2023 but the normal or contractual payment date is Friday 29 December 2023, you will need to report the payment date on the FPS as 29 December 2023 and ensure the submission is sent on or before 29 December 2023.
This will help to protect your employees’ eligibility for Universal Credit, as reporting the payday as the payment date may affect current and future entitlements.
The overriding PAYE reporting obligation for employers is unaffected by this exception and remains that you must report payments on or before the date the employee is paid.
