PPE liability is calculated on the basis of a prescribed PSA1 form. This is generally requested by HMRC to send and agree during July and August so that liability can be settled before October 19 (postal payment) or October 22 (electronic payments) after the fiscal year in which benefits were granted. Note that for higher and additional tax payers (higher rate in Scotland), paying tax and niCs with an PPE can be costly due to the mark-up process, which can almost double the cost of making the initial benefit available. They must submit an annual calculation of the income tax payable and the Class 1B NIC. HMRC will verify the calculation and confirm the consent if the basic calculation appears to be correct. It should also be noted that individuals are Scottish (or Welsh) taxpayers for a full tax year. Therefore, if the code prefix changes in the middle of the year because someone has moved, the year-end code prefix should generally be followed, as this should reflect the status of the person for the fiscal year. Employers can check the position with employees whose code changed in the year prior to the closing of the EPI (s) for this fiscal year. To manage their resources, HMRC requests calculations that are submitted annually until a specified date that may differ by agreement, but which is usually July 31 or August 31.
It is interesting to note, however, that there is no legal time limit for submitting calculations, so no penalty can be imposed for not presenting your calculation until that date. If you don`t have a PSA agreement yet, our team of labour tax specialists can help you set up and contact HMRC to make sure the agreement contains everything you want to include now and in the future. With regard to the partial decentralisation of income tax in Scotland, Scotland now has powers over Scottish income tax rates and ranges under the Employment Act 1998, amended by the Scotland Act 2016. The Wales Act 2014 provides powers over Welsh income tax rates. Income tax in Scotland and Wales is levied on income defined as “non-savings, non-dividend-related” income; Overall, this includes employment income, earnings from self-employment, retirement income and income from property received by persons classified as Scottish or Welsh tax payers in a tax year. The instruction of the employers` bulletin is to identify workers on the basis of their tax code; In other words, Scottish taxpayers are characterized by an S prefix and Welsh by a prefix C (Cymru). This means that employers must monitor the provision of all in-kind benefits provided for the inclusion of PPE by the court at the beginning of each tax year and identify all workers in that jurisdiction according to tax brackets. Different PSA1 forms are available for each jurisdiction to be completed online. Before the partial decentralisation of income tax in Scotland in April 2016, there was no need for individual calculations or precise figures – suffice it to say, for example, that a $300,000 benefit had been granted and that about 20% of beneficiaries were taxpayers with a higher tax rate, the rest being the basic rate. This was a relatively simple way for employers to pay on what was due and proved to be a success in obtaining income.
If an employer is sure that it does not have employees who are Scottish or Welsh taxpayers (see below), this is maintained. It is in the interests of both Scotland and Wales to ensure that income tax revenues are maximized to fund public services in these jurisdictions.