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What’s new from 6th April

A number of changes have been introduced which take effect from 6 April 2013 for the 2013/2014 tax year and subsequent years. The changes, together with information regarding changes made during the previous year designed to address employer non-compliance, are outlined below.

National Insurance Rates and Thresholds

The rates of NI effective from 6 April 2013 will remain unchanged however the Lower Earnings Limit (LEL) has been increased to £109 per week. The Primary (employee) Threshold has been increased to £120 per week and the Secondary (employer) Threshold has increased to £117 per week.

In April 2009, the Upper Accrual Point (UAP) was introduced as the weekly upper cap on earnings when determining entitlement to the state second pension. From 6 April 2013, the Upper Earnings Limit (UEL) will rise above the UAP for the first time and the reporting requirements have been amended to reflect the change . As a result, changes to existing fields and new fields will be required on the T14 for the tax year commencing 6 April 2013 onwards. The new fields will contain details of earnings at the LEL, earnings above the LEL up to and including the Primary Threshold, earnings above the Primary Threshold up to and including the UAP, earnings above the UAP up to and including the UEL, earnings above the UEL, total employee’s and employer’s contributions payable and employee’s contributions payable on all earnings above the Primary Threshold.

More detailed information about the NI rates and limits, together with the NI tables can be found on the National Insurance Contributions page.

Employer National Insurance Holiday

From 6 April 2012, in order to reduce the costs to employers of taking on additional employees, an employer can apply to the Assessor for exemption from having to pay the secondary National Insurance Contribution where certain conditions are met. The scheme has now been extended to run until 5 April 2015, however exemption for an employee will only be granted for a maximum of two years. Further information can be found in Practice Note 182/13.

Compulsory Use of Online Tax Services for Employers - Year Two

In 2012, the Income Tax Division of Treasury introduced legislation which made the use of Online Tax Services compulsory for employers. Details can be found in Practice Note PN 175/12 which can be viewed here. This change has been introduced in a staggered approach.

The first phase began on 6 April 2012 with the compulsory use of the online Employer Tax Service for employers with more than 100 employees.

This year employers with more than 10 employees will be required to use the online Employer Tax Service which enables them to deal with the Income Tax Division via a secure and easy to use service. From 6 April 2013 these employers will be required to do the following online:

• submit the monthly remittance card (including ‘nil payments’) and make online payment of ITIP and National Insurance via debit and credit card or BACS transfer;

• submit employee commencing and leaving (T20/T21) forms online, and

• submit the annual return form online, including the submission of online T14 and T9 forms. This applies for the return due 5 May 2014.

Compulsory online filing will be introduced for all other employers from 6 April 2014.

The Assessor will consider, and be able to accept, any reasonable request from an employer who considers that they should be exempt from the compulsory use of Employer Tax Services.

The online Employer Tax Service also enables employers to view the following records:

• View a list of current and previous employees

• View the current code for each employee

• View a list of employees’ codes (form T6)

Other benefits of this online service include the provision of real-time updates and access to data for enquiry purposes, whilst reducing the reliance on paper documentation which is beneficial to the environment.

To access the online Employer Tax Services – first register for Isle of Man Government Online Services – login to www.gov.im/onlineservices and follow the instructions. For more information regarding these services visit the website at www.gov.im/treasury/incometax/services/onlinetaxservices.xml. The registration and enrolment system is straight forward and there is now a video on the website to assist new users. If any further assistance is required in carrying out the initial registration or for additional help in the use of the online Employer Tax Services, please do not hesitate to contact the Income Tax Division. A training session can be provided or a visit arranged.

Emergency codes

No changes to emergency codes have been made, therefore, the emergency codes to be applied in cases where no previous code has been issued in respect of an employee are shown below.

Employers should note that, from 6 April 2010, the non-resident allowance is no longer available. Therefore, code HR should also be applied to all existing non-resident employees from that date.

Rates of tax

No changes to rates of tax have been made, therefore, the existing standard rate of tax (SB), higher rate of tax (HR) and the non-resident rate remain at 10%, 20% and 20% respectively and should be applied as appropriate.

The 20% rate of tax should also be used for resident employees if the lower (“standard band”) rate (SB) has been exhausted in any pay period.

Measures to address non-compliance

It is important to remember that new measures to address non-compliance were introduced by the Income Tax (Instalment Payments) (Temporary Taxation) Order 2010.

The new measures took effect from 6 April 2010 and enable the Income Tax Division to issue penalties in cases of non-compliance as follows:

• failure to notify the Assessor within 14 days of becoming an employer and making the very first payment as an employer to an employee will result in the issue of a £250 penalty;
• failure to remit the correct amount of ITIP deductions by the due date will result in the issue of a penalty equal to 5% of the amount due; if all or part of the amount due remains outstanding after six months, an additional penalty equal to 5% of the amount outstanding will be issued;
• failure to submit a full and accurate employer’s annual return within 30 days of the end of the tax year will result in the issue of a £250 penalty, with a further £50 penalty being due for each day that the return remains outstanding;
• the T9 benefit in kind form is an integral part of the employer’s annual return and if any are not submitted with the return when benefits in kind have been provided to employees, the return may be deemed to be incomplete and therefore returned to the employer; the Income Tax Division will treat such returns in the same manner as other outstanding employer returns;
• failure to notify the Assessor within 14 days of engaging a new employee or of ceasing to engage an existing employee could be deemed to be a failure to comply with the regulations and could result in the issue of a £250 penalty;
• failure to retain all records and documents needed to support an employer’s annual return and return of benefits in kind for three years following the end of the year to which the return relates will result in the issue of a £250 penalty; similarly, the failure to keep every book, record and document needed to comply with the regulations for a period of three years following the end of the year to which they relate will result in a £250 penalty;
• failure to submit a full and accurate employer’s annual return within 30 days of the date of ceasing to be an employer will result in the issue of a £250 penalty, with a further £50 penalty being due for each day that the return remains outstanding;
• failure to comply with any other obligation contained within the Income Tax (Instalment Payments) Act 1974 and Income Tax (Modified ITIP) Regulations 1987 will result in the issue of a £250 penalty if a penalty for non-compliance does not already apply (for example, the failure to supply the employee with a payslip with each payment of remuneration).