After a lengthy debate with the industry, HMRC have published some guidance for employers of harvest casuals and casual beaters. This is an important area for the agricultural and rural sector. It is good to see that the long standing agreements still stand. However payments must be reported under RTI in most cases.
The long standing agreements between HMRC and the National Farmers Union on payments to harvest casuals and one with the Country Land & Business Association for casual beaters, together with related agreements for NIC are unchanged. In many cases, although the payments are taxable, the employer is not required to deduct tax.
What has changed is the reporting of the payments. Prior to 6 April 2013 most payments were reported to HMRC annually on form P38A together with just the name and address of the casual employee. Since then, if the employer has an open PAYE scheme, these payments to harvest workers and casual beaters must be reported in real time, with more information – eg NINOs if known.
The permanent relaxation for such employees means that if the conditions are met reporting can be made weekly (and if the terms of the temporary relaxation for employers with fewer than 50 employees are met, returns can be made when the payroll is run and in any case by the tax month end). But the key problem is that each day’s work is usually a separate employment so HMRC’s guidance indicates that a separate return must be submitted for each day that payments are made, even if they are submitted say weekly.
HMRC have suggested two possible ways of reporting – in both cases the tax code operated on the FPS will be the NT tax code - to indicate that nil tax has been deducted. The alternatives are:
- Record as a new employment each day - for a daily paid harvest casual or beater, show both a start date and finish date on each FPS. If the harvest casual or beater is daily paid this date will be the same in each field of the FPS and show the pay frequency for the payments as made on an 'irregular' basis. The irregular payment pattern indicator is explained in HMRC's guidance 'What payroll information to report'.
- Treat the amount as a one-off payment in a continuing employment - if reported in this way the employer must ensure that if further payments are made to the same individual for a separate period of employment that any previous payment(s) to that person made for that tax year are excluded; ie the taxable pay in the pay period and taxable pay to date in this employment are the same for that further payment.
The potential problems for employers are that:
- To record each payment to a daily worker each day will require a significant amount of inputting into a payroll software system, especially if a record cannot be cloned after the first time. In addition, for some licences this counts each new employment towards the maximum number that a licence is for. Therefore, if a farmer has 10 people turning up 20 times to do a day’s harvesting of perishable crops this is technically 200 employments, requiring a licence for 200 staff, even if there are never more than 10 individuals. This can significantly increase payroll costs.
- To record each payment as a one-off payment requires software with that functionality. We understand that not all software has this, which would mean either preclusion from using this method of changing software, which often has significant costs associated with it, especially if the existing software ties into other processes.
There are no special agreements if an employee is taken on for more than two weeks, and the usual process for operating PAYE must be followed.
The new guidance is available at http://www.hmrc.gov.uk/payerti/employee-starting/special-situations/temps/harvest-casuals.htm
We would be pleased if any members who are dealing with reporting in this area could let us know how they are coping with these options. Please send comments to John Kimmer at jkimmer [at] att.org.uk.