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Equestrian update: Payroll and benefits – what you need to know

Employing people for the first time

As a new employer there are a number of obligations you must adhere to and others that are desirable. Below are the main obligations and some guidance on areas to focus on.

Pay the national minimum wage (NMW)

From 1 April 2018 the NMW increases to the following rates:

 Age Hourly rate
 16-17 years £4.20
 18-20 years £5.90
 21-24 years £7.38
 25+ years £7.83
 

There is also a rate for apprentices of £3.30 per hour for those aged 16 to 18 or 19 and over in their first year, thereafter they are entitled to NMW. 

Ensure the person you wish to employ has the legal right to work in the UK

As a general rule, all British and EU Citizens have the right to work in the UK, but it is always worth running a check which can be done online using the GOV.UK website.

Check if you need to apply for a DBS check

DBS checks were formerly known as CRB checks and are required if any of your work is with vulnerable people, children or security.

Take out employers’ liability insurance

This will help protect you and your business in the event of an accident.

Written statement of employment

Where you intend to employ someone for more than a month, you must provide your employee with details of the job, including the terms and conditions. Although not compulsory, it is good practice to have a written and agreed contract of employment, which is updated regularly when the job, term or pay change.

Inform HM Revenue and Customs (HMRC)

You will need to notify HMRC that you are an employer, this can be done up to four weeks before your employee starts. An online notification can be made and will provide you with an employer PAYE reference number which is then used with all communication with HMRC.

Auto-enrolment and pension

If you become an employer for the first time on or after 1 October 2017, you will immediately acquire legal auto-enrolment (AE) duties for your employee(s). These duties apply from their very first day of employment. This is known as your duties start date. What you will need to do will depend on whether you have staff who need to be put into a pension scheme or not. This is determined by their age and level of earnings. From 6 April 2018 all employees need to be assessed against the following criteria:

  • Weekly gross earnings £116 and below – All employees aged from 16 to 74 have the right to join a pension scheme provided by the employer. 
  • Weekly gross earnings over £116 up to £192 – All employees aged from 16 to 74 have the right to opt in to an employer provided scheme. 
  • Weekly gross earnings over £192 – Employees aged 16 to 21 and from state pensionable age to 74 have a right to opt in. Employees aged from 22 to state pensionable age must be enrolled.

Where employees must be enrolled, the rate on contribution from 6 April 2018 is 2% for employers and 3% for employees. Employees do have the option to opt out if they wish.

Paying expenses and benefits in kind

The taxation of expenses and benefits in kind is a complicated area and one to watch out for.

From 6 April 2016, a general expenses exemption was introduced for amounts which would otherwise be deductible. Employers no longer need to apply to HMRC for a dispensation, provided that the employee would be able to claim a fully matching tax deduction and neither employers nor employees need to report reimbursed expenses where they meet conditions under the general expenses exemption.

As this means that all existing dispensations ceased to be effective after 5 April 2016 you should now be operating a system for checking that employees are incurring and paying expenses and at the point of reimbursement, be satisfied that the expenses are not taxable. Once you are satisfied that the exemption applies in full, the expenses and benefits in kind should not be reported on form P11D or payrolled.

There are a number of expenses and benefits often found in the equestrian world and the general tax treatment of these is set out below:

  • Mobile telephones – an employee can be provided with a mobile telephone by the employer without a benefit arising. The telephone and contract should be in the employer’s name.
  • Living accommodation – where you provide living accommodation to grooms and yard managers it can be exempt from tax. The exemption can be due to either: o the employee not being able to do their work properly without living in the accommodation provided; or o it is customary for an employer to provide the accommodation and it enables the employee to better perform their duties.
  • Ancillary property costs – where there is an exemption for the living accommodation costs this also covers council tax, water and sewerage charges paid by the employer.
  • Mileage payments – where an employee using their own vehicle for business purposes, then a tax free mileage allowance of 45p per mile can be made for the first 10,000 miles, thereafter the tax free rate drops to 20p per mile.
  • Cars and vans – where a vehicle is available to be used, but is not exclusively used by one employee, then often no benefit in kind arises. If an employee has exclusive use of a car or van and it is available for private journeys then a benefit in kind is likely to arise.
  • Incidental overnight expenses – where an employee is required to stay away from home, then an employer can pay a lump sum amount of £5 per night in the UK and £10 per night outside the UK to cover the employee’s incidental expenses without incurring any tax charge. 
  • Meals and subsistence – if you provide employees with a free or subsidised meal at a workplace canteen then there is no taxable benefit. The same applies to costs involved if the employee is required to work away from home covering accommodation, meals, car parking, travel costs.

The above gives a basic guide of the most common situations an employer will come across and the obligations they face. Every situation is different and it is always advisable to seek specific advice from an expert to ensure the legal and tax treatment you follow is correct.


Lucie Hammond - Associate Partner
Lucie Hammond
Associate Partner Contact details