No. 569/2014
Ref: PTC/RE/dj/020
Date: 10 September 2014
TO ALL BRANCHES WITH POSTAL MEMBERS
Dear Colleague
RE: MTSF: Buy Down of Hours
As the result of a decision by HMRC the lump sum compensation payment for buy down of hours as part of MTSF is now to be treated as taxable.
The decision is effective from the beginning of the current tax year (6 April 2014) but following representation from the union Royal Mail has agreed to make a central settlement with HMRC for all tax and national insurance for buy downs made between 6 April 2014 and 30 September 2014. From 1st October 2014 buy down payments will be made after deduction of tax and national insurance. The business is writing to all employees considering buy down to advise them of the position.
CWU and RM agreed in 2003 that the lump sum payment for buy down of hours should be treated as tax free as part of the provision for redundancy payments of up to £30,000 to be made free of tax. The HMRC confirmed its agreement to this arrangement in writing at the time. However, the HMRC has now taken the view that its agreement eleven years ago was given in error. HMRC is not seeking retrospective payments but regards all payments made after 6th April 2014 as being subject to tax and national insurance at the appropriate rate.
Royal Mail has expressed its disappointment at HMRC’s position but has no alternative but to comply. The company’s agreement to meet the tax liability for payments made between 4th April and 30th September this year means that no one who received a buy down in that period will be required to pay tax and national insurance on it individually.
The decision of the HRMC is obviously extremely disappointing and is likely to de-incentivise buy downs. The union is in discussion with Royal Mail on potential alternative arrangements. Royal Mail is exploring the possibility of an option for payment to be made into pension as a tax free alternative. The union has raised the possibility of an option for the individual to continue to receive their previous rate of pay for a period of time as an alternative to an upfront lump sum. These alternatives will be discussed in parallel with the review of redundancy and excess travel expenses terms due to conclude on 1st January 2015.
Any enquiries should be addressed to Ray Ellis’s department, quoting reference PTC/RE/dj/020.
Email address: rellis@cwu.org
Yours sincerely
Ray Ellis,
Assistant Secretary
UPDATE:
http://www.royalmailchat.co.uk/communit ... 15&t=66353" onclick="window.open(this.href);return false;4.2 Review of MTSF and enhanced buy-down options
The MTSF Review due in January 2015 will now commence in May 2015 and conclude in June 2015. In the meantime, current MTSF terms will continue, with the exception of the following enhancements to the buy-down options, which will apply only until the 31st May 2015.
When buy-down of hour’s compensation is taken as a lump sum payment, the company will enhance the overall payment to cover the cost of 50% of the lower rate tax and National Insurance levy on the original sum.
Employees will have the opportunity for their buy-down of hour’s compensation payment to be paid as an additional voluntary contribution into their Royal Mail Pension Plan or Royal Mail Defined Contribution Plan. Under this option the lump sum due will be calculated with a 25% increase to the current MTSF formula. This option also means employees will not be liable to pay any income tax or National Insurance contribution under current HMRC guidelines.
In preparation for the formal MTSF Review, in the period between now and May 2015 the national parties will scope the overall cost of the MTSF package and the age profile of employees that have utilised it, with a view to restructuring the package in a way that will better support the overall age profile of the workforce and respond to the challenges of the future.
