CWG2 (Further Guide) Changes 06 and 09 April 2024

The all-important CWG2 was first published on 13 February 2024 for tax year 2024/25.? The tax year has just begun; however, it has already been updated twice since then.? It is important to know what has changed and ensure we are referring to the most recent version.

The CWG2 is our go-to place for Income Tax and National Insurance issues where we require ‘more detailed information’ or information covering ‘some less common situations’.??

As such, it is an important document for employers should have, though useless if we don’t have the most up-to-date version.?

Here is the recent update.? Please ensure you have the latest version (dated 09 April 2024):

The update reads:

This must be broken down into its 3 amendments:?

1. Telling HMRC about tax-free lump sums to certain employees (disability, injury or ill health)
2. The rules about making salary advance payments and
3. Correcting references to employee National Insurance percentages so they refer to tax year 2024/25 throughout

This refers to the 6th point in the section ‘5.11.2 Action to take when you make such payments’, all about making a lump sum payment over ￡30,000 to compensate for loss of employment through disability, injury or ill health:?

• Before – the guidance indicated that ‘where such a payment is over ￡30,000, you may wish to agree with us before you pay the whole amount tax-free’
• NOW – this whole sentence has been removed

This is NOT salary advances as we refer to them in payroll.? It is, strictly, payments on account of earnings where an employer may facilitate an employee access to some of their salary before the date it is contractually due (an ‘early access scheme’ or ‘access to earned income scheme’, ether operated by the employer or a third party).? It is in section 1.8.1 ‘Advance of salary — Real Time Information (RTI) reporting’:?

• Before – the guidance indicated that where the employer facilitated a payment in account scheme, a Full Payment Submission (FPS) had to be sent to HMRC
• NOW – from 06 April 2024, employers must not send an FPS to HMRC, instead sending only one FPS for each pay period (see The Income Tax (Pay As You Earn) (Amendment) Regulations 2024 and The Social Security (Contributions) (Amendment No. 3) Regulations 2024 for the legislation enabling this)

When we make an advance to an employee, possibly because of an underpayment that will be corrected in the next pay period, this is a loan advance.? We give the employee an advance that represents the approximate net pay value and then recover this at the same time as correcting the gross pay.?

A payment on account is not the same as a loan advance.

Yes, references to 10% appear to have been changes to 8%, the rate of Primary National Insurance for earnings between the Primary Threshold and the Upper Earnings Limit.? There were also some references to 12% as well.??

Still I would query some dates, though:?

• Section 1.12 talks about extra payments made after payday but the November dates in the example must be for calendar year 2022 (as they are not for 2023, 2024 or 2025).? The concept is correct though
• Section 1.18.1 gives an example of an error made in the tax year but refers to tax year 2021/22

I expect these will be amended when the document is further proof-read.

The update reads:

This is reference to the ‘Yellow Book’ payment booklet which HMRC’s Agent Update 116 advised was being phased out in tax year 2024/25.? Reference to the P30BC have been removed and it has also been deleted from the section ‘Appendix 1 — other useful forms and guidance issued by HMRC’.?

Where this was used, for payments to HMRC that are still made by cheque, ?the PAYE reference number must be written on the back.

The only update that HMRC could always have made clearer is reference to salary advances.? They are payments on account of earnings which are not the same as what we know as salary advances (which are advance loans and treatment hasn't changed).?

Please ensure you are referring to the latest version of the CWG2 and store it electronically.