More SMEs to be affected by auto-enrolment

Hart Shaw is warning that SMEs are likely to struggle to budget for auto-enrolment.

Recent data from The Pensions Regulator has revealed that approximately half a million more businesses will have to enrol than previously anticipated and will face higher employment bills as they set-up their pensions. 

Apparently, around 1.8m small and micro employers will need to meet their pension duties over the next three years, compared to the previous estimate of 1.3m. Under the new regulations, employers must contribute at least one per cent of eligible employees’ qualifying earnings, rising to two per cent in October 2017 and then three per cent a year after that. However, these contributions are not subject to National Insurance (NI) and they can be offset against business profits for tax purposes.

In addition to the employer’s contribution employee’s will also be required to make contributions which many employee’s see as an extra deduction being made by their employer and it is essential that businesses communicate clearly and at an early stage with their employees to avoid any negative feelings.

But as well as the financial implications this will have for SMEs, businesses could be hit with further costs if they fail to comply with their duties as an employer. If a scheme has not been established by its staging date, the cost could escalate, with fixed penalty fines ranging from £50 to £2,500 a day.

Steve Vickers, Tax Partner at Hart Shaw said: “It is important to remember that the contributions must be paid into your scheme at each pay reference date. I would therefore advise SME owners to calculate how much they are likely to have to pay in contributions at each date, and set their budget accordingly.
“Hart Shaw can help by providing payroll services as well as sound financial advice for SMEs. Receiving help can reduce the cost of auto-enrolment for your business by ensuring that you’re compliant and avoid financial penalties,” concluded Steve.

For further information Steve can be contacted on 0114 251 8850 or steve.vickers@hartshaw.co.uk.

 

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Essential employer update 2015

Real Time Information reporting of payroll information is now firmly established and

Download the ‘Essential Emlpoyer Update 2015’ here

HMRC are getting tough. We consider the penalties for failures to file or pay on time as these become automatic.

We also summarise the implications of a high profile Employment Appeal Tribunal decision on the calculation of holiday pay and the introduction of Shared Parental Leave and Pay. So employers and employees will be interested to know what these employment law changes mean.

Our Essential Employer Update also considers coding notice changes, NICs for under 21s and the planned changes for employee benefit and expenses reporting.

 

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New ‘agency’ rules

Do the new ‘agency’ rules apply to you?

HMRC has been concerned for some time about the loss of tax (particularly employers’ NIC) where a worker is paid via an agency without PAYE and NIC being applied. As a result legislation has now been passed which changes the long standing ‘agency’ rules.

One consequence of the changes is that more businesses may be affected by the agency rules.

 

What do the agency rules do?

The agency rules apply, for example, when an agency, such as an employment agency, sends individuals on temporary placements with their clients. If the agency does not treat the individual as their employee, the agency rules require the agency to nonetheless treat the individual as their employee if there is supervision direction and control of the individual by the end client.

So, individuals may not be employees of anyone but the agency rules deem them to be employees of the agency.

 

So what’s the problem?

HMRC considers that businesses in certain business sectors have participated in arrangements whereby the agency rules have been avoided. How they arranged this is summarised in the appendix to this letter.

 

What changes have been made to the agency rules?

The key change has been that the obligation of personal service before the agency rules can apply is removed along with the concept of an agency contract. This means that the rules now potentially apply to more businesses.

From 6 April 2014, a business which makes payments to a worker must treat those payments as subject to PAYE and NIC if:

• the worker personally provides services to a client of the business
• the services are provided under a contract between the business and the client
• the worker is subject to, or can be subject to, supervision, direction and control by someone as to the manner in which the services are provided
• any payments are not already taxed as employment income.

 

Exclusions

There have always been some specific activities excluded from the agency rules and these are detailed in the appendix.

 

Points to consider

If as part of your business you arrange for individuals to perform personal services for a client, you need to consider whether the agency rules apply. This is particularly the case if your client makes specific payments to you for these services and you make payments to the individuals in respect of these services.

You will not however be affected if the individuals are already treated as your employees or the individuals provide the services through their own company.

For other individuals the two key points to consider are:

• are the workers personally providing services to the client or is the nature of the contract you have with the client more that you are undertaking a work project for your client as part of which you use workers to progress the project?
• if the workers are personally providing services to the client, are the workers subject to supervision, direction and control by someone as to manner in which the services are provided?

An example of the personal provision of services and a summary of the meaning of supervision, direction and control can be found here.

 

How we can help

It is not yet known how HMRC will investigate the use or non-use of the new agency rules but, clearly, it is prudent to consider now whether the rules could apply so that consideration can be given to amending the terms under which work is undertaken for clients.

This is particularly important as an intermediary, from 6 April 2014, must keep and preserve records for individual workers when they are not deducting PAYE and NIC. From 6 April 2015 a quarterly return may need to be made to HMRC.

For further information please contact Steve Vickers, Tax Partner on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.

 

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Don’t be exposed to P11D problems

Employers are being warned about potential problems they may face filling in P11D forms.

Employers are required to submit P11D forms for each employee they have provided benefits or expense during the tax year.

Forms must be filed by July 6, setting out the full facts of each employee and the benefit in kind they have received, together with any expenses.

However employers need to ensure they can precisely establish the facts that need to be entered onto each form to avoid penalties for incorrect filing.

The importance of correctly filing P11D forms should not be overlooked. It may seem an easy option to simply copy figures from previous years’ P11D forms if you believe nothing has changes, but this might just be storing up problems for the future.

Many clients have difficulties in areas including the provision of vehicles, cars or vans, particularly deciding whether a vehicle is a pool vehicle or a company car.

If a vehicle is a pool vehicle, there must be evidence to prove this. If a vehicle is incorrectly identified as a pool vehicle, and this is not reported on P11D, then this could have serious consequences.

HMRC could, for example, seek to collect the unpaid tax, while also seeking Class 1A NICs, interest and penalties.

Other areas that could prove difficult for companies including interest free loans, particularly forgetting about overdrawn directors loan accounts.

If you need help filing P11D forms, it is also best to seek professional advice from a trusted accountant.

For further information, please contact Steve Vickers, Tax Partner at Hart Shaw on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.

 

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What’s in store for businesses in 2014 and beyond?

Yorkshire businesses shouldn’t fear the Chancellor’s 2013 announcements. Neither should they be celebrating.

In April 2015, there is some help for employers: Employers’ NIC is to be abolished for employees under 21. For those who believe in employee share ownership from next April there are small increases in the amounts employees may invest in both the Share Incentive Plan and the Save As You Earn scheme. Coupled with the already announced £2,000 NIC employment allowance and three new incentives aimed at indirect employee share ownership these measures are to be welcomed.

The proposed changes to the tax treatment of loans made by companies to their shareholders and directors have been postponed. So the 25% tax charge where the loan is still outstanding after the year end remains.

Affecting anyone operating using a partnership or Limited Liability Partnership, changes are coming in April 2014 which will mean many previously “self-employed” partners may find themselves back on the payroll, with the associated increases in NIC charges. Also aimed at partnerships and LLP’s from 5 December anti-avoidance measures are now targeting those with both corporate and individual members. Where profits were previously taxed on the corporate member (typically at much lower rates than the individuals suffered) if certain criteria are met, those profits are now taxed on the individuals.

In a similar vein, with an expected increase in tax revenue of some £400m new rules will target employment intermediaries which are being used to disguise employment as self-employment.

Osborne also announced measures to help small businesses with business rates. Retail, food and drink businesses with a rateable value of up to £50,000 could receive up to £1,000 off their rates for 2 years; any business moving into premises which have been empty for at least 12 months will only pay half business rates on that premises for 18 months; option to pay rates in 12 rather than 10 instalments; the double Small Business Rate Relief will continue for another 12 months to April 2015. It is expected this could benefit in excess of half a million small businesses.

Finally, good news for heavy road users; the expected fuel duty increase has been cancelled.

The tendency for successive governments announcing the “good” well in advance continues. The last date for the next general election is May 2015. Who knows what the next government will look like and how many of the trumpeted changes will actually become reality?

For further information please contact Steve Vickers, Tax Partner at Hart Shaw on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.

 

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Money Matters – Summer 2013

Hart Shaw’s summer newsletter, Money Matters is now available to download from our website.

Click here to download your copy.

 

In this edition:

The issue of overdrawn directors’ current accounts is our lead article where we consider the changes which were announced in the Budget. It is important to ensure these overdrawn amounts are cleared properly.

The Government has announced a new scheme for tax free childcare for working families. We consider the scheme and the circumstances when it will be available.

Many owner managers provide guarantees to institutions for loans made to their companies.  We report on a tribunal decision which considered whether tax relief is available when the guarantee has to be honoured.

With Real Time Information procedures now in force for the majority of employers our article looks at what happens if an employer fails to meet their obligations to file a return or pay on time.

Along with news on the restructuring of the State Pension, plans to introduce a £2,000 National Insurance employment allowance and an article considering how best to provide benefits for directors and employees, we are sure you will find something of interest.

Please contact us if you have any questions regarding any of the articles we have included in our newsletter or if you would like further information on a topic we have not covered. Your views are always important to us and we would welcome your feedback.

Brendan Hall, Marketing Co-ordinator

T: 0114 251 8850, Email: brendan.hall@hartshaw.co.uk

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HMRC to target property sales

As of September 2013, HM Revenue and Customs (HMRC) will begin a tax review into residential property sales.

 

The new Property Sales Campaign (PRC) will see HMRC reviewing the tax records of those who have sold residential properties but not reported them, to collect tax on undeclared gains.

 

People who come forward by 9 August and calculate and pay the tax due by 6 September may receive preferential treatment – for example they may be able to agree lower penalties than might otherwise apply.

 

The campaign is likely to focus on second homes, and according to HMRC, PRC will not apply to anyone who sells property as part of their business, through their company, partnership or as a trustee.

 

Those who sold property on or after 6 April 2012 should also not face scrutiny, as they have until 31 January 2014 to declare any taxable gains.

 

From September HMRC will be reviewing tax records of anyone who has sold a property and has not declared any taxable gains, since at least April 2007.

 

It is understood that the tax authority will utilise National Insurance numbers on Stamp Duty Land Tax (SDLT) forms to tie these in with income tax records of individuals.

 

While the campaign is primarily focusing on second homes, HMRC also plans to investigate sales of properties which could have been used for reasons other than residential accommodation, for example where a claim has been made for a tax deduction for home running costs.

 

For further information, please contact Steve Vickers, Tax Partner on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.

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2012 Budget Predictions

There’s a good deal of consensus that government borrowing needs to come down. Increasing tax revenues is part of the solution. But with no sign of a recovery to boost tax revenues, the pressure to raise tax rates remains. So what news will George Osborne deliver in his budget speech on 21 March?

Abolition of the 50p tax rate? This doesn’t affect most of us, but grabs many headlines. Many Tory MPs want it, but will they want to keep their Lib Dem colleagues (and voters) happy?

Raising the income tax personal allowance to £10,000 would be a popular move and the ruling parties have agreed to do this by 2015. It would certainly help low and middle earners, many of the former being in fuel-poverty.

Another option is a cut in national insurance rates. Surely though, a cut in income tax rates would be more “visible” and win more political points. With the latter not being touted, a cut in national insurance must be unlikely.

As for the two big “money spinners”: VAT and fuel duty, it’s anyone’s guess. Promised rises in fuel duty have already been postponed, and VAT rate reduction is contrary to past Tory promises. If I were a betting man I’d be backing something else.

Government think-tanks have been pushing for a further drop in the main rate of Corporation Tax from 26%. It’s already at its lowest I can remember, but last year the chancellor promised a further 3% reduction within 2 years.

What about a tax on expensive homes: often referred to as a “mansion tax”? The Lib Dem leader believes this could pay for tax cuts in other areas. This would be widely popular, but doesn’t get much, if any, support from his Tory colleagues.

My prediction is that whatever we get on 21^st March, most of us will lose more. Perhaps all we can hope for is that the pain is distributed sensibly and fairly.

Steve Vickers, Tax Partner at Hart Shaw

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Employers reminded to use correct employee details

Hart Shaw is reminding employers of the need to ensure that information they send to HM Revenue and Customs about their employees is correct.

The issue is particularly important as the Department for Work and Pensions (DWP) will start receiving real-time information on claimants’ employment income from October 2013. This means that HMRC will need to ensure that employee records held on the National Insurance and PAYE Service (NPS) system match those held by employers in order to avoid any errors or discrepancies.

Employers should ensure that details such as names, dates of birth and National Insurance numbers are exactly the same wherever they are used, particularly where employees have double-barrelled surnames or are commonly known by a different first name to that on their official records. When submitting any information to HMRC, employers should make sure they are using the correct details for all staff, rather than simply guessing what these might be.

HMRC has previously said that there are large numbers of missing National Insurance numbers and cases where data has simply been ‘made up’, which it will need to look into.

For further information please contact Steve Vickers, Tax Partner on T: 0114 251 8850 or email: steve.vickers@hartshaw.co.uk.

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Money Matters

Money Matters – a winter 2010 newsletter from Hart Shaw is now available to doanload via our website.

With the publication of three Finance Bills, 2010 has been an unprecedented year and seen many tax changes, so unsurprisingly our winter newsletter concentrates on tax issues.

Our front cover focuses on the restrictions relating to tax relief on pension contributions and the bad news that some high earners could find themselves with an additional tax charge.

If you are a high earner, has the introduction of a 50% top rate of income tax made you think that it may be worthwhile leaving the UK? We consider if this is a realistic option.

When is a car a pool car? To make sure there is no tax bill for an employee to pay, certain criteria must be met and increasingly HMRC are looking for employers to ‘prove it’. If your business has a pool car make sure that you can indeed ‘prove it’ and if you have any concerns please get in touch.

Another area under the HMRC spotlight is tax deductions for repairs and alterations to buildings. The deduction may be challenged but the cases we have highlighted show that HMRC don’t always win!

VAT is a complex area and now it seems paying what you owe is also becoming more complicated. New rules when paying by cheque were introduced in April 2010 and HMRC have recently thought it appropriate to a issue reminder. They have also issued revised guidance on correcting your own mistakes! Read ‘VATs it all about’ to find out more.

We also look at the increase in National Insurance Contributions and the decrease in corporation tax from April 2011. Finally, if you feel you have anything left to give away we look at the most tax efficient way to make donations to charity.

Included with the newsletter there are also special briefings where we look in more detail at:

– Year End tax planning tips for the individual
– Keeping the lid on Inheritance Tax
– Securing business success

Our Money Matters newsletter and these client briefings are available to download from our website via: http://www.hartshaw.co.uk/newsletters.htm