National Minimum Wage – where are we now?

Falling foul of the National Minimum Wage rules can be expensive – as well as having serious implications for employer reputation. Many firms have been named and shamed for getting it wrong – are you compliant?

Employer errors

The National Minimum Wage (NMW) keeps appearing in the headlines. Recently the Department for Business, Energy and Industrial Strategy (BEIS) announced that some 230 employers had been named and shamed for failing to pay NMW and National Living Wage (NLW). The retail, hairdressing and hospitality sectors were among the most non-compliant. Because of BEIS intervention, more than 13,000 low-paid employees were due to receive £2 million in back pay.

But the final price tag for employers who hadn’t kept the rules was much higher. Between them, they were also fined a record £1.9 million. Business Minister Margot James said there was a clear message to employers. ‘The government will come down hard on those who break the law.’

BEIS report that common employer errors include deducting money from employees to pay for uniforms, not accounting for overtime and wrongly paying apprentice rates to workers. So, what is the latest on NMW and how do employers keep on the right side of the law?

NMW and NLW – the basics

NMW is the least pay per hour most workers are entitled to by law. The rate is based on a worker’s age and whether they are an apprentice. NLW applies to working people aged 25 and over. From 1 April 2017, the rate ranges from £7.50 per hour for those aged 25 and over, to £3.50 per hour for apprentices under 19, or for those aged 19 or over who are in the first year of an apprenticeship. Changes to NLW rates are in the pipeline from April 2018, so employers may need to plan for these now.

NMW/NLW rates are reviewed by the Low Pay Commission, but it is HMRC who police the system. Employers can be faced with court action if they don’t pay NMW/NLW. Penalties for non-compliance stand at 200% of the back pay due to workers. The maximum penalty per worker is £20,000. There is a provision to reduce a penalty by half if unpaid wages and penalty are both paid within 14 days.

Not everyone qualifies for the NMW/NLW. These include people who are self-employed: volunteers: company directors: family members, or people who live with an employer and carry out household tasks eg au pairs.

But most other workers are entitled to NMW/NLW, including pieceworkers, home workers, agency workers, commission workers, part-time workers and casual workers. There are also rules regarding agricultural and horticultural workers, with slightly different small print for England, Scotland and Wales.

In calculating pay for minimum wage purposes, the starting point is total pay in a pay reference period – before deducting income tax and National Insurance. Some payments are not included, such as loans and pension payments.

To add to the complexity, there is also something called the Living Wage, which is an hourly pay rate, set independently by the Living Wage Foundation. This isn’t anything to do with the government, and any employer who pays this does so entirely voluntarily.

Latest guidance: social care workers

HMRC have updated their guidance to clarify how NMW applies in the social care sector for workers carrying out ‘sleepover shifts’, following confusion over whether such shifts qualified for NMW. BEIS had suggested sleepover shifts carried out before 26 July 2017 qualified for a flat rate allowance, not NMW. But the decision is that NMW does apply, and applies retrospectively.

This could have left employers with bills of up to six years in back pay and penalties. But from 26 July, enforcement activity for sleepover shift pay is suspended until November, with retrospective penalties for sleepover shifts before 26 July 2017 waived. The actual back pay is still due, unless employers can show they can’t pay. Although it is envisaged that underpayments will be pursued from this date, the government says it is committed to minimising the impact of future minimum wage enforcement in the social care sector.

If you would like to discuss any of this further then please get in touch 0116 2423400

Running a payroll can be time consuming and complicated and divert resources from the core activities of your business. We can address this by installing payroll software and training your staff. Outsourcing this activity also helps relieve the pressure and we can offer cost-effective solutions. We are able to provide the complete service, what ever the size or complexity of your business, or simply provide support when needed. If you would like a quote then please call 0116 2423400 or email info@torrwaterfield.co.uk

Proposals to extend pensions auto enrollment to younger workers

The government has announced proposals to extend pensions auto enrolment to include younger workers and to amend the way in which contributions are calculated.

According to the press release:

The review’s recommendations, which will now be progressed and legislated for where necessary, will see:

  • automatic enrolment duties continuing to apply to all employers, regardless of sector and size
  • young people, from 18 years old, benefiting from automatic enrolment, introducing 900,000 young people into saving an additional £800 million through a workplace pension
  • workplace pension contributions calculated from the first pound earned, rather than from a lower earnings limit – this will bring an extra £2.6 billion into pension saving, improving incentives for people in multiple jobs to opt-in, and simplifying the way employers assess their workforces and calculate contributions
  • the earnings trigger remaining at £10,000 for 2018/19, subject to annual reviews
  • contribution levels reviewed after the implementation of the 8% contribution rate in 2019
  • the government testing a series of ‘targeted interventions’ – including through opportunities to work with organisations who act as ‘touch points’ for the 4.8 million self-employed people, such as banks and those who contract labour – to explore how technology can be used to increase their pension saving.’

Under auto enrolment, employers are required to automatically enrol all eligible workers (generally employees) into a workplace pension scheme and pay a minimum contribution into their pension. Employees do, however, have the right to opt out of auto enrolment.

Currently workers who are aged between 22 and the State Pension Age with earnings of £10,000 per annum are eligible to be auto enrolled. Younger employees and those who do not meet the minimum income requirement can opt to make pension contributions.

The government plan to reduce the lower age limit to 18 by the mid 2020s, in order to encourage younger workers to get into ‘the habit of saving’.

David Gaulke, Work and Pensions Secretary said:

‘We are committed to enabling more people to save while they are working, so that they can enjoy greater financial security when they retire. We know the world of work is changing, so it is only right that pension saving does too. This ambitious package will see more people than ever before helped onto the path towards building a secure retirement.’

Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), stated:

‘Requiring employers to contribute from the first pound of earnings will mean that, by 2019, hundreds of thousands of small employers will have to pay up to £180 more per employee each year. ‘For employers in certain sectors, such as care and hospitality where margins are tight, this will really add up.’

Contact us if you would like help with payroll and auto enrolment. 0116 2423400 or info@torrwaterfield.co.uk

Tax Events are due on 19th January 2018

The following Tax Events are due on 19th January 2018:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th October 2017 to 5th January 2018

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Where the payment is made electronically the deadline for receipt of cleared payment is 22nd January 2018. In year interest will be charged if payment is made late. Penalties also apply.

PAYE, Student loan and CIS deductions are due for the month to 5th January 2018.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.  

Where the payment is made electronically the deadline for receipt of cleared payment is 22nd January 2018. In year interest will be charged if payment is made late. Penalties also apply.

Why do I need to keep my bookkeeping up to date?

Happy New Year! This is the 1st post of the year & hopefully it will help you to start thinking about how to organise your business over the next 12 months. 

As we are all aware, Making Tax Digital is fast approaching meaning you need to have bookkeeping software in place for your business that you like! 

It may take quite some time to find bookkeeping software that you get along with and understand. There are many out there including: Xero, Sage One and Iris Kashflow.

Keeping your bookkeeping up to date can be good for many reasons:

  • You can have an up to date profit and loss account to see how your business is doing and compare it to other periods
  • Review your VAT return to look at liabilities
  • You can make your own sales invoices on most bookkeeping software which can save a lot of time
  • You can also keep track of your creditors and debtors which will lead to better cash control and more reliable forecasting

In my experience the bookkeeping software that I have personally found best, and clients who have no bookkeeping experience have seemed to like the most, is Xero. This is for many reasons, some of them being the following:

  • Bank feeds – We all know that typing up your bank can be very time consuming and then you come to reconcile it you’re 1p out! This is why I love bank feeds. Everything is pulled through from your online banking, meaning you do not need to worry about that 1p; all you have to do is match the bank receipts against sales invoices and payments to purchase invoices. Xero also has the function of ‘rules’ meaning if you have a standing order set up for example £25.00 to Vodafone every month, you can create a rule to routinely post this bank payment to telephone expenses with the specified VAT treatment.

 

  • Submitting your VAT return online. Once you are happy with your VAT return on Xero you can ‘File it now’ meaning you just need to put your government gateway login information on to Xero and it will be submitted for you – unfortunately you still have to make the payment to HMRC!

 

  • Paperless record keeping – How many of us have an office full of the past 6 years of records? Everyone I’m hoping! This is a really handy feature with Xero, especially if you like a tidy office.  With Xero you can attach a pdf copy of the invoice online meaning there will always be a copy of that invoice and you will not have to keep a paper version of it.

 

If you are looking into starting your bookkeeping with online software and would like some advice on which one is best for your specific  needs, or would like some training, please get in touch with us on 0116 242 3400.

Georginda Hare, Bookkeeper 

The Apprenticeship Levy

The Apprenticeship Levy is charged on employers’ “paybills” at a rate of 0.5%. The levy is payable through Pay as You Earn (PAYE) and is payable alongside income tax and National Insurance. To keep the process as simple as possible “paybill” will be based on total employee earnings subject to Class 1 secondary NICs.

Each employer receives one annual allowance of £15,000 to offset against their levy payment. There is a connected persons rule, similar to the Employment Allowance connected persons rule, so employers who operate multiple payrolls are only be able to claim one allowance.

1.) If you’re an employer with a pay bill over £3 million each year, you must pay the apprenticeship levy from 6 April 2017. You can find out how to do this here.

You will report and pay your levy to HMRC through the PAYE process.

The levy will not affect the way you fund training for apprentices who started an apprenticeship programme before 1 May 2017. You’ll need to carry on funding training for these apprentices under the terms and conditions that were in place at the time the apprenticeship started.

Detail on how to setup and use your online account can be found here.

2.) If you do not have to pay the levy then you can still receive support to pay your apprentices.

From May 2017, you will pay 10% towards to the cost of apprenticeship training and government will pay the rest (90%), up to the funding band maximum.

If you do not pay the levy, you won’t be able to use the apprenticeship service to pay for apprenticeship training and assessment until at least 2018.

Instead, you’ll need to agree a payment schedule with the provider and pay them directly for the training. The provider must prove that you have paid your contributions as a condition of government paying its contribution.

There are 2 different types of apprenticeships to choose from:

  • apprenticeship standards– each standard covers a specific occupation and sets out the core skills, knowledge and behaviours an apprentice will need; they are developed by employer groups known as ‘trailblazers’
  • apprenticeship frameworks– a series of work-related vocational and professional qualifications, with workplace- and classroom-based training

To choose training:

If you would like to discuss any of this further then please contact us on 0116 2423400

Becky Edwards, Payroll Manager 

Important changes to HMRC payment methods.

Important changes to HMRC payment methods:

HMRC are making the following changes to the way you pay tax.

 Paying at the Post Office

HMRC are withdrawing this service from 15 December 2017.

 Paying by Personal Credit Card

HMRC will no longer accept payments of tax by personal credit card from 13 January 2018.

Please note that payments by company credit cards are still accepted.

The following methods of payment will continue to be accepted;

  • Direct Debit
  • Online or telephone banking, which includes Faster Payments, Bacs and CHAPS
  • Debit card online or by telephone

For further details please see;

https://www.gov.uk/pay-self-assessment-tax-bill

https://www.gov.uk/pay-corporation-tax

https://www.gov.uk/pay-paye-tax

Don’t overlook your December employer PAYE/NI payment

The December payment deadline is a little way off but will soon be upon us. Any electronic payment for the tax period ended 5 December 2017 must clear into the HMRC account by Friday 22 December 2017.

If you pay by cheque in the post, payment must reach the Accounts Office by 19 December.

If you shut down early for Christmas we want to remind you to pay on time or make arrangements to ensure your payment will be made on time.

If you pay the right amount at the right time and use your 13 character Accounts Office reference you won’t incur interest and Late Payment Penalties.

If you would like to discuss any of the above please contact us on 0116 2423400

Autumn Budget 2017

Yesterday saw a budget that focused, as expected, on housing and a stormy economic forecast. Our full summary is available on our website, but the key tax developments are summarised below.

Personal Tax Rates and Allowances

The personal allowance is currently £11,500 and will increase to £11,850 in April 2018. The higher rate threshold similarly increases from £45,000 to £46,350. Phillip Hammond reaffirmed his commitment to raise these thresholds to £12,500 and £50,000 respectively by 2020.

 National Insurance for the self-employed

 After the embarrassment of Mr Hammond’s U-turn earlier this year after attempting to abolish Class 2 National Insurance and increase Class 4, it was announced that in order to give sufficient time for a more popular proposal to be devised, there will be a delay of one year before any reform.

Capital Gains Tax

 After unfavourable consultation, the proposal for a 30-day window between Capital Gains arising and the tax being due has been deferred until April 2020.

 Research and Development

 Large companies claiming relief for research and development under the RDEC scheme will see their credit increase from 11% to 12% as part of plans to help the economy grow after Brexit.

Corporation Tax

Indexation Allowance – a long standing relief for companies making capital gains will be frozen from 01 January 2018. This allowance protected companies from gains that arise as a result of inflation and as a result no relief will be available for inflation accruing after this date. This move is perhaps unsurprising, with property investors more often operating through a limited company as a result of this allowance and the increased taxation of landlords in recent budgets.

 Stamp Duty

 With the youth vote rocketing in the last election, the government has decided to act further on the concerns that first time buyers are struggling to get on to the property ladder. Stamp duty will be abolished immediately for first time buyers purchasing properties worth up to £300,000. Those buying their first houses in expensive areas such as London will pay no stamp duty on the first £300,000 of properties costing up to £500,000.

 Value Added Tax (VAT)

 The VAT registration threshold will remain at £85,000 p/a for two years from April 2018. This will come as a relief for many, as some predicted this could be lowered to nearer the EU average of £25,000.

Making Tax Digital (MTD)

 As announced in July, no business will be mandated to use MTD until April 2019, and then only for VAT obligations. The scope of MTD will not be widened until April 2020 at the earliest.

The above are only the areas that I feel will be relevant to the majority of our clients, other areas and greater detail can be found on our website, click here. 

Please contact us on 0116 242 3400 if you have a specific query.

Matt Smith.

HMRC’s Worldwide Disclosure Facility (WDF)

This is a facility that the Inland Revenue introduced in 2016 which allows the voluntary disclosure of any UK tax liabilities that relate to offshore income or assets, which have not previously been disclosed to the UK tax authorities, to be declared.

This includes:

  • Income arising from a source outside the UK
  • Assets situated or held outside the UK
  • Activities carried on wholly or mainly outside the UK
  • Where the funds connected to unpaid tax are transferred outside the UK

Which years?

  • The facility applies to all tax years up to and including 2015 to 2016.
  • If HMRC has sent you a tax return for that year, or any tax year from 2013 to 2014 which is still outstanding, you must complete the return and you must not include these tax years on this disclosure form.

 

By contacting the Inland Revenue, rather than the Inland Revenue contacting you, the penalty regime will be less harsh.

 

If you think that the above applies to you then please get in touch with us as soon as possible so that the Inland Revenue can be notified. 0116 2423400

Julia Harrison, Tax Manager 

Hot Topic Making Tax Digital for Business

The government have issued information on how Making Tax Digital for Business (MTDfB) is expected to work for VAT once the rules are introduced in April 2019.

Under the proposed rules, which have been issued subject to consultation, VAT registered businesses with turnover over the VAT registration threshold will be required to submit their VAT return digitally using software. Businesses with a turnover above the VAT threshold (currently £85,000) will have to:

  • keep their records digitally (for VAT purposes only) and
  • provide their VAT return information to HMRC through Making Tax Digital (MTD) functional compatible software.

It has also been confirmed that MTD will be available on a voluntary basis to other businesses, for both VAT and income tax.

Exemptions will be available where HMRC are satisfied the business is run by a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications, some insolvent businesses; or where HMRC are satisfied that it is not reasonably practicable to make a return using an electronic return system for reasons of disability, age, remoteness of location or any other reason.

The proposed rules include provisions that where a business is in scope for MTD the business must use functional compatible software to meet the new requirements. This software will either be a software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API). The functions of the compatible software include:

  • keeping records in a specified digital form
  • preserving digital records in a specified digital form
  • creating a VAT return from the digital records and providing HMRC with this information digitally
  • providing HMRC with VAT data on a voluntary basis and
  • receiving information from HMRC via the API platform that the business has complied.

Businesses will need to preserve digital records in the software for up to six years. The digital records include:

  • ‘designatory data’ including the business name, principal place of business and VAT registration number together with information about which VAT accounting schemes they use
  • the VAT account that each VAT registered business must keep, by law, and
  • information about supplies made and received.

Further information on the required information can be found in Annex 1.

The government will make the final detailed requirements available to the software providers by April 2018 to allow time for the software to be developed and tested prior to the rules coming into effect from April 2019.

VAT returns

Businesses within the scope of MTD for VAT will be required to submit their VAT returns using their functional compatible software.

The information contained with the VAT return will be generated by pulling information from the digital records. This information will contain as a minimum the 9 boxes required for the completion of the VAT return but can also contain a specific data set of supplementary information, all of which will be pulled from the digital records.

Businesses submitting monthly or non-standard period returns will be able to continue to do so. The VAT annual accounting scheme will also be retained with the current conditions. Businesses making these types of returns will also be required to keep digital records and submit their VAT returns through software.

Under the new rules some businesses may choose to voluntarily provide further information:

Periodic updates
Businesses will be able to submit VAT information more frequently than their VAT return obligations require on a voluntary basis as a ‘voluntary update’.
Supplementary data
HMRC believes that businesses and HMRC could benefit from the submission of supplementary data detailing how the figures in the return are arrived at. HMRC believe this additional data will help them target non compliance. The software will allow for the voluntary submission of supplementary VAT data as part of a VAT return or a voluntary update. This will allow HMRC to test with businesses the extent to which they and HMRC can benefit from such supplementary data.

Timescale

VAT is the first tax to be reportable under MTD and businesses within the scope of MTD will need to keep their records digitally, using approved MTD functional compatible software, from 1 April 2019. The software will create the return from the digital records and this will need to be submitted under MTD for return periods starting on or after 1 April 2019.

We will keep you informed of developments in this area and ensure we are ready to deal with the new requirements. Please contact us for more information 0116 2423400

Applying for a Mortgage? SA302’s are no more. A Tax overview is what you need.

HMRC’s form SA302 is a tax calculation produced when you have filed your Self-Assessment Tax Return online.

It is a calculation for a particular tax year showing your income, your tax allowances, the amount of tax you’ve already paid and what tax, if any, you still owe or which should be repaid to you.

If your Tax Return has to be amended and it affects the tax payable, HMRC will send you a revised SA302 showing the up to date position for that particular year.

If you are asked to provide evidence of your income, for example if you’re applying for a mortgage, and you have been paying through self-assessment, you are likely to be asked for an SA302 for one or more tax years.  Another document you may also be asked to produce is a tax year overview.  This is a simple summary or statement of the tax due and tax you’ve paid during the tax year.

If you have filed your own tax return online, you can access your HMRC account and print off both the SA302 and tax year overview as required.

HMRC have been encouraging taxpayers to obtain a copy of the ‘Tax overview’ and ‘Full Calculation’ from the online service for some time and, from 4 September 2017, they have confirmed that they will no longer send paper SA302s to agents on behalf of their clients.

There are a number of lenders that will accept the tax overview and printed calculation in place of a paper SA302 and HMRC are working on educating other lenders to increase acceptance so that, once the SA302’s are no more, mortgage advisors will be happy with these documents instead.

If you don’t know where to start getting your tax year overview or tax calculation, most accountants, including torrwaterfield, use commercial software to produce tax returns for their clients.  This automatically generates a tax calculation which is roughly equivalent to a form SA302.  The majority of mortgage providers have agreed with HMRC to accept this Tax Calculation and the Tax Year Overview which your accountant can print off for you.

For a complete list of mortgage providers and lenders who accept Tax Year over views please click here. 

If you would like any assistance on this, then please contact the office on 0116 242 3400.

James Yarnall, Accounts & Tax