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

14 Days left to submit your 2016/17 self assessment return

The following Tax Events are due on 31st January 2018:

Personal Tax Events

Deadline for submitting your 2016/17 self assessment return (£100 automatic penalty if your return is late) and the balance of your 2016/17 liability together with the first payment on account for 2017/18 are also due.

This deadline is relevant to individuals who need to complete a self assessment tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 NI, capital gains tax and High Income Child Benefit Charge liabilities. 

There is a penalty of £100 if your return is not submitted on time, even if there is no tax due or your return shows that you are due a tax refund.

The balance of any outstanding income tax, Classes 2 and 4 NI, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2017 is due for payment by 31st January 2018.  Where the payment is made late interest will be charged.

The first payment on account for 2017/18 in respect of income tax and any Class 4 NI or High Income Child Benefit Charge is also due for payment by 31st January 2018.

If we have already dealt with your self assessment return on your behalf you need take no action.

If you haven’t completed your self assessment return yet please contact us, we can help. 0116 2423400 or send us an email info@torrwaterfield.co.uk

When is a van not a van?

It’s not important whether the vehicle is a van. What’s important is that it’s not a car.

For VAT purposes it will be a car if:

It is of a kind normally used on public roads, has three or more wheels and either:

  • is constructed or adapted for carrying passengers; or
  • has roofed and windowed accommodation behind the driver.

Excluding:

  • Vehicles capable of accommodating only one person;
  • Vehicles with a gross weight of at least three tonnes;
  • Vehicles with a payload of at least one tonne;
  • Minibuses (for 12 or more people);
  • Caravans;
  • Ambulances, prison vans and other special purpose vehicles.

For P11D/capital allowances purposes it will be a car if:

It is a mechanically propelled road vehicle, which is not:

  • a goods vehicle (of a construction primarily suited to the conveyance of goods or burden of any description);
  • a motorcycle (fewer than four wheels and an unladen weight of no more than 425Kg);
  • an invalid carriage (specifically designed for disabled use and an unladen weight of no more than 254Kg); or
  • a vehicle of a type not commonly used as a private vehicle and unsuitable for such use.

People (at least living ones) aren’t goods or a ‘burden of any description’, so anything with seats in the back (other than a double cab pick-up type vehicle with a one tonne+ payload) is likely to be regarded as a car for direct tax purposes.

Anything with seats in the back and/or roofed and windowed accommodation behind the driver (other than a double cab pickup with a one tonne+ payload) is likely to also be a car for VAT purposes.

For clarification use the link below.

http://www.hmrc.gov.uk/manuals/eimanual/eim23110.html  

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

Linda Plumb, Credit Control

 

VAT: Overseas sales

VAT: Overseas sales

Below are some very basic rules of how to deal with VAT on overseas sales. If you ever come across these, please contact us as there are a lot more details which should be reviewed before anything is submitted to HMRC.

The following are basic questions that need to be answered before being able to decide whether VAT should be charged or not:

Are you supplying goods or services?

Are you supplying to a business or a consumer?

Where are they located?

Are they VAT registered?

Goods

EU:

VAT Registered Business-

If the VAT number has been provided by the Business and there is a VAT number on the invoice as well as documentary proof of export, VAT can be charged at 0%.

Non-VAT Registered Business or Consumer-

If the customer is not VAT registered you will have to charge VAT at 20%. However this is only true until the distance selling threshold is exceeded, which depends on the country concerned.

 Outside the EU:

If the Customer resides outside the EU, VAT can be charged at 0%.

 Services

EU:

All VAT and Non-VAT Registered Businesses-

VAT can be charged at 0%, if the service is for business purposes.

Consumer-

VAT must be charged at 20%.

However, if it is an ‘e-service’ you would have to charge VAT at that country’s own rate.

Outside the EU:

All VAT and Non-VAT Registered Businesses-

VAT can be charged at 0%.

Consumer-

VAT can be charged at 0% for the following services:

Electronically supplied services

Advertising

Legal

Accountancy

Consultancy

Supply of staff

Hire of goods

Telecoms and broadcasting

 

VAT must be charged at 20% on all other services.

If you have any queries, or require any further information on this, please do not hesitate to contact us 0116 2423400

Jess Cooper, Accounts & Tax 

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

Have you got a moment?

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Have you got a moment?

Do you dread hearing that in your office or, in fact, anywhere?

It invariably means that your plans have just been scuppered and that you will know have to spend a chunk of time looking at something completely different.

Exactly how long is a moment?

I guess I’ve always thought of it as being about 30 seconds but, if you’re looking for a proper definition, my dictionary simply gives it as “a brief period of time”.

It goes on to expand a little and ends with “momentous – of great importance” which implies anything but brief!

It seems from my quick research that in the Middle Ages they had a different concept of time measurement and that a moment would be equal to 90 seconds nowadays.

How should you respond to the initial question?

Clearly it depends who is asking!

My favoured response, used with care, would be something like “Yes – I’ll be with you dreckly!”

OK, so what does that mean?

“Dreckly” is a slang word in common usage in Cornwall.  It would appear to derive from “directly”, which would of course imply an immediate response.  However, in practice it has a meaning accepted to be “at some indeterminate point in the future”.

Now it crosses my mind that everyone has a different view on how many is a few … perhaps I’ll look into that another day.

Neil Ford, Technical Manager

When Do I Have To Register for VAT?

If you are aware of an increase in turnover, or are unsure about whether you should be VAT registered or not, the following points should help:                                                   

  • If your turnover exceeds the registration threshold of £85,000 over a rolling 12 month period then you will need to register for VAT; you will then need to calculate at what point your turnover broke this threshold.
  • Once you know when you exceeded the registration threshold, you need to register by the end of the following month. For example, if the threshold was breached on 31 August, you have to register by 30 September and will be registered from 1 October.
  • If you expect you will breach the registration threshold in a single 30 day period, you must register for VAT immediately.
  • If you are late registering for VAT, then you must pay what you owe from the point at which you should have registered; as well as interest there may be penalties which depend on what you owe and how late your registration is.
  • It is possible to get an exception from registering if your turnover goes over the threshold temporarily. To do this you need to write to HMRC with evidence as to why you believe your net turnover won’t go over £83,000 (de-registration threshold) in the next 12 months. HMRC will then respond confirming whether an exception has been granted or not – this is not always guaranteed – and if denied, they will register you for VAT.
  • You can also register at any point voluntarily – you must pay HMRC any VAT you owe from the date that you become registered.

If you are unsure, there is a helpful link online (www.gov.uk/vat-registration/overview) which explains in further detail the steps you should take when registering for VAT.

If you have any queries or concerns with regards to any aspect of VAT, feel free to give our office a ring on 0116 242 3400 and we will be happy to discuss this with you.

Jake Dempsey 

Accounts & Tax 

RESTRICTION ON INTEREST RELIEF ON RESIDENTIAL BUY TO LET PROPERTIES

As many owners of rental properties will be aware, from 6 April 2017 there is a restriction on the tax relief available on mortgage interest on residential Buy to Let (BTL) loans. The restriction, which is being phased in over 4 tax years to 2020/21, will eventually limit tax relief to the basic rate of income tax, currently 20%.

For a 40% tax payer (usually taxable income over £44,000) the staggering of the restriction means that over the next 4 years, tax relief on interest will be reduced by 1/8 each year to 50% of its 2016/17 level by 2020/21. For example, a 40% taxpayer paying £2,000 in BTL mortgage interest each year will currently be entitled to £800 of tax relief; this will reduce by £100 a year to £400 by 2020/21. As income is assessed before interest is deducted, more people will find themselves in the 40% tax bracket.

This, combined with the extra 3% Stamp Duty applying to additional residential homes being purchased, amounts to a significant increase in the tax burden relating to owning residential rental property.

The tax relief restriction does not apply to companies letting residential properties, so we are experiencing an increase in requests by individuals and couples wishing to set up a limited company to acquire properties they would like to buy for rental purposes. However, the increase in Stamp Duty still applies and commercial BTL mortgage rates tend to be higher than personal rates.

In some very restricted circumstances, it is possible to transfer existing rental properties into a limited company, taking advantage of incorporation relief to hold over Capital Gains, and in even more limited cases, to avoid payment of Stamp Duty on such a transfer.

If you would like to know more, please email peter.morris@torrwaterfield.co.uk or call 0116 2423400

New Lifetime ISA

The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from today (6 April 2017). HMRC have produced a helpful guide on the account. Some of which is reproduced below:

Opening a Lifetime ISA

You can open a Lifetime ISA if you’re aged 18 or over but under 40.

As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.

Saving in a Lifetime ISA

You can save up to £4,000 each year in a Lifetime ISA. There’s no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.

The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.

Example – you could save:

£11,000 in a cash ISA

£2,000 in a stocks and shares ISA

£3,000 in an innovative finance ISA

£4,000 in a Lifetime ISA in one tax year.

Your Lifetime ISA won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your Lifetime ISA.

Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

Government bonus

When you save into your Lifetime ISA, you’ll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.

Withdrawals

You can withdraw the funds held in your Lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.

A withdrawal charge will not apply if you’re:

using it towards a first home

aged 60

terminally ill with less than 12 months to live.

If you die, your Lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.

Transferring a Lifetime ISA

You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge.

If you transfer it to a different type of ISA, you’ll have to pay a withdrawal charge.

Saving for your first home

Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.

You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.

If you’re buying with another first time buyer, and you each have a Lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their Lifetime ISA without incurring a withdrawal charge.

Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.

If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both – but you’ll only be able to use the government bonus from one to buy your first home.

You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

In 2017/18 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.

If you would like to discuss any of this further then please get in touch.  0116 2423400 or info@torrwaterfield.co.uk