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Auto Enrolment = Workplace Pension

As we have been meeting with small and micro employers over Bristol and the South West my colleagues and I find that employers are unaware of the extra work and responsibilities Auto Enrolment brings.  For some employers they don’t realise that Auto Enrolment is the main part of workplace pensions being  the assessment of the employees.  All the TV adverts ‘workplace pensions – we’re in’ and general advertising seems to be directed at the employees and it is not clear to some that the workplace pension is the end product of Auto Enrolment.

What are the consequences of not being ready?

Research by The Pensions Regulator shows that “20% of small and micro employers whose duties come into effect in the coming months do not know the exact date their duties start. Employers who are not clear about this, risk failing to comply on time and are sometimes unaware they will have to pay the pensions contributions missing because of the delay”. This will be backdated to the company staging date (the date the company is legally required to Automatically Enrol all eligible employees) and in some circumstances the employer will be required to pay the employees contributions as well as their own.

Fines issued so far…

Every three months The Pensions Regulator publishes a quarterly compliance and enforcement bulletin that shows the number of fines they have issued.
Between April and June 2015 the regulator has used its powers and issued:

  •   119 compliance notices
  •   50 unpaid contributions notices
  •   68 fixed penalty notices
  •   0 escalating penalty notices
Fixed Penalty Notices

Failure to comply with a statutory notice leads to a fixed penalty notice being sent out with a fixed fine of £400. Failure to pay the fine and comply could lead to wilful noncompliance which could lead to prosecution.  68 fixed penalty notices were issued last quarter amounting to £27,200. To date, £132,800 has been collected from fixed penalty notices.

Escalating Penalty Notices

Since the start of Auto Enrolment only 4 escalating penalty notices have been issued. Taking a look at the fines below you can see why employers are hurrying to comply after they receive a fixed penalty notice, as a daily fine of £10,000 is too much for even the biggest companies to lose.

Number of persons

Prescribed daily rate (£)
1-4 50
5-49 500
50-249 2,500
250-499 5,000
500 or more

10,000

Doesn’t look too bad!?

Don’t be fooled by the small number of fines that have been administered between January 2012 and June 2015.

Now it is the turn of small and micro businesses to stage and in a survey carried out at The Friends of Auto Enrolment Conference in September 82% of industry leaders believe there will wide spread non-compliance for auto enrolment as company’s reach their staging dates in 2016/17.  To emphasise these results this quarter’s Pension Regulators bulletin stated that 20% of companies staging between now and November 2015 have no plans in place for Auto Enrolment and therefore could be facing fines.

Why should you plan early?

As we have stated before, this year there are 45,000-50,000 companies staging, next year there will be 51,000 companies per month staging.  Pension providers will be inundated and will have to start turning companies away leaving the employer with limited options and a very basic pension scheme such as NEST.  NEST is the Government scheme that has to accept any employer. Therefore, they like others will be inundated, putting a strain on the level of support and service you might receive.  It is also important to note that a pension company asks for 3-6 months to set up a scheme.

Employers that are staging between now and 1st November 2015 who haven’t prepared for their Auto Enrolment staging date are going to find it very difficult to find a pension scheme and set everything up in time.

You don’t have to wait

The alternative to leaving everything to the last minute is to bring your staging date forward! This will bring your costs forward but may help you to get the best benefits for your employees and reduce the risk of fines later.

As an employer it is your responsibility to provide your employees with a pension scheme.  By 2018 all companies will provide a pension scheme therefore by selecting a good quality scheme you will be able to differentiate your company from others.  This will help with employee retention and attracting the best calibre of recruits.

 Summary  

The clock is ticking, your staging date may seem along way away but the earlier you prepare the better pension scheme you will be able to select, and the risk of receiving any fines will be reduced.
If you are an employer of 5 staff or under then you will still want to prepare early as closer to your staging date NEST, and the other two small providers Now:Pension and People’s Pension, will be just as inundated as the big pension providers and will struggle to offer the support and service you will need.

Remember the pension scheme is the end result no matter what size your workforce is there will be additional administration and software costs.
Payroll Compliance Ltd can reduce the Auto Enrolment burden, please give us a call on 01275 858001 and speak to either myself Rachel, or Stephanie.  Alternatively email us at
info@payroll-compliance.co.uk and we will let you know how we can help.

The post Auto Enrolment = Workplace Pension appeared first on Payroll Compliance.

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What The Pensions Regulator doesn’t tell you!

Yesterday I met with a Financial Advisor from Sanlam Wealth Planning to discuss the different pension options for companies.  We were both in agreement that The Pensions Regulator’s Guide lacks clarity on how to weigh up your different options and doesn’t necessarily give the employer the whole picture (it is also very confusing and contradicts itself in places).
From our meeting a few interesting nuggets of information came to light that I wanted to share with you all. They concern eligibility, opting out, paternal leave and pensionable pay.

Eligibility

The Pensions Regulator categorises the eligibility of the workforce to show the employer the minimum number of staff that they are required to put into the company pension scheme. This doesn’t mean that a company may not offer the pension to all employees as part of its benefits package.  In fact a business might find this to be easier and more cost effective, as the assessment process of AE will be simplified so will save time and ensure that they are able to budget more accurately. Including all employees will also eliminate discrimination and offering a good benefit package will possibly attract a higher standard of employee and enhance employee retention.

Remember The Pensions Regulator is only setting out minimum requirements and over the years contribution costs will go up for both the employer and the employee.  As long as you set up a qualifying pension scheme you as the employer can create a bespoke offering for your employees.

Our advice is to speak to a Financial Advisor as soon as possible to get a better understanding of your options whether or not you want to follow the minimum requirements or tailor a scheme to suit your company.

The Importance of Scheme Rules

Did you know an employee can join and leave a company pension scheme as often as they want?

For example; Jane is automatically enrolled in the company pension scheme and pays into it for 6 months however, this next month she is short of cash as her car needs an MOT so she decided to leave the scheme for a month, and she then opts back in next month. Three months later she decides she wants to leave the scheme again so that she can have some extra cash for her holiday.  This is great for Jane but a real headache for the employer.

Did you know you can design the scheme rules to determine when an employee can opt back into the scheme? This can be up to 12 months. This will ease the administration burden for the employer and focus the employees mind as to whether they want to lose out on up 12 months of employer pension contributions.

Parental Leave (maternity leave, paternity leave or adoption leave).

Here I simply want to highlight that whilst an employee is taking their paternal leave you the employer are still contributing to the employee’s pension pot based on their full earnings prior to them going on parental leave.

The Pensionable Pay Conundrum

For me this is where the regulations get confusing. Therefore with the help of my strategic partner from Sanlam Wealth Planning I am going to try and simplify how as an employer you can tailor the employer contributions.

Whether you need to automatically enrol an employee depends upon a number of factors the main two being age and wage.

For this example I am going to assume a male aged 30 who earns £30,000 per annum of which £20,000 is basic pay and £10,000 is commission. I am also going to assume that the employer pays the full employer contribution rather than increasing or “phasing” it in over a number of years for the sake of simplicity.

For automatic enrolment assessment (i.e. do they need to be enrolled) pay is most forms of earned income, this typically includes;

Salary
Wages
commission
bonuses
overtime
statutory sick pay
statutory maternity pay
ordinary or additional statutory paternity pay
statutory adoption pay

However what you pay an employee and what their pensionable pay is can be two different things.

Qualifying Earnings – Cost control

Qualifying earnings are based on an employee’s total earnings.

However pensionable pay is only calculated on earnings that fall between £5,824 and £42,385 (2015/2016).

The total contribution will be 8%

At least 3% from the employer and the balance from the employee and the government via tax relief

In this example the employer contribution would be £725.28 per annum.

Certification

You can also certify pension pay from the first pound of income as an employer you have three options.

Set 1 – The simple option

Total contribution = 9%

At least 4% from the Employer + the balance from the employee and the Government via tax relief

This is based on an employee’s basic annual gross salary and may exclude commission/overtime/bonuses. Your contributions are based on a set amount each month making it easier to manage the finances.

In this example the employer contribution would be £800 per annum.

Set 2 – Lower cost more administration

Total contribution = 8%

At least 3% from the employer + the balance from the employee and the government via tax relief 

In order to use this set you must be able to demonstrate pensionable pay is at least equal to basic pay and at least 85% of total earnings across the scheme. In other words does basic pay make up 85% or more of the employer’s total payroll cost for that employee?

This creates an additional administrative burden for employees with a mix of salary, bonuses and overtime payments to ensure they remain compliant.

In the above example basic pay only equals 66% of total earnings so it is unlikely it could be used if other members of the scheme have a similar pay structure.

Set 3 – An open ended cost

Total contribution = 7%

At least 3% from the employer with the balance from the employee and the government via tax relief

All earnings are pensionable and as such your pension costs are not capped.

In this example the employer contribution would be £900 per annum.

I believe that the above illustrates how “minor” design decisions can have major cost implications to your business.

Summary

I understand that this procedure puts a tremendous administrative burden and additional cost on you as an employer however the sooner you face up to the fact that the process of Auto Enrolment cannot be ignored  (IT IS THE LAW) and start to prepare, well in advance of your allotted staging date, the smoother the transition will be.
For more information and assistance in preparing for Auto Enrolment please contact me at rachel@payroll-compliance.co.uk

The post What The Pensions Regulator doesn’t tell you! appeared first on Payroll Compliance.

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Pros and Cons of Zero Hour Contract for employers and workers What is a Zero hour contract?

A zero hour contract is a contract between an employer and a ‘worker’ where there is no obligation for the employer to offer work, or for the employee to except it.

Am I classed as a ‘worker’? According to Gov.UK you are classed as a worker if the following applies to you:
  • you have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written)
  • your reward is for money or a benefit in kind, e.g. the promise of a contract or future work
  • you only have a limited right to send someone else to do the work (subcontract)
  • you have to turn up for work even if you don’t want to
  • your employer has to have work for you to do as long as the contract or arrangement lasts
  • you aren’t doing the work as part of your own limited company in an arrangement where the ‘employer’ is actually a customer or client
    As a worker you are entitled to certain employment rights these are stated as:
  • receiving the National Minimum Wage
  • protection against unlawful deductions from wages
  • the statutory minimum level of paid holiday
  • the statutory minimum length of rest breaks
  • to not work more than 48 hours on average per week or to opt out of this right if you choose
  • protection against unlawful discrimination
  • protection for ‘whistleblowing’ – reporting wrongdoing in the workplace
  • to not be treated less favorably if you work part-time
    You may also be entitled to:
  • Statutory Sick Pay
  • Statutory Maternity Pay
  • Statutory Paternity Pay
  • Statutory Adoption Pay
  • Shared Parental Pay
    Be aware that as a Worker you are not usually entitled to:
  • minimum notice periods if your employment will be terminated
  • protection against unfair dismissal
  • the right to request flexible working
  • time off for emergencies
  • Statutory Redundancy Pay
You are a worker if most of these apply:
  • you occasionally do work for a specific business
  • the business doesn’t have to offer you work and you don’t have to accept it – you only work when you want to
  • your contract with the business uses terms like ‘casual’, ‘freelance’, ‘zero hours’, ‘as required’ or something similar
  • you have to agree with the business’s terms and conditions to get work – either verbally or in writing
  • you are under the supervision or control of a manager or director
  • you can’t send someone else to do your work
  • the business deducts tax and National Insurance contributions from your wages
  • the business provides materials, tools or equipment that you need to do the work
What should I be aware of as a worker or an employer of zero hour contracts?

As of 26th May 2015 new legislation came into force prohibiting employers to enforce an exclusivity clause which restricts works to work for other employers. This is beneficial for the worker as they can now have a number of zero hour contracts giving them the opportunity of more work. For the employers this will limit a workers availability and may make zero hour contracts less attractive.

There is a lot of negativity around zero hour contracts. However, if used and monitored carefully by the employer and worker they can be very beneficial to both parties involved. The majority of zero hour contracts will give the individual worker employment status giving them the same employment rights as regular workers however they may have breaks in their contracts affecting the right to accrue overtime.

As stated above in some cases the contract only exists when work is provided therefore if there is a break in the work of 7 days (Sun-Sat) then that would bring about a break in employment. During this time the worker does not accrue any holiday, however, any holiday they have accrued will need to be paid to them by the employer.

After a year of continuous employment the worker is entitled to some extra employment rights such as taking holiday before it has been accrued.

To ensure zero hour contracts are advantageous to both parties it is important to have a clear understanding of what you the worker and you the employer want from the relationship and  that can be outlined in a comprehensive contract.

What are the pros and cons for my business for employing workers on a zero hour contract?

If you want to take on workers using a zero hour contract make sure you are aware of all your employer responsibilities and set out a clear contract.

What are the pros and cons for me as a ‘worker’ to be employed on a zero hour contract?

Depending on your circumstances a zero hour contract could be a good way of getting back to work after a long period of time out without being committed to contracted hours of work. Zero hour contracts are suitable for people who want occasional earnings and want to be flexible about when they work such as students. A zero hour contract is not for everyone as there is a lack in security and stability.

The post Pros and Cons of Zero Hour Contract for employers and workers appeared first on Payroll Compliance.

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Do you own your own company?

As a company owner you are in a favourable position: you benefit from being rewarded as a director and a shareholder.

Directors take a salary from the company. Shareholders draw dividends. By splitting your income between salary and dividends you could generate large income tax and national insurance (NI) savings. By managing your salary and dividends effectively you could find yourself in a lower tax bracket with more spendable income.

What is the difference between salary and dividends?
  • Salaries can be paid even if the company is making a tax loss
    • A salary is tax deductible
    • A salary generally qualifies for corporation tax relief, whilst dividends do not
    • Salaries are instantly subjected to income tax and NI via PAYE
    • Salaries are classed as earnings and therefore affect pension contributions
  • A dividend requires the company to be in profit
    • Being paid a dividend does not reduce the company tax bill as dividends are paid from a company’s post-tax profits
    • Dividends are not subject to NI
    • Income tax on dividends is collected at a later date via self-assessment
    • Dividends are not classed as earnings
Non-tax factors to consider

Make sure you consider the cashflow and working capital requirements of the business before you give yourself a salary or dividend. Dividends can be declared and left unpaid. This strategy saves the director/shareholder’s annual tax-free dividend allowance from being wasted and also helps the company’s cashflow. However, if the director/shareholder is a higher-rate taxpayer income tax will still be payable on dividends declared but not paid.

If the company is insolvent, or the payment of a dividend will render the company insolvent, then dividends should not be declared. Also consider that a large salary or bonus will depress the company’s profits, affecting the company’s ability to borrow. On the other hand, a low salary may make it difficult for you as an individual to borrow. Not all lenders will acknowledge dividends.

The value of a company is often based on a multiple of its after-tax profits. However, a small majority shareholder’s stake is often valued according to the dividend history of the company. Therefore, a consistent or steadily increasing annual dividend will enhance the value of the shares.

The post Salary vs. Dividends – The Facts for Directors appeared first on Payroll Compliance.

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Dividends vs. Salary

Company Directors often pay themselves a small salary and obtain the remainder of their income from dividends, based on the company’s profits.  This helps to keep personal tax liability to a minimum whilst ensuring that National Insurance contributions are made.

In previous years, dividends were tax-exempt; however, George  Osborne’s tax reforms introduced  a new tax on dividends which came into force in 2016 and further changes to the tax-free dividend allowance may lead some companies to change their remuneration strategy sooner rather than later.

Currently the dividend allowance means that an individual’s first £5,000 of dividends are tax free.  When added to the increased personal allowance of £11,500 this gives a combined tax-free income of £16,500 for those whose only income is from dividends in 2017-18.

Above the £5,000 allowance, dividends will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate).

Be warned: from April 2018 the tax-free dividend allowance will drop from £5,000 to £2,000.

Tax code allowance changes

For 2017 to 2018 the basic Personal Allowance will be £11,500 and the basic rate limit will be £33,500. For Scottish taxpayers the basic rate limit will be £31,500.

The new threshold (starting point) for PAYE is £221 per week (£958 per month).

The new emergency code is 1150L for all employees.

Income Tax rates and bandwidths are:

UK Rate % Bandwidth
Basic Rate 20% £1 to £33,500
Higher Rate 40% £33,501 to £150,000
Additional Rate 45% £150,001 and above
     
Scottish Rate % Bandwidth
Basic Rate 20% £1 to £31,500
Higher Rate 40% £31,501 to £150,000
Additional Rate 45% £150,001 and above

Information taken from www.gov.uk

National Minimum and Living Wage Increases

Workers must be at least school leaving age (last Friday in June of the school year they turn 16) to get the National Minimum Wage. They must be 25 or over to get the National Living Wage.

Contracts for payments below the minimum wage are not legally binding. The worker is still entitled to the National Minimum Wage or National Living Wage.

Current rates

Year 25 + 21 – 24 18 – 20 Under 18 Apprentice
April 2017 £7.50 £7.05 £5.60 £4.05 £3.50

These rates are for the National Living Wage and the National Minimum Wage. The rates change every April.

Information taken from www.gov.uk

New £1 Coins

The original £1 coin entered circulation in 1983 and has become notoriously easy to counterfeit; it is estimated that one in every thirty of these old style pound coins is fake. The new bi-metallic £1 coin entered circulation on 28th March, 2017.  It features a number of anti-counterfeit elements including a 12-side design, a hologram type image, micro-lettering and milled edges.

The old coins will cease to be legal tender from 15th October 2017.

The post April 2017 Updates appeared first on Payroll Compliance.

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Not Yet 40? Better Meet LISA!

Have you heard about the new Lifetime ISA?  Launched this month, it provides a new means for you to squirrel money away for one of two purposes: to save for a deposit on your first property or to use as you wish once you reach 60.

The LISA encourages people to save by offering a 25% government bonus on investments each tax year.  So if you save the maximum annual amount of £4,000 the government will add £1,000 to take the total up to £5,000.  Not an insignificant sum.  Both Cash LISAs and Stocks & Shares LISAs will be available; you will also benefit from either interest on your cash or growth on your shares. Don’t forget that stocks can go down too, losing you money.  If you don’t want the risk, opt for a Cash LISA; the first one will be available from June 2017.

You can only open a LISA if you are aged between 18 and 40 years of age.  Once open, you will be able to pay in up to £4,000 per year until your 50th birthday.    Under the current rules, assuming that you open a Cash LISA on your 18th birthday and pay in the maximum amount every year until you reach 50, you will have saved £128,000 before interest and gained an additional £32,000 paid in by the government to reach a total savings pot of £160,000.

The government bonus is paid in annually until April 2018 and monthly after that date.  You will get interest on this too.  The bonus is calculated on your own contributions, and not on interest or stocks and shares growth/loss.

The downside is that there is a 25% early withdrawal penalty that will apply to money taken out before the saver reaches 60 years of age, unless the money is taken as a deposit on a property.  At first glance this might seem to amount to losing the government’s money and not your own.  However, the reality is that early withdrawal will cost you just over 6% of your own contribution.

For aspiring homeowners it is worth noting that money cannot be withdrawn from a LISA to use as a deposit on a property within the first year of opening the account.  Its use is also restricted to residential properties costing less than £450,000 and you must be a first time buyer – this means that you will have never owned even a share in a property either in this country or overseas.  You are permitted to hold a Help to Buy ISA as well as a LISA but you should keep in mind that you’ll only get the first-time buyers’ bonus on one of these accounts.

If you change your mind within the first year of opening your LISA you can close the account and withdraw your money without penalty, since you don’t receive the 25% bonus until the end of the first year.  The rules also state that you won’t pay a withdrawal charge if you die or are terminally ill.  Any LISA money, including bonuses and interest, will pass to your beneficiaries without penalty, although it will be part of your estate and therefore subject to inheritance tax.

There aren’t too many providers to choose from at the moment – and right now only one company are advertising their cash LISA.  However, if you are looking for an alternative place to save for either yourself or your children once they reach 18, it is worth doing some further research into the new Lifetime ISA.

The post Not Yet 40? Better Meet LISA! appeared first on Payroll Compliance.

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Employee Well-being and the Impact of Stress on the Workplace

It’s the first day of Spring and the sun is shining through the office window. Whether your staff are out and about in the fresh air or sitting at a desk looking at a screen, how they feel about their working environment, and their sense of employee satisfaction, will have an impact on their productivity and even general health. Multi-million and billion pound businesses can create amazing spaces for their employees: Google’s head offices are decked out like an adult play-zone with basketball courts, giant slides, pool tables and allotment spaces. There are cosy rooms to relax and share ideas and bright open spaces for meetings and lunches. As amazing as they look (Google them!) a recent survey of 1, 096 British workers by CartridgePeople.com shows that only 8% of workers described these facilities as being at the top of their wish list for their dream office.

Small to medium business owners will be relieved to read that many employees list much simpler demands for their dream office. Rather than asking for selfie booths (
8%) or sleeping pods (7%) many of the employees surveyed listed more obtainable requests such as access to windows that open to provide fresh air (49%); space away from work areas to enable employees to eat their lunch away from their desks (44%); and spaces brightened by plants and flowers (40%).

11.7 million work days lost to stress in 2015/16

Such things may seem trivial and easy to dismiss but when the recent statistics from the Labour Force Survey are considered (from the Health and Safety Executive Website) the figures are far from trivial. According to the data in the article, Work related stress, anxiety and depression in Great Britain
in 2016 there were:

⦁ 488,000 cases of work related stress, depression or anxiety in 2015/16
⦁ 11.7 million working days lost to these conditions in the working year
⦁ 24 days lost on average per case
In fact, 45% of all working days lost to ill health were due to stress. Now stress, as we all know, is a daily part of all our lives. We need a certain amount of stress to motivate and engage us in tasks and to focus our minds on doing a job well. The difficulties arise when, as a result of factors both in and out of our control, stress levels tip from being manageable to unmanageable; and this is at a different point for each and every one of us.

Being aware of our own surroundings and the factors that both exacerbate and help us manage stress can be an important strategy in managing well-being. Employers can also help their work force by modelling good stress management strategies. Again, it’s the simple things that count: having access to decaffeinated hot drinks and water stations will encourage people to avoid overdosing on stress-inducing levels of caffeine. Providing opportunities for employees to get out for a walk during their lunch hour and encouraging positive discussions about hobbies and relaxation can help them to incorporate stress management techniques in their daily routine. Add this to open windows, proper lunch breaks away from desks and some office greenery and you have a few affordable strategies for keeping your workforce happy and healthy.

The post Employee Wellbeing and the Impact of Stress on the Workplace appeared first on Payroll Compliance.

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Apprenticeship Levy 2017

The Government aims to create 3 million new apprenticeships by 2020 and is funding this through new employer contributions.  This Apprenticeship Levy comes into effect from April 6th, 2017.

Employers will be expected to pay the Apprenticeship Levy if they:

  • Have an annual pay bill of more than £3 million
  • Are connected to other companies or charities for Employment Allowance which in total have an annual pay bill of more than £3 million

This applies to all employers including public and private sector companies, charities and education providers such as universities and academy groups.

The basic charge rate is 0.5% of an employer’s pay bill.  This is offset by an annual £15,000 levy allowance, meaning that only those employers with an annual pay bill of more than £3 million will be eligible to contribute.  The levy is paid to HMRC through the PAYE system.

Example 1: An employer with an annual pay bill of £5,000,000:
levy sum: 0.5% x £5,000,000 = £25,000
subtracting levy allowance:

£25,000 – £15,000 = £10,000 annual levy payment

Example 2: An employer with an annual pay bill of £2,000,000:
levy sum: 0.5% x £2,000,000 = £10,000
subtracting levy allowance:

£10,000 – £15,000 = £0 annual levy payment

Report how much you owe

From 6 April 2017, you’ll need to tell HMRC how much Apprenticeship Levy you owe each month:

  • from the start of the tax year if:
    • your annual pay bill (including any connected companies or charities) in the previous tax year was more than £3 million
    • you think your annual pay bill (including any connected companies or charities) for the tax year will be more than £3 million
  • if your annual pay bill (including any connected companies or charities) unexpectedly increases to more than £3 million – start reporting when this happens

If you’ve started paying Apprenticeship Levy, you’ll need to continue reporting it until the end of the tax year even if your annual pay bill turns out to be less than £3 million.

Connected companies or charities will each need to tell HMRC how much Apprenticeship Levy they owe.

How to Pay

You’ll need to pay the Apprenticeship Levy each month through the PAYE process in the same way you pay Income Tax or National Insurance contributions.

If you’ve overpaid Apprenticeship Levy during the year, you’ll receive a refund as a PAYE credit.

Apprenticeship Levy payments are a deductible expense for Corporation Tax.

When the levy applies in specific sectors

Franchises

Franchises with an annual pay bill of over £3 million (including any connected companies or charities) will have to pay the levy. You’ll have an annual allowance of £15,000 for all of the franchises under your control. You can choose to share the allowance across the franchises you control or across your PAYE schemes.

Off-payroll working in the public sector

Payments from a public sector employer to a personal service company, a partnership or other individual which are subject to off-payroll working reforms must be included in the public sector employer’s pay bill. This is because the public sector employer will be liable to pay the Class 1 NICs for workers engaged through such intermediaries from April 2017.

These changes don’t apply for services provided through intermediaries such as a personal service company to clients in the private sector.

Short-lived companies

Short lived companies such as special purpose vehicles will have to pay the levy if they’re liable for Class 1 secondary NICs. You’ll have a full £15,000 allowance if the special purpose vehicle has been set up part way through the tax year. You’ll have to check whether you’re connected to another company or charity at the start of the following tax year.

Managed service companies

If you’re a managed service company you’ll have to pay the levy if you have an annual pay bill of over £3 million. If you’re connected to another employer, you may have to pay the levy if your pay bill is less than £3 million.

Employment or recruitment agencies

You’ll need to pay the levy if all the following apply:

  • you supply labour (including subcontractors) to a client
  • you pay Class 1 secondary NICs on the earnings of those workers
  • your pay bill exceeds £3 million (including any connected companies or charities)

Joint ventures

If you’re in a joint venture partnership where 2 companies each have a 50% share in a further company, neither company will have overall control. As a result, the joint venture would not be connected to any other companies. The 2 companies and the joint venture would therefore each be entitled to their own levy allowance of £15,000.

Other types of joint ventures will get a full £15,000 allowance if they’ve been set up part way through the tax year. They’ll need to check if they’re connected to another employer at the start of the next tax year to work out their allowance for the following year.

Schools

For voluntary-aided schools, foundation schools, free schools and academies, the governing body is the employer. Each governing body will be entitled to an allowance of £15,000.

For other maintained schools, the local authority is the employer. The local authority remains legally responsible for payment of the Apprenticeship Levy for schools under their control, even if they’ve delegated responsibility for payroll including payment of Class 1 secondary NICs. Each local authority has an annual allowance of £15,000.

The employer for faith schools will be the local authority if the school is voluntary-controlled, otherwise it will be the governing body.

Multi-academy trusts will get a single annual allowance of £15,000.

If a school becomes a voluntary-aided school, foundation school, free school or academy part way through a tax year, the academy’s governing body will be responsible for the Apprenticeship Levy from this point and get a full allowance of £15,000.

 

HMRC 2017

The post Apprenticeship Levy 2017 appeared first on Payroll Compliance.

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National Minimum Wage Rise April 2017

The National Minimum Wage (NMW) is the hourly rate of pay that workers in the UK are entitled to by law.  The rate changes according to the employee’s age and whether they are employed as an apprentice.

The table below shows the current NMW rate of pay and the increased rate, which will apply from April 2017:

 Year

25 & over 21 to 24 18 to 20 Under 18 Apprentice
October 2016(current rate) £7.20 £6.95 £5.55 £4.00 £3.40
April 2017 £7.50 £7.05 £5.60 £4.05 £3.50

Apprentices

Apprentices are entitled to the apprentice rate if they’re either:

  • aged under 19
  • aged 19 or over and in the first year of their apprenticeship

Example:  An apprentice aged 22 in the first year of their apprenticeship is entitled to a minimum hourly rate of £3.40, rising to £3.50 in April 2017.

Apprentices are entitled to the minimum wage for their age if they both:

  • are aged 19 or over
  • have completed the first year of their apprenticeship

Example:  An apprentice aged 22 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £6.95, rising to £7.05 in April 2017.

The post National Minimum Wage Rise April 2017 appeared first on Payroll Compliance.

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Salary Sacrifice Schemes

Employers: do you know that the rules regarding salary sacrifice schemes are due to change next April?  Have you considered what this will mean to your company budget?

Employees: do you drive a company car or benefit from a company mobile phone, paid for through a salary sacrifice scheme?  If you do, you will want to read on…

Salary sacrifice schemes are a popular way to provide company perks to employees whilst saving money. Employers benefit from reduced National Insurance costs, while employees gain from their lowered taxable income. Everyone’s a winner!  Everyone, that is, except the Treasury, who have calculated the annual loss of taxable income due to these schemes and decided enough is enough.

Once an employee has opted to give up a portion of his/her salary in exchange for a perk, the money sacrificed is no longer included in the taxable rate for income tax or NI, reducing the amount of tax deducted.

In the Summer Budget 2016 the government announced plans to limit the number of salary sacrifice schemes that yield tax and NI advantages.  Many are protected from the changes proposed for 2017: workplace pensions, childcare vouchers and bicycles, through the cycle to work scheme will all stay as they are, at least for now.  But the other perks offered by tax-savvy companies: cars, car park spaces, mobile phones, gym membership, computers and white goods, to name a few, will soon cease to generate savings for either employer or employees.

For many employees, who have endured a number of lean years with little or no salary increases, perks such as a company car are likely to have a big impact on their sense of success and satisfaction.  Removing the tax breaks that come with this benefit will make a big impact, not only on budgets but, arguably, also on employee wellbeing.

However, for smaller companies who don’t have the opportunity to offer these big money perks, the loss of salary sacrifice tax breaks may help to level the playing field and potentially widen the recruitment pool for them.

The proposed changes will be introduced through legislation in the Finance Bill early next year and will take effect from 6 April 2017.

The post Salary Sacrifice Schemes appeared first on Payroll Compliance.

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