Tag Archives: HMRC

Auto Enrolment / Work Place Pensions

This blog applies to any of you that have at least one employee on PAYE.  Please note all my clients are classed as Small or Micro Entities.

You may have seen the adverts stating ‘We’re all in’.  Over the last few years large and medium companies have had to deal with the government’s new Work Place Pension scheme which is often referred to as ‘Auto Enrolment’.  This has been a relatively small amount of companies and small amount of pension schemes holding a large number of employee pensions.  These companies have had the resources to source good schemes with reputable providers for their staff pensions.

However, in 2016 & 2017 all small and micro employers are expected to do the same.  This will involve 100,000s of pension schemes holding a very small amount of employee pensions and because of this, most of the main pension scheme providers are already saying they will not deal with Auto Enrolment for small and micro entities as the administrative costs will be too high.

So here are a few of the key points to try and make things a little clearer and forewarn you of things to come.

Staging Date                                                                                                                                     If you have employees on PAYE you will be receiving a staging date which will be sometime in 2016 or  2017.  This is the date you must start deducting and paying pensions for all applicable staff so you must have a pension scheme and the ability to deal with this in place by that date.

I have the staging dates for all clients who I run payroll for and will be contacting each of you individually regarding this.

For those who run their own payroll you can access your staging date at http://www.tpr.gov.uk

Director only employees                                                                                                                 If you trade as a Limited Company and only have the director(s) (up to 5 directors) as employees, you do not need to set up a pension scheme.  You will still receive all the standard letters from HMRC and Auto Enrolment will still apply unless you submit an exemption email.  There is a little admin involved and this will have to be re-done every 3 years.

For all clients I run payroll for, that have only Directors on the payroll, I have the email address and a template of the information that is required for the exemption and will be able to submit this on your behalf.   I will contact each of you individually as you approach your staging dates.

For other Limited companies that this applies to, please contact me if you would like the email address and template.  A small charge will apply or I have a contact who will do this for you for £135 + VAT and give you a certificate of compliance when done.

Note, if you take on an employee you will only have 6 weeks to organise a pension scheme and auto enrolment for that employee before getting a fine.

Who this applies to                                                                                                                          If you have at least one eligible member of staff on PAYE you will need to have a pension scheme in place even if they have already stated they do not want to pay into it.  The employees have to be auto enrolled into the scheme before they can ‘opt out’, (although see ‘Postponement’ below as this can help here). Please note they then only have 4 weeks to opt out and claim back the money that has been deducted from their pay automatically and this has to be done with very specific documents going back and forth to the pension provider.

Postponement                                                                                                                             You can postpone enrolling staff onto the pension for up to 3 months.  This can help if you have temporary staff who you know will leave within 3 months or staff who wish to opt out.  You can only postpone an employee once.

Eligible Staff                                                                                                                               There are 3 tiers of staff:

  1. Those between age 22 to state pension age and who earn more than £10,000.                   These staff will have to be automatically enrolled but they can opt out.
  1. Those between 16 to 74 who earn between £5,772 to £10,000 and those between 16-21 and pension age to 74 who earn over £10,000.                                                                          These staff do not qualify for auto enrolment but can request to ‘opt in’ and you then have to pay their employer contribution.
  1. Those who earn less than £5772.                                                                                        These staff are not auto enrolled but can request to ‘opt in’ but you do not have to pay the employer contribution.

Just to add some further complication, the amounts stated need to be divided by 12 for the monthly pay ie £10,000/12 = £833.33.  If you have an employee in category 2 who one month does some overtime so their pay goes over £833.33 they will get automatically enrolled and employee pension contribution deducted, employer contribution paid.  If they still do not want to be enrolled they will then need to opt out and claim back the money.

All employees who have opted out will be automatically re-enrolled every 3 years and will need to opt out again.

You are not allowed to force or even advise employees to opt out, this can result in a custodial sentence.

Contributions                                                                                                                               The minimum levels of contributions are being phased in and are calculated as a percentage of pay between £5772 and £41895 and are currently as follows:

To 30 Sept 2017          total contribution of 2% with employer paying 1%, employee paying 1%

1/10/17 to 30/9/18       total contribution of 5% with employer paying 2%, employee paying 3%

1/10//18 onwards        total contribution of 8% with employer paying 3%, employee paying 5%

Pension Scheme Providers                                                                                                           As previously stated the main pension providers will not handle this for small and micro entities but there are 3 main trust providers.  These are Nest, Now and Peoples Pension.  I will focus on Nest as it is the only one which is wholly government backed and was set up to deal with Auto Enrolment for small businesses although some large companies such as M&S and BT are also using this.  It is owned by the Indian company Tata.

It is predicted that with 100,000s of schemes coming online with tiny pension contributions (there is one month in 2016 that has 130,000 businesses staging dates), the system will possibly go into meltdown with the huge administrative burden, so who knows what kind of return on investment this pension will give but it’s free to the employer and there to help you be compliant.  They charge the employee 1.8% of contributions paid in.

You can check out the website for further details http://www.nestpensions.org.uk

The way forward                                                                                                                              In the first instance you need to know your staging date and nominate a contact person for all correspondence to be sent to.  Do this at http://www.tpr.gov.uk .  If you have a director only payroll, apply for the exemption.  If you need to comply, a pension scheme needs to be set up.  For clients whose payroll I run, I will be contacting you individually to discuss how to proceed.  For those who run their payroll through a payroll bureau, you will need to contact them to make sure they have an action plan for you to meet the deadlines.  For those who run their payroll themselves please contact me to discuss how to proceed.

I also have a contact who can set up, educate and make you fully compliant for £295+vat.  This does not include the ongoing processing of payroll and Auto Enrolment.  All costs will increase the nearer ‘crunch time’ approaches as all companies dealing with this are expected to become over subscribed.

Ongoing this does add a significant administrative burden to the payroll and all payroll costs will increase.  I would advise anyone with employees on weekly pay to transfer them to monthly pay before your staging date as dealing with this 52 times per year is a lot of extra work.  There is a lot of correspondence required between the employer, the pension provider and the employee. Failure to provide the required correspondence can mean non compliance fines will apply.  Payroll software which is AE compliant is essential but at the moment free packages such HMRC Basic Tools are not compliant.  Some packages such as Moneysoft are compliant to process the numbers but do not automatically run and submit the correspondence required.   Brightpay is fully compliant as is Sage but the AE bolt on can be expensive.

Failure to comply                                                                                                                    Current fines are £400 then £50 per day.

I hope this has cleared up some of the queries and no doubt thrown up some more.

All figures are based on the current 2014/15 rates.

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Deadline is Looming

So the deadline for Self Assessment tax returns is Midnight on 31st January and while the majority of our clients have already been to see us and got their returns done, there are always some that leave it to the last minute.

This is just a reminder to those that we need the paperwork asap.  As the month goes on we are less likely to be able to guarantee the returns can be done on time and if they are submitted after the deadline there is an instant £100 fine regardless of whether any tax is due or not.

Each year HMRC publish their top 10 weirdest late tax return excuses people used to try and get out of paying the fine.  Last year’s list included ‘I had a run-in with a cow’ and ‘my pet goldfish died’.  Needless to say these excuses failed as did the ones on this year’s list which are:

  1. “My pet dog ate my tax return …. and all the reminders.”
  2. “I was up a mountain in Wales and couldn’t find a postbox or get an internet signal.”
  3. The poor taxpayer at number three ‘fell in with the wrong crowd.”
  4. “I’ve been travelling the world trying to escape from a foreign intelligence agency.”
  5. “Barrack Obama is in charge of my finances.” – I wonder how much he charges.
  6. “I’ve been busy looking after a flock of escaped parrots and some fox cubs.”
  7. “A colleague borrowed my tax return to photocopy it and didn’t give it back.”
  8. “I live in a camper van in a supermarket car park.”
  9. “My girlfriend is pregnant.”
  10. “I was in Australia.”

HMRC have said there are genuine excuses for being late with your tax return but I don’t know what they are, I mean, being dead is not classed as an excuse so what could be??

Picture credit to Gratisography

 

A Bit On The Side

A Bit on the Side

No, not what you’re thinking, I’m talking about the Side Gig, Side Hustle, Moonlighting, Homers, whatever you want to call it, it can be a very good idea.

Initially I built up my accounts practice on the side of my day job before leaving that job to grow my business full time.

More and more people are moonlighting on the side of their day job – so why is this such a good idea?

Test the waters

If you eventually want your side job to become your full time job, growing it on the side gives you time to test the waters, experiment and learn.  It lets you try out different strategies to see what works and allows you to fail, all whilst keeping the financial security of your day job.

Not having to rely on your side gig for income allows you to focus on the long term success rather than short term income.

Extra Income

You’ll no doubt make some money from your side gig to compliment your full time income.  Whether you use this extra income to grow the business, save or dig yourself out of debt is up to you but the extra cash will always be nice.

Cash lets you fund your own start up or take a pay cut when you eventually want/need to ditch the full time job and make your side job the full timer.

Money can make you feel that you have options, that you have some backup, that you can afford to fail.  In other words it makes you feel safe, and if you feel safe you are more likely to take the small risks necessary to start up.

What to do

You need to establish what your side gig is going to be – what are you good at, what do you know how to do, what would you like to do, what would others pay you to do.

Getting started

Once you’ve decided what you are going to do you need to work out how you are going to get clients/customers.  How are you going to get the word out about what you are doing and what platforms are you going to use to do this.

Keeping it going

Office management – even if your side job is something low tech such as dog walking, don’t think you don’t need to get involved in office management.

A side gig doesn’t have to be about money.  It can be for fun, to gain experience or self education.   However, if money is the main objective you need to take it seriously.  Dealing with administrative tasks, paperwork, income, expenses, taxes and marketing all need to be done.  If you are making money you have a legal obligation to declare this for tax which requires some record keeping.

Stay Organised

If you’re working 9–5 and then moonlighting on the side, you are going to be busy.  You must stay on top of the admin and if you are making money you need to stay on top of the finances.  Keep track of all income, expenses, bank and paypal accounts.  You may need to develop systems for tracking this, customer/client relationship management and other items relevant to your line of work.  These systems can be anything from notebook scribbles or spreadsheets to specialised software.  The more you have going on, the more you need to attend to these back office tasks.

Word of warning

If your side gig is something that could tread on the toes of your full time employers business, you should get their permission first as there may be clauses in your employment contract to stop employees setting up in competition against them or stealing their clients.

SplitShire_IMG_7348-800x500

Photo Credit: Splitshire.com

New Annual Tax Statements

So October is just a handful of days away, and this October not only allows us to throw our car tax discs away but for some of you lucky folk October also brings you the New Annual Tax Statement.

One of the Coalitions promises back in 2010 was that every tax payer would be sent a statement of their tax position, including National Insurance and where the money is spent. Four years on and they are nearly here – but not for everyone.

Initially the statements will only cover your tax position for 2012/13 and will only go out to those paying tax under self assessment and are registered for HMRCs online services; or if you pay PAYE and receive a P2 Notice of Coding or a P800 tax calculation.

If you do receive one of these you don’t need to do anything with it, as it’s just for information purposes but it would be good to check through it.

One very handy use for this statement will be to check your NI contributions. There are new State Pension rules coming into effect in April 2016 and to receive the full State Pension you need to have paid the correct amount of NI contributions for 35 years. You will be able to check that you have paid enough with these statements.

We await their arrival!!

tax disc

HMRCs Home Office Policies

How much can you claim, for using a room in your home for business purposes?

HMRCs guidance uses typically vague words such as ‘fair & reasonable’ and ‘modest or excessive’. The trouble is someone earning mega money will think one figure is fair and reasonable but to most of us the same figure would seem excessive.

HMRC believes just £4 per week is all that should be claimed for the use of a home office. This measly amount is deemed as a ‘significant’ expenses and any claim over this amount must be justified by providing records or demonstrating your calculations.

How to can claim over the £4 per week

One way to prove your claim is reasonable is to calculate your monthly outgoings for gas, electric, rent, water etc then divide this by the number of rooms in the property (excluding kitchens & bathrooms).  For example if you have 5 rooms (Lounge, Dining Room, 3 Bedrooms) and one is used as an office take 1/5th of these bills.

If this amount seems too substantial for your business use you could divide it down further by the number of hours you spend in it working each day eg, 8/24 hrs or by the number of days per week that you work or by square meterage if known.

Beware

Be careful if claiming for more than one room as you will need more justification but it is possible ie a photographer could have an office and a darkroom (days before digital).

You should never claim the room is ‘solely’ for business purposes as this could lead to a business rates claim by the local council for part of your home or even Capital Gains Tax when you sell your property. Most people’s home office also doubles as a spare bedroom or is home to the unused exercise bike or the kids use it for doing their homework.

If you run your business through a Limited Company you can draw up a lease agreement so your company is reimbursing you for the costs of the room thus reducing your Corporation Tax but again, to be exempt from Capital Gains Tax when you sell the property make sure the agreement doesn’t state that it is solely and exclusively for business purposes.

Let’s talk about Chris Moyles

Now first off I was never a huge fan of this guys radio show and I hope his smug grin has been erased for a while and quite frankly I am amazed that he had earned enough money to try and avoid paying £1 million tax.Chris-Moyles-Radio-1-007

What cases like this have done is blur the line between tax avoidance and tax evasion and got the public, through the media, thinking that all tax avoidance is wrong.  Let’s distinguish:-

Tax Avoidance – This is just good tax planning, we all want to pay as little tax as we have to so we claim all the proper expenses etc., to get our tax as low as possible.  It’s what you pay people like me for and is completely legal.

Tax Evasion – This is illegally reducing the amount of tax you pay or deliberately not paying what you owe.

So back to Chris Moyles, the scheme he was involved in was called ‘Working Wheels’ and was described on HMRCs own website as ‘Abusive Avoidance’.  Its members claimed to be self employed used car traders.   Yes the Radio 1 DJ claimed on his tax return that he was a second hand car dealer!  They would declare large tax deductions for vast finance fees (£1m fees)incurred to borrow small amounts of money (£5,000) to invest in their so called ‘trade’ that they were not actually pursuing.  In fact the only fees they had to pay were to the scheme promoter.

Although the scheme was a legal tax avoidance scheme the Appeals Tribunal has dismissed it after the Judge said it was impossible to reach a conclusion that this was a trade seriously pursued with a view to profit, i.e., Chris Moyles wasn’t actually trading as a used car dealer – quelle surprise!!

So despite this being a ‘legal’ tax avoidance scheme it has been decided that Mr Moyles and the other 450 members of the scheme must now pay the tax they owe.  Surely this then makes the scheme illegal tax evasion but they have not been issued with any punishments, only to pay what they should have paid in the first place plus some interest and penalties.  The scheme provider can go on to sell their doggy avoidance schemes to others.

Hopefully HMRC will one day seriously clamp down on these schemes so they don’t exist in the first place then they won’t have to spend millions of honest tax payers money to get the dishonest tax payers money they are owed.

 

Credit for some of the content and inspiration to AccountingWeb.

Beware of the HMRC Tax Refund Scam Emails

phishing silver

Ok, so my first blog post and it’s going to be a word of warning.  I promise to do slightly more interesting posts as I get the hang of this blogging lark.

You may have received one of these emails before, I know I have, and I know some of my clients have received them as they’ve queried them with me.  Every year tens of thousands of these emails are sent appearing to originate from HM Revenue and Customs.  They are actually from scammers attempting to get your bank or card details – this is called Phishing.  A lot of people must fall for this scam or the scammers wouldn’t keep sending them out.

The email informs you of a tax refund you are entitled to receive and all we have to do is claim it. It then goes on to tell you that it can be transferred directly to your bank account and all you have to do is enter your bank details.  It then directs you to a link where you can enter your bank details,

this is where they steal your details

never click on links from any emails to enter bank details, always go direct to the source website.

HM Revenue and Customs has stated that ‘HMRC will never tell you about a tax rebate, or ask you to disclose personal or payment information by email’.

If you do receive one of these emails just disregard it.  If you wish to, you can report these as HMRC has set up a dedicated phishing email reporting service at phishing@hmrc.gsi.gov.uk .  Forward the email to them and their Fraud team will look into it.

This is not the only scam to appear to originate from HMRC, there are others connected to online VAT  and tax and as the use of online filing becomes more widespread so will the devious scammers emails.

So be vigilant, have a good anti-virus program,

be careful about clicking on links in emails and do not enter bank details through any email ever. Ever.

yellow phishing