Category Archives: Business News

Auto-enrolment to be expanded to younger workers, as minimum contributions rise

The majority of businesses across the UK are making preparations to increase their minimum workplace pension contributions, having successfully enrolled more than 8.5 million staff into schemes.

Auto-enrolment minimum contributions were due to rise in October 2017 under the original plans and then again in October 2018, but the Government took the decision to push the date back six months.

This means that the first increase will now take place on 6 April 2018 and will see total contributions increase from two per cent of qualifying earnings to five per cent of qualifying earnings, of which two per cent must be paid by the employer.

Then on 6 April 2019, the rate of contribution will rise again to a total of eight per cent of qualifying earnings, of which three per cent must be paid by the employer.

The increase in minimum contributions comes as the Government confirms that it will lower the starting age for auto-enrolment on workplace pension savings schemes from the current age of 22, down to 18.

It is believed that the move will introduce more than 900,000 young people into the workplace pension system, allowing these workers to save an additional £800 million.

Work and Pensions Secretary David Gauke told the BBC’s Andrew Marr Show: “We believe that what we’ve seen over the last few years since auto-enrolment came into place in 2012 is much greater saving for pensions.

“After decades of declines in workplace pension saving we are now seeing increases. We want to extend that benefit to people under the age of 22. At the moment the starting point is 22, we’re now lowering that to 18.”

While many workers may welcome these changes, some employers may look at them as yet more of a burden on their limited time and resources.

LINK: Pension Contributions Rise

New Year, New Home – Self-employed reminded about changes to SA302

With many people looking to get on to the housing ladder in 2018, it has never been more important to have easy access to a mortgage.

However, since HM Revenue & Customs (HMRC) changed the way it issues details of tax calculations and tax year overviews for submission with mortgage applications last year, self-employed workers in the UK have found it harder to get a mortgage.

Before 4 September 2017, self-employed workers and their accountants had been able to get a paper copy of form SA302 that lenders require in order to complete the mortgage application process.

HMRC now no longer issues paper copies and instead provides digital versions.

This has restricted the number of lenders that will offer a mortgage to self-employed workers, with initial reports suggesting that lenders are still insisting on original paper copies rather than electronic printouts, despite HMRC undertaking discussions with UK Finance, formerly the Council of Mortgage Lenders, about lenders’ requirements.

When submitting information to eligible mortgage lenders, self-employed individuals and their advisers are now required to supply the relevant year’s tax computation, printed from the adviser’s software, along with the tax year overview that advisers can print from HMRC’s online services page in order to act as a self-serve SA302 that will satisfy lenders.

Many accountants are therefore reminding self-employed individuals to check their lender’s requirements before making an application.

LINK: SA302 Tax Calculation

Recently given your staff a gift?

Maybe you have recently given your staff members a bottle of wine or a voucher to help celebrate the New Year or as a thank you for their services in 2018, but did you know this could be classed as a trivial benefit in kind.

While the cost may not be ‘trivial’ to some, this tax relief does cover benefits, such as taking employees out for meals or giving gifts – costs which quickly add up.

New rules introduced in 2016 overhauled the procedures for taxing trivial benefits in kind, which state that any benefit that meets the following criteria set out by HM Revenue & Customs is exempt from income tax and national insurance:

  • The cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person);
  • The benefit is not cash or a cash voucher;
  • The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements); and
  • The benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services).

The rules differ slightly for office holders of the company, family members and members of the household, whose exemption is capped at £300 for each tax year.

If you believe that such a benefit has been provided to your employees then you may no longer need to include them on a P11D form, as has previously been the case.

Link: Tax exemption for trivial benefits in kind

Don’t PIN your hopes on paying your tax by credit card

If you have in the past paid your tax bill using a credit card, you will need to use a different method this year.

That is because credit card payments to HM Revenue & Customs (HMRC) have fallen victim to a Government initiative originally intended to make it easier to pay for goods and services in this way.

This month sees the introduction of a ban on the practice of passing on credit card charges to consumers, whether by commercial enterprises or Government bodies. As a result, HMRC is now unable to do so and has said it would be “unfair” to absorb the charges because this would pass the burden onto other taxpayers.

The last five years have seen HMRC pass on £50 million in credit card charges to taxpayers, according to The Telegraph.

An HMRC spokesman told The Telegraph: “We will no longer be accepting personal credit card payments from the 13 January as new rules mean that we can no longer pass on what our bank charges for processing a credit card payment.

“It would be unfair to expect other taxpayers to pick up this cost. There is a range of ways for people to pay us depending on the type of tax being paid, including debit cards, Direct Debit, Faster Payment and BACS.”

Link: Taxpayers banned from using credit cards to pay personal tax bills

Points mean penalties in HM Revenue & Customs late filing reforms

A shake-up of penalties for late submissions and payments under the Government’s Making Tax Digital (MTD) programme is to see a points-based system introduced, HM Revenue & Customs (HMRC) has confirmed.

The new system is set to be introduced in tandem with the launch of MTD for VAT in 2019 and will see taxpayers receiving a point each time they file or pay after a deadline.

Taxpayers who then exceed a penalty threshold will be fined and will receive further fines each time they subsequently miss a deadline. After a period of meeting deadlines on time, the points total will reset to zero.

HMRC has proposed the following penalty thresholds:

Submission frequency       Penalty threshold

Annual                                     2 points

Quarterly                                 4 points

Monthly                                   5 points

Meanwhile, it has proposed the following good compliance periods, in which taxpayers who have exceeded the above thresholds would need to meet every deadline in order to see their points totals reset to zero:

Submission frequency      Good compliance period

Annual                                     2 submissions

Quarterly                                 4 submissions

Monthly                                   6 submissions

The move is intended to penalise those who repeatedly miss deadlines while offering leniency in respect of one-off late filings or payments and encouraging improvement from those who have repeatedly missed deadlines.

Full details of the scheme are to be included in draft legislation, which is expected to be published this summer before being put out for consultation.

Link: Making Tax Digital – sanctions for late submission and late payment

Revenue aims for 100 serious and complex tax crime prosecutions by 2022

With tax avoidance and evasion continuing to be high on the political agenda, HM Revenue & Customs (HMRC) has announced its intention to achieve 100 serious and complex tax crime prosecutions by the end of the current Parliament in 2022.

The announcement was included in HMRC’s Single Department Plan, published last month, which sets out three overarching objectives:

  1. Maximise revenues and bear down on avoidance and evasion;
  2. Transform tax and payments for our customers; and
  3. Design and deliver a professional, efficient and engaged organisation.

As part of the first objective, HMRC has said that it will invest an additional £800 million in efforts to tackle evasion. It expects these efforts to raise an additional £5 billion annually by 2019-20.

Meanwhile, the Revenue has said that it will bring 2,000 more individuals with net wealth between £10 million and £20 million into its model for the wealthiest individuals.

The document also reveals that in the 2016/17 tax years, HMRC brought in £574.9 billion in revenue, an increase of £38.1 billion on the previous year, of which it attributed £28.9 billion to compliance activities.

Link: HM Revenue and Customs single departmental plan

Don’t forget the Self-Assessment deadline

While most people will be focused on the festive celebrations at this time of the year, businesses and their owners must not forget the all-important Self-Assessment deadline.

The deadline for sending 2016-17 tax returns to HMRC is midnight on 31 January 2018.

The penalty regime for missing the 31 January filing deadline includes an initial £100 penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.

Any tax due from the previous year must also be paid by midnight on 31 January, or penalties may also be issued for late payment of tax.

It is important that you do not leave submission until the last minute, as from experience HM Revenue & Customs tends to take a more careful view of those returns submitted near to the deadline.

If you haven’t submitted your tax return yet or provided information to your accountant to assist them with the necessary preparations, now is the time to act!

LINK: Self-Assessment deadlines

SMEs risk losing out on Christmas income totalling £2bn if they don’t accept cards

A new study has revealed that almost half of all shoppers will not spend money with a business this Christmas if it doesn’t provide facilities to pay by card.

A study, commissioned by card machine provider Paymentsense, has found that 45 per cent of UK shoppers walk out of cash-only smaller retailers and independent outlets because they cannot pay by card, while a quarter of customers are also unlikely to return to a business if it did not take cards on a former visit.

More than 1,000 consumers took part in the research, which also revealed that shoppers use their cards to spend just under £135 a month at smaller retailers, independent restaurants and cafes. It also found that 80 per cent of those surveyed owned a contactless card.

By extrapolating the data, the study suggests that more than £2 billion of consumer spending could be missed out on by small businesses which cannot take card payments in the month running up to Christmas.

Guy Moreve, Head of Marketing at Paymentsense, said: “Contactless card payment is fast becoming the norm, with our research showing that most consumers now use credit and debit cards. Shoppers now expect to use them almost everywhere – either in a traditional or contactless manner.

“As well as the significant revenue loss, our study suggests that smaller retailers and cafes who don’t yet take card or contactless payments could permanently lose every fourth customer, which would be a particularly difficult blow at this busy time of year.”

LINK: Cash-only SMEs risk Christmas losses worth a total of £2bn

Business rates to switch from RPI to CPI, saving SMEs billions of pounds

Businesses across the UK have welcomed the Chancellor’s decision to bring forward plans changing the way business rates are set by two years.

In the Autumn Budget, Philip Hammond announced that from April 2018 business rates would rise in line with the Consumer Price Index (CPI) measure of inflation, not the Retail Price Index (RPI).

This move will help around 5.5 million small businesses to save up to £2.3 billion over the next five years, according to the Chancellor.

Business rates were due to go up next year in line with September’s RPI of 3.9 per cent, but will instead stay in line with CPI that was three per cent during the same month.

Helen Dickinson, Chief Executive of the British Retail Consortium, which campaigned for the switch alongside the British Chamber of Commerce, said: “It’s clear that the Chancellor has listened to the retail industry and the growing chorus from across business and commercial life who have spoken up in favour of action to mitigate rising rates bills.

“Crucially, this relief will unleash investment that retailers want to direct towards the needs of their customers.”

Within the Budget, Mr Hammond also promised a change to the law that has led to companies receiving much higher rates bills if their offices were in communal blocks or spread over several floors.

This move comes after the Supreme Court ruled that a single business space meant that small businesses using multiple spaces in a building had been billed for rates as if they were separate premises, but should not have been.

The Chancellor has also promised to backdate the law to compensate firms for the additional charges.

In April this year, many businesses saw a rise in their business rates, some experiencing more significant increases than others. This rise reflected the first adjustment of rateable property values for seven years.

Those hardest hit were retailers and offices in city centres where property prices have risen the most.

To prevent a similar drastic rise in future, the Government has now committed itself to revaluations on a three year basis, instead of a five year basis as previously proposed.

LINK: Autumn Budget: Business Rates

Class 2 and 4 NIC merger delayed until 6 April 2019

The abolition of Class 2 National Insurance Contributions (NIC) will now be delayed until 6 April 2019, according to a new written statement to the House of Commons.

HM Treasury has written to MPs to let them know that the move has been delayed to allow additional consultation with interested parties, particularly in respect of the effect of the abolition of Class 2 NIC for lower earners.

Currently, self-employed workers that have profits below the small profits threshold (£6,025 for 2017/18) can protect their rights to the state pension and certain other state benefits by paying voluntary Class 2 contributions – this includes 967,000 people, according to the Office of National Statistics, who had income below the threshold.

However, those workers with profits between the Class 2 and Class 4 thresholds (£8,164) only pay Class 2 NICs of £148.20 per year to gain a full year’s NI credit, whereas Class 4 NIC currently provides the taxpayer with no NI credits, as it is a tax on profits.

The abolition of Class 2 NIC and a subsequent reform to class 4 NIC would leave some low earning taxpayers paying into the more expensive Class 3 NIC (£714 for 2017/18), to retain entitlement to the same state benefits.

There are also concerns amongst some professionals that the need to make a Class 3 NIC payment may create barriers and discourage lower earners from protecting their state benefit entitlements.

However, a system of NI credits would be provided for no payment where the individual has profits between the current small profits threshold and the higher Class 4 NIC threshold.

With all this in mind, it is apparent why the Treasury has decided to delay the abolishment of Class 2 NIC until thorough consultations have been completed.

LINK: Update on the National Insurance Contributions Bill