My view before and immediately after the Budget was
SFA for SMEs!
On reflection, I may have been a little harsh.
True, the reduction in corporation tax to 20% will, as mentioned yesterday, make no difference to the vast majority of small businesses, but the announcement of the creation of an “employment allowance” for every company in the country, reducing their total employer national insurance by £2,000 each will benefit more than 450,000 small businesses.
It may even help the typical one man band business where the owner/director takes a small salary (currently about £7,600 per year) to avoid paying National Insurance and then takes dividends to increase his/her income. Unfortunately, unless the director has other taxable income some of the personal allowance (currently £8,105) is wasted. Increasing the salary to £8,105 is of no benefit because both employer’s and employee’s National Insurance have to be paid on the excess, which negates the tax savings.
The introduction of an “employment allowance” will eliminate the employer’s National Insurance and allow the salary to be increased to avoid wasting any of the personal allowance.
The saving will not be huge (probably about £200 when the new measures come into effect) but when nothing else has been given to small businesses, it should probably be gratefully received!
- RTI requires all employers to start providing employee PAYE, National Insurance (NI) and Student Loan information to HMRC on or before every payday rather than at the year end as currently.
- Construction Industry Scheme (CIS) details do not have to be reported under RTI.
- Businesses must sign up to PAYE online now if they are responsible for their own payroll reporting.
- Employers must ensure the data they hold (e.g. NI numbers, addresses, date of birth) is correct.
- Each time an employee is paid, an employer must submit details of gross pay, deductions, statutory payments,etc
- Details must be submitted for all employees who are paid, including those who are paid below the tax and NI thresholds and therefore do not have any deductions.
- The most difficult aspect of RTI may be collecting the correct NI number!
- Employers must record changes to employee work patterns. If an employee takes unpaid leave, the employer must notify HMRC , or HMRC will assume they have left their employment!
- Businesses will no longer have to report starters and leavers separately as this information will be supplied in real time as part of the payment report (Full Payment Submission – FPS).
- Employers must continue to provide P45 forms to leavers.
- There will be no need to complete forms P35 and P14 at the end of the year.
- Employers must, however, continue to provide each employee with a form P60 by 31 May.
- Before going live with RTI, employers must follow a process of “data alignment” by submitting an Employer Alignment Submission (EAS).
- Once the EAS has been submitted, you will receive an ‘invitation’ from HMRC to join the RTI scheme.
With effect from 6 April 2013 all employers will send their wages information electronically to HMRC each time they pay their employees rather than sending the information at the end of the year (on a P35).
Employers will need to check their payroll software is RTI compliant or make arrangements to use an external provider such as their accountant.
Pay details etc. must be reported to HMRC on or before the payment date.
All information (there are up to 118 individual items – see below) must be accurate and up to date.
Information is required for all employees – full-time, part-time, temporary or casual.
Full name, date of birth, National Insurance number, gender and address will be required.
The software must collect details of all employees’ pay,tax and deductions and the hours worked during each pay period.
Construction Industry Scheme (CIS) details are not reported under RTI.
HMRC are warning us that any P9Ds, P11Ds and P11D(b)s must be submitted to HMRC before 6 July, which can mean only one thing
HMRC will penalise you if the returns are late
FreeAgent are the first to admit their payroll system is pretty basic. Finding an alternative isn’t easy.
No payroll provider links to FreeAgent so whichever one you choose, you’ll have to enter the payroll details manually every week/month. Third party payroll processing is expensive and you’ll still have to enter the payroll details yourself.
FreeAgent copes best when there are no changes to the payroll (new employees, leavers, bonuses, etc.). Problems can arise with incorrect PAYE Codes, no P45 and directors starting employment part way through the tax year. At the end of the tax year FreeAgent doesn’t allow you to submit your Employer Annual Return (P35, P14s and P60s) from the software. You have to register with HMRC and enter the details online.
Our solution to these problems is to offer two services:-
- During the year we will monitor the changes to your payroll (new employees, leavers, new PAYE Codes) and make sure they have been dealt with correctly. We’ll also point out, where possible, errors in the Codes themselves. The price for this service is £80 per year.
- At the end of the tax year we will complete your P35, P14s and P60s based on the information in FreeAgent and submit them to HMRC. We will send you copies of the forms, together with an acknowledgement from HMRC that the return was submitted on time. Late submission incurs a penalty of £100 for every month it is late. The price for this service is £80 per year.
The price for both is £150 per year.
HMRC have published details of what to do if your employer goes into liquidation when you’re having deductions made from your pay to repay your student loan.
Their advice, however, seems somewhat back to front. Contacting the liquidator if you have no proof of deductions made isn’t the answer. Liquidators may not be able to extract the necessary information , or worse still, may not even be bothered about your problem.
The answer is look after your paperwork (payslips, P60s) just in case you need them.
HMRC have sent an “Email Alert” to all employers who have registered for the HMRC employer email alert service. The details are shown below but if you’re an employer and you haven’t received this e-mail I would advise you to register as quickly as possible because this is the only way HMRC will communicate with you in future.
Welcome to the Employer Email Alert Service
HMRC have just published important information on their website which includes:
- the latest edition of the Employer Bulletin, issue 40, which identifies 3 essential articles
- the latest version of Basic PAYE Tools for 2012
- how to finish your payroll for 2011-12
- start your payroll for 2012-13 by using our form P9X (2012) Tax codes to use from 6 April 2012, at http://www.hmrc.gov.uk/helpsheets/p9x.pdf and
- Real Time Information
To find out more go to http://www.hmrc.gov.uk/paye/forms-publications/employer-pack.htm
HMRC has announced that a smartphone, supplied by your employer, will now be treated as a mobile phone and need not be included on your P11D as a benefit in kind.
Having said that I think most people have always treated their smartphone as a mobile phone anyway! Even HMRC seem to agree when they say:
In most instances an employer-provided smartphone will not have been reported to HMRC as a taxable benefit.
There are two important points relating to this statement though:-
- If you did treat your smartphone as a taxable benefit you may be entitled to a tax repayment (see final section of statement); and;
- It does not cover tablet computers.
HMRC have released the latest version of Basic PAYE Tools, a software package to help you run your payroll throughout the year.
The tool allows you to work out the tax and National Insurance contributions (NICs) for your employees in each pay period and, if you have up to and including nine employees at 5 April, you will be able to file your Employer Annual Return (forms P35 and P14) online. You can also use it to file your starter and leaver forms (P45 and P46) online.
