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 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
I would desperately like to believe that whoever wrote the latest HMRC press release does have a sense of humour because it is funny.
Taxman urges employers to ditch AN Other
is a plea to employers to get their PAYE paperwork in order, after more than 500 returns claimed to employ “AN Other”, and the mistakes don’t end there.
128 staff were entered as Mr, Ms or Mrs “Dummy”
572 people had surnames which only included the letter X, ranging from Mr X to Mrs XXXXXX
75 staff had the surname “Casual”, 11 “Cleaners”, 9 “Workers” and 6 “Students”
824 employees were called “Unknown” and
40 people were apparently 200 years old or more after incorrect dates of birth were submitted.
Don’t forget that if you pay your PAYE quarterly the deductions for July, August and September 2011 are due on or before October 19th unless you’re paying electronically in which case you have until October 22nd for the money to arrive in HMRC’s bank account.
If you are registered as an employer but have not deducted any PAYE or NationalInsurance from your employees during the quarter you must tell HMRC by submitting a £nil return.
FreeAgent users are reminded this payment is due in the Tax Timeline on their Overview page.
If you’re not using FreeAgent, and I can already hear voices in Edinburgh saying “Who isn’t using FreeAgent?”, then you can sign up with Business Link and receive e-mail reminders from them. The only problem with the Business Link scheme is that you have to register using your Government Gateway details and who can ever remember where they are!
When I wrote the post about work rules I never imagined the Financial Times would publish my letter to the Editor suggesting a third rule.
P.S. The reference to graduates relates to the original article. In my opinion the rules relate to everybody – graduates are no better or no worse than non-graduates (just so I don’t upset any particular group!)
Most small businesses are struggling with the amount of employment legislation which has been introduced over the last twelve years.
The recent bad weather has added to their problems with many businesses having to lay off staff but not many of those businesses seem to be aware of Statutory Guarantee Pay.
Briefly, it is the minimum an employee should be paid for any complete day when they are laid-off work. To get statutory guarantee pay they must:
- have been employed continuously for at least one month (this includes part-time workers)
- reasonably make sure they are available for work
- not refuse any reasonable alternative work, including work that is not in their contract
- not have been laid-off because of industrial action
More information is available on the Business Link website and the BIS site.
The only crumb of comfort I can offer to hard-pressed employers is that the upper limit is £21.20 per day (although this will be revised on February 1st).
