After considerable pressure, HMRC have relented (slightly) over the RTI reporting rules for small businesses.

Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th).

N.B this isn’t a deferral in the date RTI starts, it’s (in HMRC’s words)

to enable small businesses to adapt their processes or change their arrangements with their payroll service supplier so that they can comply with the new legislation.

 

If you’re aged between 18 and 30 and you’re thinking of going into business you should take a look at Start-Up Loans , a government backed scheme to fund and mentor young entrepreneurs.

Chaired by James Caan, the former star of the BBC TV show Dragon’s Den the scheme offers loans (the average loan is about £2,500) and mentoring to would-be entrepreneurs. Strangely, the scheme is only available to start up businesses where the owner(s) live in England.

I came across the scheme last week when I was reading the Gateway , a business and careers newspaper for students.

The article mentioned

60% of all private sector jobs and 50% of public sector output is provided by SMEs. The creation of new small businesses is vital to Britain’s financial health and job creation……

What a shame that last week’s Budget didn’t reflect this

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!

As I mentioned in my previous post I attended a conference at the Said Business School University of Oxford yesterday about Taxing Multinationals:the International Allocation of the Tax Base. It seemed very strange to be a participant along with people from the London School of Economics, PwC, Schroders and the CBI to name a few!

Much of what was said was new to me (not surprisingly I don’t act for many multinationals) and some of it went completely over my head!

One thing which did strike me, however, was that no matter how much bad publicity the multinationals receive, over their tax avoidance schemes, it appears to have not made one iota of difference to their attitudes.

During the first discussion session John Connors, Vodafone’s Head of Tax, asked what the OECD, the European Union and the United Nations would do to help stop the adverse publicity the multinationals continue to receive over transactions which were perfectly legal and what they would do to help stop the morality of the multinationals’  tax bills being questioned in the press.

Two thoughts struck me immediately

1. If I was Head of Tax at Vodaphone I would be keeping very, very quiet! and
2. Here is yet another multinational refusing to discuss the issues raised by the press purely to maintain the status quo.

I’m fairly certain that Mr Connors will not be happy with some of the answers he received!

Michael Lennard, Chief of International Tax Cooperation and Trade at the United Nations, asked if the correct amount of tax had been paid and said that “morality is part of the debate”.

Pascal Saint-Amans, Director, Centre for Tax Policy and Administration, OECD, invited the multinationals to join the debate and engage in changing the rules and pointed out that “some in the business community are in denial“.

Philip Kermode, Director, Directorate-General for Taxation and Customs Union, European Commission told us “We will get there”.

I just hope that all three organisations have people who will stand up against the likes of John Connors to make sure things do change. Being nice to multinationals will achieve nothing. The rules (and laws) will have to be changed despite the protestations of the companies.

Yesterday I attended a conference at the Said Business School University of Oxford about Taxing Multinationals:the International Allocation of the Tax Base.

I shall write about the conference later (from the small business perspective) but one of the interesting points mentioned in the introduction by Professor Michael Devereux, Director of the Oxford University Centre for Business Taxation, was that the corporation tax rate may drop to 20% in tomorrow’s Budget.

A word of warning to the UK’s small businesses though, before you all celebrate the reduction, the vast majority of small businesses are already paying 20%. This reduction will only apply to those businesses whose annual profits are more than £300,000.

If this “rumour” is correct, it’s not the help I or hundreds of thousands of other small business owners are expecting.

P.S. Professor Devereux is a member of the Business Forum on Tax and Competitiveness, chaired by the Exchequer Secretary (a junior ministerial post in the Treasury).

1. 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.
2. Construction Industry Scheme (CIS) details do not have to be reported under RTI.
3. Businesses must sign up to PAYE online now if they are responsible for their own payroll reporting.
4. Employers must ensure the data they hold (e.g. NI numbers, addresses, date of birth) is correct.
5. Each time an employee is paid, an employer must submit details of gross pay, deductions, statutory payments,etc
6. 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.
7. The most difficult aspect of RTI may be collecting the correct NI number!
8. 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!
9. 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).
10. Employers must continue to provide P45 forms to leavers.
11. There will be no need to complete forms P35 and P14 at the end of the year.
12. Employers must, however, continue to provide each employee with a form P60 by 31 May.
13. Before going live with RTI, employers must follow a process of “data alignment” by submitting an Employer Alignment Submission (EAS).
14. 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.

Just added a comment to @economiamag Red Tape Special but had to add #cynicaljoke so accountants knew it was a joke http://t.co/qaxxGB8B8O

March 6, 2013 17:18 via HootSuiteReplyRetweetFavorite

@StuartJones

Stuart Jones

Let me know your favourite piece of Red Tape and I’ll forward it to Economia for their Red Tape special in May

A few weeks ago HMRC published their first list of businesses who they say are deliberately defaulting paying tax. Richard Murphy has suggested that only little people are named and shamed for not paying tax but I would like to raise another point

What is the point of HMRC naming and shaming businesses when they have failed to collect the tax and penalties and will probably never ever receive a penny of the amount due?

The Trade Beverage Company Ltd of Mobberley owed £156,000 in corporation tax and £292,000 in penalties but according to the Manchester Evening News the company

was set up in March 2009, but 13 months later defaulted on a tax payment. It did the same in February 2011 and again in the following September. Last March it was served with a winding up notice and is now listed as being in liquidation.

HMRC would be better spending their time collecting the tax rather than naming and shaming people who are probably not bothered about the publicity. However, as I have explained previously, it’s not HMRC’s fault.

Paul Barrett of Ilkley added to my concerns about taxation of small and medium sized businesses.