Summary of the Tax Rates – What’s new for employers in 2019?

As we move into the new tax year we have put together a summary of the main changes that will affect both the employer and the employee.

Income Tax

  • Personal allowance is increasing to £12500
  • Standard tax code = 1250L
  • From 6th April HMRC will no longer require subsistence receipts to be collected when using their Benchmark Scale rates, but Sapphire will continue to collect them as this is an FCSA requirement.

National Insurance

Percentages remain the same:

  • Employees 12% between PT and UEL, 2% above the UEL.
  • Employers 13.8% between PT and UST except employees under 21 and apprentices under 25, this is 0%, anything above UST is 13.8%.

Pension

The minimum pension contributions will be rising from 6th April. These are based on qualifying earnings, so between £6,136 and £50,000 per year.

Pay Rates

A few facts about NMW:

  • It is 20 years old! (first introduced in 1999)
  • Initial rate for over 22’s was just £3.60/hour!
  • Around £2m people will get a pay rise of up to 5% as a result of the latest increases
  • SSP increases to £94.25 per week
  • Statutory payments (SMP, SPP, SAP, SHPP) increases to £148.68

Student Loans

New loan type introduced from 6th April; Post Graduate Loans (PGL).

The threshold for 2019/20 is £21,000. 

Earnings above £21,000 for PGL will be calculated at 6%.

Threshold Changes

Plan 1 – £18,935

Plan 2 – £25,725

Payslips

National minimum wage now must be shown on payslips – Sapphire already show this.

Partnership Power: Sapphire Accounting announce an apprenticeship levy transfer with Seashell Trust

Sapphire Accounting will be transferring 10% of our apprenticeship levy to Seashell Trust. This will help Seashell Trust to fund more apprenticeships for their existing and new staff  

The accountancy firm, Sapphire Accounting, are transferring 10% of their apprenticeship levy to Seashell Trust to enable them to fund more apprenticeships for existing and new staff. Any business can gift up to 10% of their overall levy to another business as it is a ‘use it or lose it’ tax. According to an Open University study published in May 2018, it is estimated only 8% of the total £1.28bn in apprentice levies paid over the last 12 months have been used, so there is a huge amount of opportunity for companies to transfer their levy to charities.

Maria McGrath, Learning and Development Manager at Seashell Trust said ‘we are so grateful to Sapphire Accounting for their generosity and such a forward thinking CSR strategy. At the moment we have 47 people signed up to apprenticeships and are committed to ensuring our staff have the best opportunities for career development.

She continued, ‘but as a charity we just don’t have the budget to offer apprenticeships to everyone who would benefit, so this money will really change the lives of local people.’

Sapphire are also planning a whole host of fundraising activities for Seashell over the next year including the Manchester 10K, the Yorkshire Three Peaks and payroll giving to raise funds for the charity that supports children and young people with complex disabilities.

Mark Connor, Managing Director at Sapphire Accounting, said “We are delighted to partner with Seashell Trust, a local charity which our staff voted overwhelmingly to support. The work that Seashell Trust do to make a significant difference to children and young people’s lives is truly inspiring and everyone at Sapphire is really proud to support such a great cause.”

If your business has unused money in the levy pot that you would be willing to transfer to benefit a local charity, contact wendy.bray@seashelltrust.org.uk or call her on 0161 610 0168.

Be sure to follow our team as we take on the Manchester 10 KM and Yorkshire Three Peaks. Find us on Twitter and LinkedIn

Autumn Statement 2015 – Recruitment Industry Soundbites from Sapphire Accounting

Recently, the Chancellor of the Exchequer produced the Treasury’s Autumn Statement to Parliament.

You can now read our helpful breakdown of the key points (for the recruitment industry) by clicking on the link below.

Sapphire Autumn Statement 2015 Soundbites

(You must have Adobe Reader installed to read the above document correctly, please go to www.adobe.com/reader to download)

HMRC announces “Second Incomes Campaign”

What’s the issue?

HMRC has been busy pushing its new Second Incomes Campaign, so – how might directors and other business owners be affected?

Why are HMRC doing this?

HMRC are concerned that many taxpayers aren’t properly declaring all taxable sources of income, and have therefore introduced the Second Incomes Campaign. It says this is to enable individuals to bring their tax affairs “fully up to date on a voluntary basis”. There are many activities which can bring in a second income but two of the most likely sources for directors and other business owners are consultancy and training services offered in a personal capacity, i.e. not through the business.

HMRC’s Approach:

Although HMRC is encouraging voluntary disclosures of this nature, it won’t assign them to the ‘Second Incomes Campaign’ automatically. In order to take advantage of what it calls the “best possible” tax repayment terms you must specifically tell it that you want to participate by completing the correct notification form. Once this has been done you then have to calculate the unpaid tax that’s due and send HMRC a disclosure form. Once that’s acknowledged the tax owed must be paid within four months.

If undeclared sources of income aren’t voluntarily disclosed and HMRC subsequently finds out, you could face higher penalties or, even worse, a criminal prosecution. There is no end date for the Second Incomes Campaign

What to do if you think you may be affected:

If you’re concerned, Sapphire suggests that you don’t leave things to chance.

Sapphire Tip:

Rather than going straight to HMRC – either for advice or to make a disclosure – directors and business owners should first seek specialist advice and, if necessary, representation. Apart from the fact that HMRC’s online calculator can only manage basic tax affairs, personal declarations made by high net worth individuals may prompt an inspector to undertake a deeper investigation.

Undeclared personal fees, e.g. for consultancy work, are being targeted. If you’re worried, don’t automatically make a disclosure under the campaign – it could prompt a deeper investigation. Speak to your accountant first.

Employment Intermediary Reporting – Act Now!

What is it?

From 6th April 2015, any Employment Intermediary who has a direct contractual relationship with an end user/hirer (with whom they place workers) must send a report to HMRC each quarter with details of each worker paid where PAYE was not operated (i.e. not reported on a PAYE RTI return – Full Payment Submission).

In other words, a Recruitment Agency who pays a worker through an Umbrella company or direct to their own Limited Company (PSC) rather than operating PAYE themselves (via their own PAYE payroll) MUST be reported to HMRC on an Employment Intermediary report every quarter.

Why the changes?

These changes have been brought in to help ‘police’ the Onshore/Offshore Intermediaries legislation which took effect in April 2014, to tackle the avoidance of employment taxes (false self-employment) by using intermediaries.

Act now!

The first quarter (6th April – 5th July) has now elapsed, and Employment Intermediaries now have one month (until 6th August) to submit their first quarter’s report. This must be done by uploading a CSV/OSD file containing the information required (see the link below for what must be reported) to the HMRC website. You must specifically add this feature to your HMRC online services section by entering your company’s PAYE reference and Accounts Office reference numbers.

There are fines in place for intermediaries that do not comply, file on time or provide false information.

More info

You may find the following link of some use in the lead up to the first deadline:

https://www.gov.uk/government/publications/employment-intermediaries-reporting-requirements

 Sapphire Summary

These changes place even more of an administrative burden on Recruitment Agencies. If you’re still unsure of your obligations as a result of these changes, Sapphire can provide you with further advice and assistance in order to comply with these new requirements.

Please feel free to contact us at any time if we can help in any way to meet your new obligations.  

The Budget 2015 – Industry Soundbites

Budget 2015 – Industry specific Soundbites


Tax Rates

  • Income tax: personal allowance in 2015-16 – The income tax personal allowance will be increased to £10,600 from April 2015. The higher rate threshold will be increased to £42,385 (2014: £41,865).
    Sapphire Comment: This effectively increases the most tax efficient PSC salary from £833 per month to £883
  • Transferable tax allowances for married couples (Announced previously) – From 2015-16 married couples and civil partners will be able to transfer £1,050 of their income tax personal allowance to their spouse or civil partner.
  • National Insurance Contributions (NICs)- Rates remain unchanged – (Employer’s 13.8% and Employee’s 12%) but the thresholds at which NICs are due have been raised from £153 to £155 per week (£8,060 per annum) for Employee’s and £156 per week (£8,112 per annum) for Employer’s. Upper limits are now aligned with the PAYE higher rate threshold.
    Sapphire Comment: The £2,000 “additional” Employer’s allowance will continue to apply for 2015/16 therefore on a salary of £10,600 only Employee’s NICs of £305 pa is due (£10,600- £8,060 x12%)
  • Class 2 National Insurance Contributions abolished: Self Employed workers will no longer be required to account for these and there will be consultation on the reform of Class 4 NICs to include a contributory benefit test.

 

Low Paid Workers

  • Simplifying self-employed NICs (Announced previously) – from April 2016 Class 2 NICs which are £2.80 per week from 6th April 2015 (2014: £2.75) for the self-employed will be collected through Self-Assessment.
  • No Employer’s NICs on Apprentices under 25 years old (Announced previously)
    Any Employer who employs under 21’s will not have to calculate or pay over any Class 1 Secondary (Employer’s) National Insurance contributions. ER’s NICs (up to the upper earnings limit) for apprentices aged under 25 will also no longer be due from April 2016.
  • The self-employed and Tax credits
    From April 2015, self-employed Working Tax Credit (WTC) claimants will need to register their self-employment with HMRC for Self-Assessment purposes and provide a Unique Tax Reference number in order to be able to claim. Those declaring income less than the equivalent of working 24 hours a week at the National Minimum Wage (NMW) will also be required to provide evidence to HMRC that the work they are undertaking is genuine and effective.
    Sapphire Comment: This is an attempt to prevent abuse of Self Employed payment models and tackle self-employed workers who may not be submitting tax returns.

 

  • National Minimum Wage will increase to £6.70 from £6.50 in October 2015- an increase of 3%. The government has previously announced funding will increase by £3m in 2015-16 for enforcement of NMW.
    Sapphire Comment: This makes the “fully loaded” NMWR for Umbrellas effectively £8.01 without any scope for a margin (£8.50 if a margin of £20 is charged)


Bank Interest Receipts

  • Bank Interest will effectively no longer be taxable for 20% tax payers for the first £1,000 of interest income. Higher rate tax payers will not be taxed on the first £500 of interest income.
    Sapphire Comment: This is a useful political soundbite but in reality will not really have much of an impact on many taxpayers with bank interest rates at 0.5% or less


Office of Tax Simplification (OTS)

  • The OTS issued a comprehensive report in March 2015 in respect of employment status. This explores the use of so called “zero hours” contracts as well as how self-employed and employed individuals are determined. The aim of the report is to create a “level playing field” in respect of the benefits received by workers/employees/self-employed.Sapphire Comment: The OTS has been very active in the last 3 years and has published many reports. Its status as a temporary appointment means that it will not survive beyond this Parliament so it is impossible to predict how its recommendations will be adopted (or ignored) by the next government.

Personal Service Companies

  • (Announced previously) Corporation tax rates –The main rate of corporation tax will be reduced to 20% from April 2015 (which aligns the rate with the small companies’ rate).
  • (Announced previously) The end of “Goodwill on Incorporation”
    A widely used tax planning mechanism for those moving from self-employment into limited company working will no longer be available going forward
  • (Announced previously) Simplification of benefits and expenses– From April 2015 the government will provide a statutory exemption for trivial benefits in kind costing less than £50. An annual cap of £300 will also be introduced for office holders of close companies and employees who are family members of office holders


Personal Tax returns

  • Digital Tax Accounts will be used going forward – These will apparently remove the need for a personal tax return to be completed but not much detail has been given

Sapphire Comment: This is an intriguing announcement and will be a very significant change to the current tax system. More detail will be published later in 2015 but such a radical change cannot be expected to be introduced for at least 2 years. This would be a positive development for small businesses but perhaps not for accountants with large tax return departments!

 

Umbrella Companies and Recruitment Agencies

  • (Announced previously) Offshore and Onshore intermediaries – From 6 July 2015 onwards, Recruitment Agencies will have to send HMRC reports that contain details of all workers and their payments where the Agency, or the payroll operator, didn’t operate PAYE. Penalties will be given based on the number of offences in a 12-month period:
    £250 – first offence; £500 – second offence and £1,000 – third and later offences
    Sapphire Comment: This is an onerous reporting requirement for Recruitment Agencies who will have to report (by individual contractor) every payment made to an Umbrella company or a PSC. Agencies will become responsible for any ‘uncollected PAYE’.
  • Restricting Travel and Subsistence Claims for Umbrella and PSCs from 6th April 2016
    As expected, the government will be abolishing T&S expense claims for Umbrella workers and those in PSCs who do not meet the new “supervision, direction and control” definition as in the “On-Shore Intermediaries” legislation. The tax saving is estimated at £240m in 2016-17Sapphire Comment: This was a widely expected development and shows that the umbrella industry’s efforts to emphasise “Compliance with legislation” to secure government support has failed. The government is clearly intending to eliminate the umbrella industry in its current form. It is notable that the legislation will be extended to PSCs, implying that the IR35 rules may be applied more rigorously. The use of terms which were used in the “On Shore Intermediaries Legislation (OSIL)” probably means we’re going to see Recruitment Agencies made liable for PAYE debts further down in the supply-chain in the same way as it appears in the OSIL. The ‘greater transparency’ on how workers are employed will be an interesting development and will presumably focus on initial briefings and, perhaps, narrative on payslips


Context for Government Policy on self-employment- it’s all about PAYE!

  • Self-employment
    Self-employment has been increasing steadily as a proportion of total employment over the last 14 years, from 11.7% in the 3 months to December 2000 to 14.7% in the 3 months to September 2014. This suggests ongoing structural change in the labour market, rather than people becoming self-employed because they cannot find other work:Sapphire Comment: 50% of total government revenue comes from PAYE and NICs so it is logical that government is incentivised to maintain this stream of revenue. The growth of self-employment makes the collection of tax revenue more difficult so controlling self-employment is a government focus. (c/f the elimination of the Construction Industry Scheme in 2014)

 

Tax Avoidance Structures including Off Shore Schemes

  • Promoters of Tax avoidance schemes
    Legislation was introduced in Finance Bill 2014 to require taxpayers to deposit amounts, so that the amount in dispute is held by HMRC while the dispute is resolved. Accelerated Payment Notices are being used more heavily than was expected and there will be heavier penalties for promoters going forward.
    Sapphire Comment: This is a continuation of the government’s attack on offshore schemes and it is clear that the focus of the attack will be increasingly on “Promoters”
  • Additional penalties for “Serial Avoiders”
    Individuals who have a history of utilising avoidance schemes will be specifically targetted by HMRC going forwrad

Sapphire Comment: This is a particularly draconian move but underlines the determination of the authorities to eliminate mass marketed avoidance schemes. This may make accountants nervous about engaging with those individuals who have been earmarked by HMRC as ‘high risk’ as there is likely to be additional work for accountants to carry out for such individuals

 

 

2013/14 Tax returns and child benefit

The Law of Decreasing Returns
There has been an increase in the number of people who failed to submit a tax return for 2013/14 when they should have done. HMRC received 10.24 million tax returns by midnight on 31 January. Around £0.9m people have yet to file their SATR’s, that’s nearly 10% of all those who should be doing one! If you know anyone who hasn’t done one, let them know that Sapphire can help! Missing the tax return deadline results in an automatic £100 late-filing penalty. There are further late-filing penalties after 3, 6 and 12 months. People with a genuine reason for not filing should contact HMRC to ensure they do not incur more penalties.

Why have more people missed the deadline for 2013/14?
Blame for an increasing number of late tax returns is being partly attributed to those who should be paying extra tax to claw back some of their child benefit. The rules for this are so tricky that thousands of parents aren’t aware they should be paying it, let alone taking the initiative and telling HMRC that they need to fill in a self-assessment form.

Sapphire Tip
If you have overlooked the so-called high income child benefit charge (HICBC) and so not submitted a tax return, you will have incurred a fine of £100. But by notifying HMRC now and paying any tax due you can avoid, or at least minimise, other penalties. The sooner you act the more sympathetic HMRC is likely to be.

Did you forget to mention that you received Child Benefit and earning over £50,000?
On the other hand, if you submitted a tax return but missed reporting the HICBC, simply amend your return and pay any additional tax before 1 March 2015 and no penalty will apply, although you will have to pay a tiny amount of interest.

Sapphire Summary
Thousands of taxpayers have overlooked the high income child benefit charge and so failed to tell HMRC that they need to complete a self-assessment tax return. If that’s you, tell HMRC without delay and pay the tax due. This will minimise the penalty you might be charged.

 

Are you with the right accountant?

How important is it to find the right accountant?
It is really important, if you take the time to find a good accountant, it could save your business, and you personally, a lot of time, effort and money.

How do I know if I’m working with the wrong accountant?
If your accountant is preparing your tax return for the tax year ended 5th April 2014 in January 2015 (the deadline is 31st January 2015), you can be reasonably sure you are using the wrong accountant! Some accountants are only interested in the fee, others can be too busy to give you the service you need, which means your business suffers, which can include paying more tax than you need to.

When should an accountant prepare my tax return?
If your accountant is properly engaged in tax planning, you should have discussed your tax return for the year ended 5th April 2015 by January 2015 in order to give you time to take advantage of any tax planning opportunities before the tax year ends. Your tax return for the year ending 5th April 2015 should then be prepared by 30th June 2015. This ensures that any payments on account (due on 31st July 2015) can be properly calculated and you can get on with tax planning for the following year.

In Summary: if your accountant is chasing you for information for your tax return for year ended 5th April 2014 in January 2015 you are with the wrong accountant!

What can an accountant help me with?
All the things which can be a huge burden to deal with, and an even bigger burden if you get them wrong: PAYE, VAT, personal tax, business tax, year-end accounts, returns – tasks that many individuals and business owners find difficult or just plain boring. Not everyone is good with figures, and trying to do it yourself could in fact prove much costlier than paying an accountant to do it for you. You will also have peace of mind which leaves you free to concentrate on other, more value added matters.

What about monthly fee arrangements?
It is generally better to pay as you go, that way, you can see what work your accountant has done. You can reduce your accountancy fees by doing your own simple bookkeeping and keeping an orderly record of your expenses, of course but you should consider the Opportunity Cost of carrying out these tasks for yourself.

What about paying for basic advice?
Your accountant shouldn’t charge for occasional basic advice. Anything more than that and you’ll probably have to pay, but having to pay for half an hour with your accountant could save you a stack of money.

Should I appoint an accountant when setting up a business?
Generally speaking – yes! Getting things set up properly from the get-go can save you a lot of time and trouble later on. Many accountants will even give you free basic start-up advice, if you agree to them doing your accounts. You can set up your own limited company without an accountant but you will then receive a plethora of documentation from the taxman and Companies House which may be daunting – it’s usually best to use an accountant so that you know all these things are taken care of.

How important is it to find an accountant with relevant experience?
For businesses in sectors with specific tax rules such as the temporary labour market, it is crucial. You should find an accountant with a good track record of working with temporary contractors. My advice? Ask an accountant to explain IR35 to you – if they take more than 60 seconds and/or you can’t understand what they are saying, chose a different accountant.

How do I get the best out of my accountant?
If you value their opinion – follow their advice. Don’t bargain them down too hard on price – you may get a deal, but you’ll never be top of their priority list. When your accountant asks for something, provide it quickly. If you want to keep the fees down, do what you can to make their job easier.

In summary?
Most people never change their accountant – even if they have a terrible experience… in the same way that people don’t change their bank. Rest assured, changing your accountant isn’t hard at all – so don’t over stress about choosing one. If it isn’t working for you, find another accountant – simple as that!

HMRC: The Worst Excuses for missed Tax Returns

HM Revenue & Customs has published what it considers to be the worst excuses for missing the January 31 tax return deadline.

A few are believable, others sound like a forgotten homework excuse, and some are outlandish, but all have been used in unsuccessful appeals against HMRC penalties for late filing.

Many of the excuses claim it was someone else’s fault – pets, girlfriends, and work colleagues – and one person even implicated US president Barack Obama.

Here’s the full list:

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. I fell in with the wrong crowd.

4. I’ve been travelling the world, trying to escape from a foreign intelligence agency.

5. Barack Obama is in charge of my finances.

6. I’ve been busy looking after a flock of escaped parrots and some fox cubs.

7. A work 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’s pregnant.

10. I was in Australia.

HMRC director general of personal tax, Ruth Owen said: “People can have a genuine excuse for missing a tax deadline, but owning a pet with a taste for HMRC envelopes isn’t one of them.”