National Payroll Week at Sapphire!

We are joining the CIPP’s National Payroll Week’s celebrations!

About National Payroll Week

It is the 21st anniversary of the CIPP’s National Payroll Week. Taking place on the 2nd – 6th September, National Payroll Week was established to raise the profile and awareness of payroll in the UK.

It helps demonstrate the impact the payroll industry has in the UK through the collection of income tax and National Insurance; which is expected to contribute in the region of £301bn* to the UK economy in 2019/20.

It aims to provide payroll professionals with a celebration week to highlight that they do more than just push a button and can benefit organisations through strategic decision making related to overall reward and remuneration.

Payroll is the largest expenditure in most UK organisations and therefore should be managed by qualified professionals. Payroll can save employees money through salary sacrifice and other arrangements which improves employee motivation and morale.

Sapphire will be celebrating by having fun all week! The office will be decorated, and we will be having a bake off, party games, quiz, bingo and a mini office sports day!

#NPW19 #keepUKpaid #payroll

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.

Can Micro-Companies Organise Christmas Parties Tax Free?

Can Micro-Companies Organise Christmas Parties Tax Free?

It’s not just large firms that can benefit, it’s possible for one-person limited companies to benefit from this tax relief.

Staff exemption

Most companies that have a staff count of over 5 probably organised their 2016 Christmas party months ago. To make sure that their staff won’t receive a BiK (Benefit in Kind) tax bill, they will have kept the cost within HMRC’s £150 exemption. However for micro-companies, this probably wasn’t the case. Micro-companies with only one or two staff (including directors) might be wondering if they can go for a meal with their partner and still benefit from this tax exemption.

What the law says

The legislation defines fairly clearly who exactly can claim this tax exemption. Section 264 of the Income Tax (Earnings and Pensions) Act states, “Where in the tax year only one annual party or similar annual function to which this section applies is provided for the employer’s employees, no liability to income tax arises in respect of its provision if the cost per head of the party or function does not exceed £150.” Although there are a couple of extra conditions, there’s no cap on the size of the business, meaning the exemption applies for one person limited companies. You can also include guests in the tax exemption, so your spouse/partner can tag along without paying tax or National Insurance.

Company tax deduction

When it comes to CT (Corporation Tax), it doesn’t matter whether or not the Christmas Party is a taxable BiK as it can claim a deduction for the cost either way. However don’t jump the gun and expect a financial advantage. In order to make this tax break, you must maximise the BiK exemption.

Sapphire Tip: Spend whatever you like within the £150 budget, but by going £0.01 over you’ll be taxed the full amount along with a NI charge.

Get-out clause

Naturally you’ll be eager to maximise the annual party tax and NI exemption but it’s not always that simple to keep track of your budget on the night. For example, if you forgot to account for the end of the night “Sambucas”, you might go over your budget by £5 which would rack up a hefty Tax and NI bill. However there’s a simple way to escape this trap.

Sapphire Tip: Always book the venue in the company’s name and should the £150 budget be exceeded, the director should personally pay the bill and claim back only up to £150 per head from the company, with receipts to prove the costs. This is a great way to make sure the company stays within the tax exemption.

Autumn Statement November 2016 – Recruitment Industry and Accounting Provider Soundbites

Autumn Statement November 2016 Recruitment Industry and Accounting Provider Soundbites

The below summary includes direct ‘lifts’ from the Chancellor’s Announcement (the red boxes) for ease of reference. The Sapphire Comment is an initial view and is subject to change following more detailed consideration and additional information such as Guidance Notes and the Draft Legislation which will be published in the next few weeks

Personal Service Companies (PSCs)

1. Off Payroll Engagement in the Public Sector (‘IR35’)

As widely predicted, those entities paying limited companies in the public sector will now be liable for any PAYE or NICs which is not deducted before payment is made to a Limited Company where the worker is operating “inside IR35”. Draft legislation is not yet published.

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Sapphire Comment: This will be the biggest change in the temporary labour market since IR35. Recruitment Agencies will not be comfortable taking the risk of paying a limited company ‘gross’ and the end users are unlikely to want to help with the assessment. This may well lead to the establishment of a new type of “IR35 expert” intermediary who conducts the IR35 assessment and immunises the Agency from any potential liability.

2. Tackling inappropriate use of the Flat Rate VAT Scheme

A new flat rate VAT rate of 16.5% is introduced from 1st April 2017 for business with “limited costs”, such as labour-only businesses. A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either less than 2% of their VAT inclusive turnover in a prescribed accounting period or greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year.

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Sapphire Comment: Draft secondary legislation will be published on 5th December 2016 so we need to wait before commenting further. It seems this ruling may have been introduced to combat the rise of the “micro-umbrella” which has emerged since the Travel and Subsistence and Employment Allowance rule changes in April 2017

3. £30,000 tax free redundancy payments remain

 From April 2018, termination payments over £30,000 which are subject to Income Tax will also be subject to employer National Insurance Contributions

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Sapphire Comment: A sensible clarification of the rules

Self-Employment

4. Employer’s National Insurance on Self Employed Payments?

The Chancellor stated that the “growth of self-employment erodes tax revenues”. The announcement implies that Employer’s NICs may applied to certain payments to the self-employed and that payments without NICs may even be disallowed for Corporation Tax purposes.

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Sapphire Comment: The detail on this legislation change is yet to come but the threat that certain payments may not be eligible for Corporation Tax relief (if Employer’s NICs have not been applied) is a very aggressive proposal. Clearly patience is running thin with those who still operate “gross payment” arrangements

Umbrella Companies and Recruitment Agencies

5. Salary Sacrifice arrangements to be ceased

The tax and Employer NICs advantages of salary sacrifice schemes will cease, except for pensions, childcare, Cycle to Work and ultra-low emission cars. Arrangements in place at April 2017 will remain until April 2018 and arrangements for cars, accommodation and school fees will be remain until April 2021.

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Sapphire Comment: This is the continuation of a policy designed to ensure that all payments to employees fall within the income tax and NICs legislation. Salary sacrifice schemes which have been popular for the last 2 decades will no longer be viable

6. National Minimum Wage

The NMW will increase to an annual equivalent of £13,500, continuing its ‘inflation busting rise’ since 2010

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Sapphire Comment: This move will put further pressure on the viability of travel and subsistence arrangements

Tax and National Insurance Thresholds

7. Income Tax and National Insurance Thresholds Increased

In April 2017, the tax free personal allowance will be rise to £11,500 and the higher rate threshold will rise to £45,000 From April 2017, employee and employer (secondary) National Insurance Contributions will be aligned so the threshold for both will be £157 per week

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8. Small Entrepreneurs can earn up to £1,000 with no tax implications

Some good news in the Autumn Statement for budding entrepreneurs or those earning money from a hobby. As long as the income (presumably the net income), remains below £1,000, there is no need to report the income.

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Sapphire Comment: A small but interesting concession indicating the government’s pragmatic approach to small micro businesses

Digital Accounts

9. The Digital Tax Accounts Initiative continues with Quarterly Reporting on the horizon…

There will obviously be a need for accounting software providers to engage with government on some significant changes which are planned for the longer term. As per the announcement below, it is suggested that taxpayers will be more engaged with HMRC and there is the distinct possibility that tax payments will be made earlier (corporation tax is currently not due until 9 months after a company’s year end for example)

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Sapphire Comment: The Online world has arrived and the role of the accountant is changing in the modern era. Embracing technology and the use of Apps and online software will be essential HMRC and accountant tools in the very near future.
The intent from HMRC in this area can be accurately predicted in that the above initiative is likely to be coupled with Quarterly reporting of landlord and limited company incomes during the 2017/18 fiscal year.