RTI Payroll Year End
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RTI Payroll Year End
Payroll year end under RTI should now be a much more straightforward affair than in pre-RTI times. Our suggested procedure is as follows.
1. Last FPS submission will be the last payment date (not necessarily payroll date) on or before 05-Apr-14: for monthly paid this will normally be payroll for the month of Mar-14, but for weekly paid it may be less clear.
If for example your pay week ends on a Friday and is paid Wednesday the following week then week ending Friday 28-Mar-14 will be paid Wednesday 02-Apr-14, and this will be your last payroll for 2013-14 tax year; the week ending Friday 04-Apr-14 will be paid on Wednesday 09-Apr-14 which is in 2014-15 tax year (CAERP: users should check the Company Settings ‘Tax & Payroll details’ tab).
2. Make sure you ‘tick the box’ (CAERP: “This is the final FPS submission of the tax year.“) to indicate that this is your last FPS submission for the tax year, and answer the additional questions.
3. If you have made no employee payments and do not therefore need to make a FPS submission then you will need to make an EPS submission as soon as possible after 05-Apr-14 (CAERP: users will find this at the bottom of the P32 report), and tick both the “No payments were made” box and the “This is the final EPS or FPS submission of the tax year.”
HMRC provide further guidance at http://www.hmrc.gov.uk/payerti/end-of-year/tasks.htm
4. Run your P60 reports and forward to all the individuals who have been employed in the 2013-14 tax year.
5. Update the tax codes for those individuals where notices for 2014-15 have been received from HMRC.
6. Update ‘L’ tax codes by adding 56 so that for example ‘944L’ becomes ‘1000L’.
7. Remove any ‘Week 1’ or ‘Month 1’ indicators (CAERP: untick ‘Wk 1 Mth 1 Basis ‘ in employee records).
HMRC provide further guidance at http://www.hmrc.gov.uk/payerti/payroll/year-start.htm
New for tax year 2014-15
8. From 06-Apr14 you will no longer be able to recover a proportion of SSP paid to employees and the NIC holiday arrangements will come to an end.
9. There is however a new employer’s national insurance ‘Employment Allowance’ whereby eligible employers can reduce their Employer Class 1 NICs bill by up to £2,000 per year. Employers who qualify should submit an EPS as soon as possible after 05-May-14 and tick the ‘Employment Allowance Indicator’ box.
HMRC provide further guidance at http://www.hmrc.gov.uk/news/nic-emp-allowance.htm
10. Perhaps the biggest change for the new tax year is that HMRC will be taking a much harder line on late submission of FPS/ EPS returns with automatic penalties, so please be sure that you make a submission at least monthly, even if only a ‘nil’ EPS return.
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
Not all accounting is the same
Management accounting combines accounting, finance and management with the leading edge techniques needed to drive successful businesses.
In addition to strong accounting fundamentals, CIMA teaches strategic business and management skills:
- Analysis – understanding the story behind the numbers and using it to make business decisions
- Strategy – using the insight from analysis to help formulate business strategy to create wealth and shareholder value.
- Risk – applying analytical skills to look at end-to-end business processes to identify and manage risk.
- Planning – using accounting techniques to plan and budget.
- Communication – knowing what information management needs and explaining the numbers to non-financial managers.
You can trust CIMA members
CIMA members and students are required to comply with the CIMA code of ethics and to adopt the fundamental principles to their working lives. CIMA members are at the heart of business as its conscience, adding judgment, independence and objectivity to their professional qualification.
Every year, CIMA audits its members to ensure they uphold these ethics and will take action if members have been less than true to them.
First there was Fair Trade, now there is Fair Tax……
The Fair Trade Mark is now common place on goods we buy ensuring that workers aren’t exploited, but now there is a new mark, the Fair Tax Mark.
The Fair Tax Mark Criteria assess the quality of a business’ publicly available information on key tax and transparency issues. In this context, publicly available information primarily means a full set of accounts available to all via Companies House or the company website. However, it can also include the company website and/or any other freely available printed material.
For every business type, the criteria are divided into two main categories that assess a business on:
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Transparency
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Tax rate, disclosure and avoidance
Will your business be applying to use the Fair Tax Mark? would you buy more from a business that uses the Mark?
steve@bicknells.net
Loans to Directors of Close Companies
New rules announced in Budget 2013 discourage participators in close companies from taking loans from their own companies, previously legislated under s.419 ICTA 1988, currently s.455 CTA 2010.
The basis of s.455 CTA 2010 is that, where a close company makes a loan to a participator (or associate of a participator) then it is required to pay to HMRC a tax equal to 25% of the value of the loan. The tax is due for payment 9 months and 1 day after the end of the accounting period in which the loan was made. However, if the participator repays the loan before that date, then the requirement to account for the ‘s.455 tax’ is cancelled, by virtue of s.458 CTA 2010. Where the loan is repaid after that date then HMRC repay the ‘s.455 tax’ 9 months and 1 day after the end of the accounting period in which the loan is repaid.
This brings us to one of the measures brought in by budget 2013. With effect from budget day (20th March 2013) ‘bed and breakfasting’ is no longer possible. ‘Bed and breakfasting’ is a commonly used loophole where the loan is repaid to the company before the day 9 months and one day after the year end to prevent the ‘s.455 tax’ charge becoming due, then soon after the trigger date has passed, the participator re-loans the money from the company. Or indeed, where loans are repaid after the ‘s.455 tax’ has been paid to HMRC, but again the participator soon afterwards re-loans the money from the company and reclaims the ‘s.455 tax’ from HMRC.
HMRC have long tried to challenge these cases. Their manual instructs inspectors to “obtain as much factual evidence of the transactions and the accompanying arrangements as possible” where they think they have found a case of ‘bed and breakfasting’ for referral to the Corporation Tax International and Anti-Avoidance technical team.
However, the new rules now give HMRC a statutory basis to deny relief in circumstances where s.455 tax has been paid if, within a 30 day period, repayments of more than £5,000 are paid to the close company in respect of amounts which have given rise to a charge which are then redrawn either via a loan, advance or ‘extraction of value’ – something else new to watch out for!
In addition, where the 30 day rule does not apply, relief will also be denied if there are amounts outstanding of at least £15,000 and, at the time of the repayment, there are arrangements or there is an intention to redraw an amount again through a loan, advance or an extraction of value.
There has been some discussion amongst tax commentators over whether there is a possibility that ‘s455 tax’ may never be repaid in the circumstances where a participator makes regular withdrawals from their company which are treated as debits to the director’s loan account and then are cleared via a payment of salary or a dividend before the nine-month cut off because there is an intention to continue withdrawing funds in this way in future; a common practice in many owner-managed companies. However our view is that s464C(5) will, in almost all cases, overcome this problem, as it is clear from the draft legislation that the restriction on repayment of ‘s455 tax’ will not apply in relation to a repayment which gives rise to a charge to income tax on the participator (or associate) by reference to whom the loan, advance or benefit was a chargeable payment i.e. where they are charged to income tax on the dividend or salary used to clear the outstanding loan account balance. Without the inclusion of s464C(5) this new legislation could have caused an awful lot of headaches for accountants, tax advisers and owner-managed companies the length and breadth of the UK, so this sensible, well thought through paragraph is really a saving grace in what could have been an extremely burdensome piece of legislation.
Watch out for the references to “extractions of value” in the revised s455 rules. This is an extension of the rules to cover less traditional arrangements where, instead of providing loans the close company seeks to extract and transfer value to a participator in some other way which would have been neither chargeable to tax nor within the s.455 charge before the introduction of this new wording.
Finally, there is a further new rule which puts beyond doubt that fact that loans made via a partnership, LLP or trustees of a settlement are caught by the s.455 tax charge!
For further advice – see your local CIMA qualified accountant.
Ref CCH
martin.pope@theaccountingfactory.co.uk
Did you know …. you can lend money to your own pension
If you have a SSAS or a SIPP Pension you will probably want to invest some of your funds in Commercial Property – Shops, Office, Industrial Units. Pension funds can borrow money and with the current interest rates low and yields as high as 10%, you can increase your return and use less cash by borrowing.
But one thing you may not know is that connected parties can lend to the fund…
Trustees of registered pension schemes may sometimes wish to borrow funds, for example to enable them to purchase an asset. There is no objection to a registered pension scheme borrowing funds for any purpose providing that the scheme administrator/trustees are satisfied that the borrowing will benefit the scheme and that the borrowing is within the rules laid down by the Department for Work and Pensions (DWP).
A registered pension scheme is treated as borrowing or having a liability of an amount, if that amount is to be repaid or met from cash or assets held for the purposes of the pension scheme.
A registered pension scheme may borrow funds from any individual, company or financial institution whether or not they are connected to the scheme, but any borrowing from a connected party which is not made on commercial terms will be subject to a tax charge – see RPSM04104020 .
http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm07104010.htm
This is useful where you have paid in the maximum allowed pension contributions but you still have cash, so you could lend to your pension to buy a property.
steve@bicknells.net
Big is not always beautiful!
It may seem strange advice to beware of winning big contracts. After all most small businesses dream of catching that biggee which will set them up for the future. However, many a great small business has failed because they won a big contract with a large corporation.
The biggest problem is cash flow.
Large companies will often demand slow payment terms, which means it can be several months between paying employees and suppliers your end and receiving payment for your services. It is important to remember that even if you have agreed 30 day payment terms the cash will usually come in quite a but later than that. This is particularly problematic in the current economic climate where banks are reluctant to lend money to tide you over the interim period.
If a large proportion of your business is geared to fulfilling one large contract you leave yourself exposed should the large company you are dealing with has financial problems themselves.
Also, if you have to neglect your traditional client base whilst you complete the large contract you may find you have no business left one the contract is finished.
Now, I am not suggesting you never bid for large contracts. What I am saying is go into the process with your eyes open. Put away your rose tinted spectacles and examine fully what winning the contract will truly mean for your business. Are you prepared to accept the risks as well as the rewards?
Finally, there are professionals out there – such as your accountant – who can help you, so use them.
Fiona 🙂
Business Disclosure – do it right or risk a penalty
Displaying the right information on the right documents is important, so here is a quick reminder…
The rules for companies are set out in The Companies (Trading Disclosures) Regulations 2008
The key sections is…
6. (1) Every company shall disclose its registered name on—
(a)its business letters, notices and other official publications;
(b)its bills of exchange, promissory notes, endorsements and order forms;
(c)cheques purporting to be signed by or on behalf of the company;
(d)orders for money, goods or services purporting to be signed by or on behalf of the company;
(e)its bills of parcels, invoices and other demands for payment, receipts and letters of credit;
(f)its applications for licences to carry on a trade or activity; and
(g)all other forms of its business correspondence and documentation.
(2) Every company shall disclose its registered name on its websites.
Companies House enforce the regulations and can levy penalties of £1000 for non compliance.
Sole Traders can trade under their own name or a “trading as” name provided its not offensive, contains sensitive or resticted words, includes PLC, Limited Company, LLP or is similar to another business (check the internet for potential conflicts).
Partnerships should show all the partners names or if there are more than 20 partners it may keep a list of names at its principle place of business.
steve@bicknells.net
How changing your year end can help cash flow
Basically if your company makes a loss you carry it forward.
The amount of trading loss available to be carried forward is the loss sustained less any loss relieved in the current year or surrendered as group relief.
Carry forward a corporation tax loss is automatic, therefore as no claim is required there is no time limit.
The legislative reference for a trading loss carried forward is: CTA 2010 s45) [old reference ICTA 1988 s393(1)].
You can also make a claim to carry a loss back 12 months.
The legislative reference for carry back loss relief is: CTA 2010 s37(s)(b)(6)(8) and s38 [old reference ICTA 1988 s393A(1)(b)(2)-(2C)].
But there is another option, to help improve your cash flow, lets say you have been making profits and you have just come to the end of your accounting period, the next few months are going to be tough and you will make a loss. If you change your year end by extending it or having a shorter period you could help your cash flow.
Corporation Tax is payable 9 months and 1 day after your year end, so you will have a return for 12 months and have tax to pay but if you had a 6 month return to follow it you could reduce the time before you claim relief for the loss.
If you extended your accounting period to 18 months the figures might even look better for credit rating.
You can shorten as much as you want but not beyond the start date of the accounting period being changed.
You can only extend once every 5 years.
See the Companies House Checklist for details
steve@bicknells.net
Will HMRC help you get over the Floods?
Will it ever stop raining!
But help is at hand, HMRC launched their helpline (12/2/14)
The helpline will enable anyone affected to get fast, practical help and advice on a wide range of tax problems they may be facing.
HM Revenue and Customs (HMRC) will also:
- agree instalment arrangements where taxpayers are unable to pay as a result of the floods;
- agree a practical approach when individuals and businesses have lost vital records to the floods;
- suspend debt collection proceedings for those affected by the floods;
- cancel penalties when the taxpayer has missed statutory deadlines.
The helpline is in addition to other HMRC telephone contact numbers.
The helpline is 0800 904 7900. Opening hours are Monday to Friday, 8.00 am to 8.00 pm; Saturday and Sunday, 8.00 am to 4.00 pm, excluding bank holidays.
I hope the weather improves soon and your business can keep going and survive the storms.
steve@bicknells.net
Not another accountant!
I was asked by a prospective client, “Why should I hire another accountant to work with me on this transaction when my firm already employs a qualified accountant and retains a firm of auditors?”
It was a good question and probably one that many SME owners would ask under similar circumstances. I was pretty sure of the answer, but wanted to avoid the usual clichés, such as “you only sell your business once”, “you have to get it right first time” and “there is too much money at stake to take a chance on inexperienced advice”, however they are the main reasons why and they did form part of the response.
I explained that not all accountants are experienced in all matters. An accountancy qualification provides an excellent introduction to the world of business, but accountants tend to specialise like any other profession, and this is one of my key areas of expertise.
The owner in question knew that his in-house accountant did a great job of running the day-to-day finances of the business, handling the sale and purchase transactions, managing the payroll and producing monthly reports. He also looked after most other things relating to the administration of the business, such as property and insurance, but the owner also knew in his heart that his accountant had never sold a business before and had no idea what it entailed. He also knew his auditors were competent at producing year-end accounts and preparing his tax returns, but they had no direct experience of preparing a business for sale or making important presentations to maximise its sale value from prospective acquirers.
The owner had talked to his corporate finance advisor and had listened carefully to the advice offered – the extraordinary workload, the amount of detail, the intrusive due diligence that would examine every part of the business, the negotiation of terms with seasoned acquirers and the potential impact of all of these on his time, the day-to-day running of the business and how much he might get out of the transaction.
The bottom line was that the owner knew that he needed to strengthen his team for the duration of the project and that was the reason he and I were having the discussion.
He listened carefully whilst I gave him my estimate of the value of the business based on its current earnings and the sort of multiples he could expect from trade and private equity buyers.
I compared and contrasted the different acquisition rationale of trade buyers and private-equity buyers, and I talked about the process and timescales, including the possibility of an extended timescale if the acquirer needs more time to make certain, i.e. to get another month’s or quarter’s trading on the slate.
I also explained how the owner might secure more money through an earn-out if the business did better than expected and I highlighted what the potential acquirers would be looking for, i.e.
- the quality of earnings,
- the relationships with customers,
- the market potential,
- the possibility for vertical or horizontal expansion,
- the geographic reach,
- the white space around existing markets and sectors
- the strength of the business model,
- the size of the pipeline,
- the skills of the people,
- the integrity of the business processes,
- the control over cash management,
- the robustness of financial forecasts,
- the performance against budgets,
- the treatment of expenditure,
- the cash conversion of sales and profits,
- the level of investment required to sustain and grow the business
We discussed these at length and I felt comfortable that we were having a fruitful discussion about important aspects of his business and I sensed that he was reassured by what I said and how I could help him address these issues.
I also said that I had looked at the company’s website and noted job vacancies, details of contracts secured, strategies for expansion etc., and I asked how these were going. I explained that everything in the public domain needed to be verified, so that there were no inconsistencies and no empty promises – everything needed to withstand scrutiny.
The owner made meticulous notes throughout, after all – it was sound advice – and free!
Business owners are savvy people, they know that good advice is important and a trusted advisor is something very special.
However, returning to the story.
Did I get the job? Yes, I did.
Did he make a lot of money? Yes, he did. He is a very happy client!
If you found the article interesting then maybe you would like to share it, or if you would like to comment then I would be delighted to hear from you either on this site or at mjones@finexec.co.uk
Business Accountant 