Top 5 useful things I have learnt about RTI
Real Time Information (RTI) has now been with us for a few months and once you get used to Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) its not too bad.
HMRC recently reported:
With over 1.4 million PAYE schemes successfully reporting in real time, the launch of PAYE Real Time Information (RTI) continues to go well. The vast majority of employers (83% of small & medium size employers and 77% of more than 1 million micro employers) have started reporting in real time, but we are aware that there are still some employers who have not started yet.
Given time you might even get to Love doing your RTI Payroll as much as Suzie Humphreys…
Here are some things that I have learnt that you might find helpful:
Split FPS Submissions
You can only submit each employee once for each payment period but you can make more than one Full Payment Submission, this is useful if you have Monthly and Weekly payrolls, or a late starter you have process after the FPS has been submitted, or if you split your payroll by seniority and different staff process sections.
Hashtag and Paying by BACS
At the moment if you pay employees by Direct BACS using systems such as Nat West Payaway the Direct BACS submission needs to include a Hashtag to enable HMRC to match the payment with the FPS, however, if you don’t use Direct BACS and you just pay by Online Banking, Bankline, BACS or CHAPS or any other method you don’t need the Hashtag. I am sure that will change!
Starters and Leavers
When you enter a new employee HMRC are notified on the first FPS that they appear on and you must no longer use a P46 to get starter information you need to us the new HMRC Starter Checklist
P45’s are just for the Employee to refer to and are useful to show to their new employer, don’t send them to HMRC. HMRC are notified of leavers on the FPS.
CIS
If you have deductions under the Construction Industry Scheme you need to enter them on the EPS to reduce the amount of tax payable.
NI Holiday
NI Holidays for new companies end in September 2013 but until then need to be entered on the EPS. Form E89 is used to keep track of how much has been claimed.
Here are some more useful tips and facts on RTI:
Relaxation of Rules for Small Companies
HM Revenue & Customs (HMRC) recognise that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC have therefore agreed a relaxation of reporting arrangements for small businesses.
HMRC is planning to extend the temporary relaxation for employers with fewer than 50 employees to April 2014. This relaxation means that these businesses are still required to report through the new system, but are able to do so once a month (but no later than the end of the tax month (5th)), rather than each time they pay their employees. This gives small businesses that pay weekly (or more frequently), but who only run their payroll at the end of the month, some extra time to adjust to the new requirements.
Annual Schemes
Many micro businesses such as one person companies are switching to annual payrolls.
An annual scheme must meet all of the following requirements:
- all the employees are paid annually
- all the employees are paid at the same time/same date
- the employer is only required to pay HMRC annually
Once a business is registered as an annual scheme, an Employer Payment Summary (EPS) is not required for the 11 months of the tax year where no payments are made to the employees.
But currently HMRC are unable to process requests to become Annual.
HMRC are working to rectify this position and will publish a further ‘What’s New’ message to announce when this is ready.
Late Filing Penalties
If you do not report the final payment made to an employee, for the tax year 2013-2014, by 19 May in the following tax year you will be charged a late filing penalty.
Penalties are calculated on the basis of £100 per 50 employees and accrue for each month (or part month) that a return remains outstanding after 19 May.
If you fail to report this information by 19 May, or tell HMRC no return was due by sending an EPS, they will write to you (and your authorised agent if you have one) advising that a penalty may already have been incurred and that you must report this information as soon as possible to prevent the penalty building up any further.
steve@bicknells.net
Employee Shareholders – will your employees want shares?
The Growth and Infrastructure Act 2013 comes into force on 1st September 2013 and Section 31 makes changes to the Employment Rights Act 1996 inserting section 205A Employee Shareholders.
205A Employee shareholders(1) An individual who is or becomes an employee of a company is an “employee shareholder” if—(a) the company and the individual agree that the individual is to be an employee shareholder,(b) in consideration of that agreement, the company issues or allots to the individual fully paid up shares in the company, or procures the issue or allotment to the individual of fully paid up shares in its parent undertaking, which have a value, on the day of issue or allotment, of no less than £2,000,(c) the company gives the individual a written statement of the particulars of the status of employee shareholder and of the rights which attach to the shares referred to in paragraph (b) (“the employee shares”) (see subsection (5)), and (d) the individual gives no consideration other than by entering into the agreement.(2) An employee who is an employee shareholder does not have—(a) the right to make an application under section 63D (request to undertake study or training),(b) the right to make an application under section 80F (request for flexible working),(c) the right under section 94 not to be unfairly dismissed, or(d) the right under section 135 to a redundancy payment.
Giving up employment rights might not sound like a good idea for employees but there are tax advantages for both the employee and employer:
- Dividends are not subject to PAYE or National Insurance
- Dividends would not be used as Pay in Auto Enrolment
- Capital Gains Tax Allowances should make most gains tax free
- The employer will benefit from cost savings on the sacrificed employment rights
steve@bicknells.net
R&D Tax Credits: Patent Box And Property Embedded Fixtures And Fittings Allowances For Commercial Properties Are Leading Government Policy Aims For UK Firms.
It is little recognised and few know very much about these very valuable and available policies for British companies. I can say this on the basis of the latest statistics published recently showing the takeup of R&D Tax Credits. Although there is improvement, the scheme is still under used and sets the UK among the lower spenders on research and development. I will remind readers that this state of affairs is not down to Government policy in the matter: no, it is the failure of directors and companies to find out and make claims for the three areas of support I set out above.
The challenge remains: what to do about the reluctance of British companies to take advantage of that which is put there for their support? There is a body of support and expertise available to SMEs and LCs. This consists of companies willing and able to work with companies’ own accountants and to represent and interact fully with each of the seven Special R&D Units run by HMRC.
Infrastructure is in place, the schemes for takeup are in place and functioning: it is up to directors to contact us, or contact someone and find a way forward for their firms. They owe this to themselves and to their shareholders and clients.
Read all about it!
My last post was all about the Entrepreneur’s Convention and how motivated I was when I came back.
Just to prove this was so I thought I would base this blog on my journey writing a newsletter for the first time, and what I got out of it.
I gave myself four days to get it in the post, because I was due to go away for a long weekend with my mum for her birthday on the Thursday morning and I knew that if I waited until I came back momentum would be lost.
I had no idea what tool to use as I didn’t have Microsoft Publisher as part of my Office package – and Publisher was the only tool I knew. After some research we found Swift Publisher 3. This tool was relatively inexpensive ($18 I think) but had the professional look I was after. Package bought and downloaded it was time to think of a theme and title.
After much head scratching my hubby came up with a great title. As my blog is Bright Business Thoughts how about Bright Business Bulletin? Perfect!!
Then it was a case of using branding and pictures I already had on my website to give the right look and feel.
Content was the next issue. As the newsletter is for clients and other good business contacts it is important to me that they get value from the newsletter. It is not to be about me but about other interesting businesses and with useful tips and advice.
The Entrepreneur’s Convention was an ideal lead article as it was topical and of interest to an audience of entrepreneurs and business people.
The rest of the newsletter was filled with regular features I plan to run each month: A quote from that great business guru Winnie the Pooh; a slot with our financial agony aunt Jenny; Michael’s minutes where Michael gives us a quick tip on time management; dates for your diary; and a community section featuring a great business; someone who has helped me in the month and a partner of the month (someone I recommend).
I have had some good feedback so hopefully it is the right mix of content and entertainment.
I met my ‘in the post’ target – just!
By the end of Monday I had the newsletter at the printers, the envelopes ordered and the stamps bought. By the end of Tuesday I had the list of recipients prepared and labels printed. The envelopes arrived Wednesday pm so I was able to label and fill them before popping them in the post by 6pm Wednesday evening.
So what did I learn? Firstly, you can achieve a lot when you give yourself a deadline – even if the tight schedule meant a typo missed editorship! Secondly, a good tool takes a lot of the stress away from doing a project. And thirdly, I am very lucky to have a husband who is very good at graphics and is happy to help!
Fiona 🙂
Employing the self-employed – time to stop burying your head in the sand
Do you run a small business charity or non-profit organisation?
If you have employees then by now you should be filing on-line payroll returns every time you pay your employees. From 6 April 2013 employers started reporting PAYE information to HM Revenue & Customs (HMRC) in real time. You may see this referred to as Real Time Information – or RTI. This means that employers (or their accountant or bookkeeper) have to:
- send details to HMRC every time they pay an employee, at the time they pay them
- use payroll software to send this information electronically as part of their routine payroll process
But we don’t have any employees!
Really? Are you sure?
Think very carefully about all of the people you make payments to. Are you really sure that they are self-employed?
Now that I have planted a seed a doubt in your mind take a look at the Employment Status Indicator on the HMRC website. http://www.hmrc.gov.uk/payerti/employee-starting/status.htm
By answering a number of questions you can check whether that “helper” you make a payment to would be classed as an employee. Can you satisfy yourself that every person you pay would be classed as self-employed?
So that’s all clear then!
Well, unfortunately not quite so clear and a recent example has come to light in the instance of church organists. A phone call to the general HMRC helpline yielded the answer that an organist might be employed or self-employed depending on circumstances. Further probing however yielded a very different answer.
Following an Employment Tribunal decision, wherein an Organist was declared to be an employee, it has been the Law since 2007/8 that he/she should have been put on a payroll and been subject to the usual tax rules. Two further Tribunals have decided in similar manner, that an organist is an employee.
An HMRC Employment Status Officer has advised that Church of England Organists:
- Are engaged under Canon Law (which is correct);
- Play what the Incumbent authorises (according to that Law);
- Cannot substitute anyone else without the Incumbent’s express permission;
- Any substitute would be under his (the Organist’s) control (another employee) otherwise the Organist could not determine the substitution;
- Must play the required music on set days and at set times determined by the Incumbent;
- Does not provide his own “tools”, i.e. the organ;
- Have full employment rights under EU Law.
This is a very specific example that illustrates the need to check employment status carefully.
Everybody has to pay tax but what if HMRC get it wrong?
If you don’t file your tax returns HMRC will assess the amount of tax due but it will probably not be the correct amount. So what can you do to correct the tax payable?
A person can claim overpayment relief to recover overpaid income tax, CGT, Class 4 NIC or corporation tax or to reduce an excessive assessment. A person can claim overpayment relief to recover overpaid bank payroll tax or to reduce an excessive assessment.
This includes amounts paid under a contract settlement.
This is an important ‘relief of last resort’ for taxpayers who have missed all other deadlines and face a tax bill from HMRC, where there is no statutory right to amend the actual legal liability because the relevant time limits have passed.
Special relief is intended as a final and exceptional remedy where it would be unconscionable for HMRC to pursue tax that is legally due. HMRC has a duty to both Parliament and taxpayers generally to collect the tax due under relevant tax law and to ensure the tax system is operated fairly. This means that HMRC cannot simply disregard the time limits for making a self-assessment if it appears that a determination might be excessive. There must be further circumstances which make it unconscionable to recover the full amount due under the determination or not to repay an amount already paid.
Such circumstances might be where a person
- is suffering from a temporary or sporadic illness, including mental illness, and consequently finds it particularly difficult to engage with the tax system
- has not received our notices or other communications for reasons outside their control
- is insolvent. Where the debt is based on determined sums, and the late submitted evidence (or returns) prove that a different amount would have been due if returns had been made in time, we would consider using this relief. Relief would be considered where doing so is fair to other creditors – so the unconscionable element would be that pursuing the amount in the determination would be to the detriment of other creditors.
For a claim to special relief to be successful, it must, among other things, explain why the person considers that it would be unconscionable for HMRC to recover the full amount charged by a determination. Unconscionable means “completely unreasonable” or “unreasonably excessive”. SACM12240
HMRC may in their discretion mitigate any penalty, or stay or compound any proceedings for recovery thereof, and may also, after judgment, further mitigate or entirely remit the penalty. TMA70/S102.
Mitigation will be considered in three circumstances.
- Where some sort of HMRC maladministration, usually delay, has caused or contributed to the size of the penalty – where delay and/or lack of co-operation by the taxpayer have caused the department additional costs that will weigh against mitigation.
- Where to enforce payment of the penalty would cause the taxpayer genuine and absolute hardship.
- Other exceptional circumstances such as the penalty or penalties being wholly disproportionate to the offence – for example a large tax-geared failure penalty under S93(5) following upon very large S93(3) daily penalties for the same offence, or belated information revealing the type of situation set out at EM5212 (“In-built” penalty).
There is no appeal against HMRC’s decision on S102 mitigation and a taxpayer wishing to litigate would need to seek Judicial Review.
steve@bicknells.net
CIMA shows professionals how to do the right thing
The Chartered Institute of Management Accountants (CIMA) has produced an ethical scenario tool to help businesses comply with ethical standards in a volatile and complex business environment.
This follows a recent Chartered Global Management Accountant (CGMA) survey which revealed that nearly 25% of respondents worldwide worked for an organisation that had suffered from a serious reputational failure. This rose to over a third in the UK, which has witnessed a series of corporate crises ranging from LIBOR to tax avoidance and meat scandals. CGMA research last year also highlighted that one in three finance professionals around the world have faced pressure to act unethically.
As CIMA members in practice are committed to upholding a Code of Ethics, the institute has produced this interactive tool to support and guide ethical decision-making. Created with input from members globally, and available to the wider business community, it takes the user through a series of challenges in areas such as conflict of interest, the supply chain, bribery and data protection.
Tanya Barman, CIMA’s Head of Ethics, said:
“Ethical challenges are part of working life, and often there is no perfect answer. But if they are not dealt with appropriately, there may be severe consequences when they come to light – both for the individuals and for the companies they work for.”
“Unfortunately it is still common for employees, be they in finance or in other parts of the business, to face pressure to compromise their ethical standards, and the standards of their company. It is vital to act ethically; to build long-term business success and avoid the shortcuts that can turn into tomorrow’s scandal.”
“Through releasing this tool – to both members and the wider business population – we hope to encourage better working cultures that lend themselves to the ethical standards that most firms subscribe to.”
The tool is available at: www.cimaglobal.com/ethicstool
Estimating sales
It’s common practice for business owners to estimate sales by focussing on total revenues and using that to drive their business plan. But, if you think about it, that doesn’t make sense. Whether you succeed or fail, you will have no idea how or why it happened. You’re flying in the dark.
It takes a little more time, but your sales forecast should start from the bottom up and in as much detail as you can. You clearly need to know the sales price of your products and services, but you can also calculate an average sales value, based on historical data (revenue ÷ number of sales).
Look where your business is coming from and report it by market sector or sales channel (direct, distribution, internet, etc). Analyse the source of your new business in previous years. Where did your sales come from? Was it the result of advertising, telesales, direct mail, networking or online enquiries/SEO? The idea is to build up a map of where your business is coming from and then use historical data as the basis for your forecast.
You might expect established customers to maintain their sales levels – but how much of your business does that represent? If a high proportion of your sales are one-offs, you will be much more reliant on converting leads. So which ones worked best for you in the past? How well did they convert? You can use the conversion rate to help generate your forecast.
Start to build your forecast by looking at each market sector or channel. What unit sales did they produce in the past and is that a good basis for next year? If you are investing in marketing, you should be able to tell from historic data what each campaign cost and the return it generated. Now you can use your planned investment in marketing to generate a forecast for new sales.
It may take you a while, but you will end up with a much better understanding of your business and the factors which are driving it. And it means that when you compare your actual results with what you predicted, you’ll be able to see exactly where things exceeded or fell short of your expectations.
Are you missing out on money you’re entitled to?
You could be missing out on money that is owed to you:
UK Benefits https://www.gov.uk/benefits-adviser
The benefits adviser checks if you’re eligible to claim:
- Attendance Allowance
- Bereavement Allowance
- Bereavement Payment
- Carer’s Allowance *
- Carer’s Credit
- Child Benefit *
- Child Tax Credit *
- Constant Attendance Allowance
- Disability Living Allowance
- Employment and Support Allowance *
- Guardian’s Allowance
- Housing Benefit *
- Incapacity Benefit
- Income Support *
- Industrial Injuries Disablement Benefit
- Jobseeker’s Allowance *
- Maternity Allowance
- Pension Credit *
- State Pension
- Statutory Adoption Pay
- Statutory Maternity Pay
- Statutory Paternity Pay
- Statutory Sick Pay
- War Widow’s or Widower’s Pension
- Widowed Parents Allowance
- Working Tax Credit *
(*) – For these benefits, you’ll also get an estimate of how much you might get.
Lost Pensions https://www.gov.uk/find-lost-pension
The Pension Service will help you track down any lost pensions, if you’re not retired you might be able to consolidate all your pensions to get a better return.
Unclaimed Assets and Forgotten Funds http://www.unclaimedassets.co.uk/
Assets are considered dormant when contact with the owner is lost – typically due to a name change after marriage or divorce, an unreported change of address or expired postal forwarding order, and incomplete or illegible records.
It’s important to note millions of family members remain unaware they’re entitled to collect unclaimed assets owed deceased relatives, who passed on without leaving updated financial records for their heirs.
The majority of this lost money comes from dormant bank accounts, orphan pensions, unknown windfalls, missing shares and abandoned dividends, forgotten life insurance policies, National Savings Certificates and Premium Bonds which have not been redeemed; but also included is £300 million in unclaimed National Lottery winnings!
Lost Savings and Bank Accounts http://www.mylostaccount.org.uk/
If you think you may have lost touch with your account or savings, this website will guide you through some simple steps to help reunite you with your money. This is a FREE service and is brought to you by the British Bankers’ Association, the Building Societies Association and National Savings and Investments.
steve@bicknells.net
Company Filing Requirements Consultation
Red Tape Challenge.
As part of the UK Government’s intention to make regulations more relevant to the world we live in there is a consultation on the filing requirements for UK companies. The pdf document can be downloaded from the gov.uk website. Included in the consultation are suggestions to reduce the burden of form-filling for small businesses including scrapping the annual return and reducing the need to hold duplicate information at your registered office and Companies House.
The consultation document goes into great detail on the costs and benefits of each change being proposed. The cost saving to companies in not having to complete the annual return is assessed at £1.60, but this ignores any fines incurred by people who have missed their deadlines for filing.
Have your say.
The last consultation from Companies House only received a few hundred responses (according to my source) so if you have strong feelings on bureaucracy imposed on you, your response will have some impact. If you are uncertain of your filing requirements you can ask an accountant who will be able to advise on anything you need to do.
Checking the record.
If you are company you can check your details on the Companies House website, or at the following link replacing the last eight characters with your own company registration:
http://data.companieshouse.gov.uk/doc/company/SC433814
If your company registration has fewer than eight characters add leading zeros to make it the correct length. Of course you don’t have to limit yourself to checking your own details – whenever you are considering a new customer or supplier who is a limited company / limited liability partnership etc. it is a good idea to check their entry on the companies house register to get more information on them including names of directors.
Useful links
| Companies House WebCHeck | http://wck2.companieshouse.gov.uk//wcframe?name=accessCompanyInfo |
| Red Tape Challenge | http://www.redtapechallenge.cabinetoffice.gov.uk/home/index/ |
| GOV.UK public consultations | https://www.gov.uk/government/publications?publication_filter_option=consultations |
Business Accountant 