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Payroll Bureaus – Does Auto Enrolment Apply to your Director Clients?
Auto Enrolment is about to hit its peak with over 500,000 small and micro employer set to stage in 2016. With this high volume of micro employers staging early next year, it is important to know whether or not Auto Enrolment applies to your clients.
If your client has at least one member of staff who is paid via a PAYE scheme, Auto Enrolment duties will apply. The only exeption when Auto Enrolment duties does not apply is when a company or individual are not considered to be an employer.
You won’t have any duties if you meet one of the following criteria:
● you’re a sole director company, with no other staff
● your company has a number of directors, none of whom has an employment contract
● your company has a number of directors, only one of whom has an employment contract
● your company has ceased trading
● your company has gone into liquidation
● your company has been dissolved
Automatic enrolment will apply if more than one director has a contract of employment, be it a written or verbal contract. You can find out more about Automatic Enrolment for Directors here.
What if Auto Enrolment does not apply to my clients?
If your client receives a letter which includes their staging date and you believe that auto enrolment does not apply to them, you or the employer need to notify the Pensions Regulator.
To inform the Pensions Regulator, you must fill out an online form with your client’s PAYE Reference and Letter code. Notify the Pensions Regulator here.
Once you have notified the Pensions Regulator, you will receive a confirmation email and your client will no longer receive any further communications.
Change in Circumstances
Your client’s circumstance will change if a new member of staff is taken on other than a director, or if at least two directors started working for them under contracts of employment.
If this occurs, auto enrolment will now apply to your client and the employer, or you on their behalf, must notify the Pensions Regulator of the change.
However, if you do have auto enrolment duties to perform it will make it easier if you have suitable payroll software in place to automate the AE duties. BrightPay is a payroll solution that is free to employers with up to three employees or the bureau licence has unlimited employees and employers. Why not try our free 60 day trial to find out for yourself ?
Written by Rachel Hynes for BrightPay Payroll and Auto Enrolment Software
New tax procedure for Directors Loans (s 455)
Its very common in Small Businesses for the Directors Loan account to be overdrawn creating a Directors Loan.
If the loan isn’t repaid within 9 months of year end the company will pay temporary additional Corporation Tax at the rate of 25% on the balance outstanding.
Section 455 CTA 2010 liabilities must be included in a company’s CT600 tax return. The S455 tax forms part of the calculation of tax payable by the company under Paragraph 8 Schedule 18 FA 1998.
A claim to relief under Section 458 is a claim for relief against the original tax charge for the AP in which the loan was made. The time limit for the claim is four years from the end of the financial year in which the loan is repaid, released or written off. COM53120
Until now there has been no set format for writing to HMRC to reclaim the s.455 tax but now you must use form L2P to enable a close company which has paid tax on a loan to a participator to reclaim that tax once the loan has been repaid, released or written off.
steve@bicknells.net
What are Directors Emoluments?
The reporting requirements are set out in The Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, obviously emoluments include:
- Salary
- Bonuses
- Compensation for Loss of Office
- Benefits
- Share Options
- Long Term incentives
- Pensions
But it can also include payments made via other companies for ‘Qualifying Services’, these are payments paid in relation to the Directors services as a Director of the reporting company (Section 8, Part4, Paragraph 17).
In many cases this could be obvious for example if the Director used a Personal Service Company (PSC) or if the director invoices the company for management services or for management charges. But often invoices relate to the supply of products and services which don’t fall within qualifying services.
Its worth noting that unquoted companies with less than £200k for Directors Emoluments are not required to report details of the highest paid director.
Its also worth remembering that any related party transactions should be fully disclosed in the related party note, so is further clarification of what should be emoluments needed?
steve@bicknells.net
Are you a Business Owner with No Private Pension?
You’re not alone its estimated that 1.3 million business owner have no private pension that’s approx one in two UK Business Owners (according to Prudential).
https://www.moneyadviceservice.org.uk/en/articles/uk-business-owners-lack-pension-savings
Nearly one in three business owners (or 792,000 people) say they will be entirely reliant on the State Pension when they come to retire, compared with twice as many people across all employment types retiring this year in the UK.
Other self-employed workers will supplement their retirement incomes with money from a mix of alternative sources:
- half will draw on other savings and investments
- one in four will use equity from their properties or plan to use their partners’ pensions, and
- one in five plan to use funds from the eventual sale of their businesses.
Most of us know we should be saving more for retirement and the government knows that we need to save more too. That’s why they give pensions tax breaks and employers are being forced to auto enrole staff into pension schemes and make payments.
But how many of us stand a chance of saving £400k into our pensions? it’s a huge amount of money and yet it only buys a modest pension. Work out your strategy now before its too late.
http://stevejbicknell.com/2012/07/29/what-is-the-minimum-pension-fund-you-will-need-to-retire-400k/
steve@bicknells.net
Related Parties and Conflicts of Interest – Directors Responsibilities
The disclosure requirements for Related Party Transactions in published accounts are a common cause of confusion, on the face of it, its sounds easy but getting it right is often a balance between compliance and relevance. The rules are set out in the Companies Act 2006, FRS8 and for smaller companies FRSSE (April 2008). The rules apply to both Full and Abbreviated Accounts.
- FRS 8 defines a related party to include an entity’s subsidiaries, associates, joint venture interests, directors and close family members of directors.
- The standard requires an entity’s transactions with related parties, regardless of whether a price is charged, to be disclosed in that entity’s financial statements.
FRS 8 section 3 and FRSSE section 15.7 states that disclosure of the following is not required:
- Pension contributions paid to a pension fund
- Emoluments in respect of services as an employee or the reporting entity
- Transactions with parties simply because of their role as:
- Providers of Finance
- Utility Companies
- Government Departments
- Customer, Supplier, Franchiser, Distributor or Agent
The disclosure under FRS8 and FRSSE should include:
(a) the names of the transacting related parties
(b) a description of the relationship between the parties
(c) a description of the transactions
(d) the amounts involved
(e) any other elements of the transactions necessary for an understanding of the financial statements
(f) the amounts due to or from related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date
(g) amounts written off in the period in respect of debts due to or from related parties.
Dividends to directors do meet the definition of related party transactions and are disclosable as such.
Trival items don’t require disclosure and the principle of materiality should be applied.
An item of information is material to the financial statements if its misstatement or omission might reasonably be expected to
influence the economic decisions of users of those financial statements, including their assessments of management’s stewardship.
The Companies Act 2006 places a statutory duty on directors in relation to potential conflicts of interest:
A director must “avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company”.
Related Party Transactions will often create a potential conflict of interest.
Authorisation may be given by the directors—
(a)where the company is a private company and nothing in the company’s constitution invalidates such authorisation, by the matter being proposed to and authorised by the directors; or
(b)where the company is a public company and its constitution includes provision enabling the directors to authorise the matter, by the matter being proposed to and authorised by them in accordance with the constitution.
The authorisation is effective only if—
(a)any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director, and
(b)the matter was agreed to without their voting or would have been agreed to if their votes had not been counted.
So it is vital that Directors disclose any potential conflict of interest and seek authorisation from the Board of Directors.
steve@bicknells.net
Business Accountant 