AUTOMATIC ENROLMENT IS A CONTINUING RESPONSIBILITY FOR EMPLOYERS

ON-GOING EMPLOYER RESPONSIBILITIES FOR AUTOMATIC ENROLMENT

It is vital to be aware that employer’s duties do not end after their duties start date.  Like it or lump it, Automatic enrolment is a continuing responsibility for employers.

TO AVOID PENALTIES EMPLOYERS MUST MEET THEIR DUTIES.

Employers can avoid penalties by understanding how they must meet their duties.  Employers should be fully aware that they are responsible to:

(A) Keep records of your automatic enrolment activities (this includes the names and addresses of staff you have enrolled, records of when contributions were paid into a pension scheme, staff opt-in notices, pension scheme reference or registry numbers and information sent to the pension provider) for six years and opt-out notices for four years.

(B) Monitor the ages and earnings of your new and existing staff and check their automatic enrolment eligibility every month (our payroll software can help us do this for you) for existing and new staff.  As staff become eligible they will need to be enrolled.

(C) Enrol staff and write to them to let them know how automatic enrolment applies to them as they become eligible.

(D) Pay contributions to their pension scheme

AE DUTIES PART OF A COMPANY’S STANDARD OPERATING PROCEDURES

In a nutshell responsibility for meeting workplace pension duties ultimately lies with the employer.  Automatic enrolment duties do not just stop once employees have been enrolled.  They must become part of a company’s standard operating procedures.

Employers must help their staff understand automatic enrolment and raise awareness through varying channels of communication.  Messages such as why saving for retirement is important and the law surrounding workplace pensions.  Providing details where staff can find out more about workplace pensions and their provider is key.

The Pensions Regulator (TPR) sends out letters and emails to employers to support them with their automatic enrolment duties.  These letters form a series of communications which are sent during the automatic enrolment process, helping employers to understand their duties and guiding them through what to do next.

Employers must calculate and pay their own contributions to their pension scheme on behalf of their staff, as well as calculating, deducting and paying over their staff’s own contributions.

Employers will have agreed contribution rates and when to pay them with the pension scheme when they were setting it up.  The amount they must pay must be at or above the minimum amount set in law.

You must monitor the ages of your staff and the amount you pay them (including new starters) to see if you need to put any of them into a pension scheme.  You must put them into a pension scheme and write to them within six weeks from the day they meet the age and earnings criteria.

If you have any staff who are

  • – aged between 22 up to state pension age*
  • – and earn over £10,000 per year, or £833 per month or, £192 per week

you must put them into your pension scheme and you must both pay into it.

*If you are unsure what the state pension age is you can use the State Pension Calculator to find

If any of your staff, who can ask to join your scheme write to you asking to do so, you must put them into it within a month of receiving their request.

You will have to pay into the pension scheme if they are:

  • – aged 16-74
  • – and earn at least £520 a month or £120 per week.

To find out how much you will need to pay you should ask your pension scheme provider.

Any of your staff can choose to leave your pension scheme after being put into one.

If they do ask to leave within one month of being put into a scheme, this is known as opting out.  Many pension providers will manage the opt out process on your behalf, speak to your provider if you’re unsure.  If any of your staff opt out, you need to stop taking money out of their pay and arrange a full refund of what has been paid to date.  This must happen within one month of their request.

MoneyHelper have produced a guide for staff who are thinking of leaving their pension scheme.

You must keep records of how you’ve met your legal duties, including:

  • – the names and addresses of those you’ve put into a pension scheme
  • – records that show when money was paid into the pension scheme
  • – any requests to join or leave your pension scheme
  • – your pension scheme reference or registry number

You must keep these records for six years except for requests to leave the pension scheme which must be kept for four years.

Once you have set up a pension scheme and put your eligible staff into it, your legal duties don’t end there.

You must continue to make the payments that are due into the scheme every time you run payroll.  TPR monitor the contributions that are paid into workplace pensions and can tell if payments that are due are not being made into your staff’s automatic enrolment scheme.  TPR will take action if you fail to comply with your ongoing legal duties, and you may need to backdate any missed payments.

Every three years you’ll need to put staff back into your pension scheme if they have left it, and if they meet the criteria to be put into a pension scheme.  This is known as re-enrolment.  TPR will write to you in advance of your re-enrolment date to explain more.

In conclusion

It is vital to be aware that employer’s duties do not end after their duties start date.

Like it or lump it, Automatic enrolment is a continuing responsibility for employers and it is essential to incorporate employer duties into a company’s standard operating procedures.

Our payroll team and the software we use can help employers in all of these duties.

If you would like to know more please get in touch with our payroll team via thefollowing email addresses:

fiona.percival@jeffreyahuddart.co.uk

christine.mccarthy@jeffreyahuddart.co.uk

The Furlough Scheme enters its final weeks

Furlough

Furlough was introduced in March 2020, with the intention to stop employees being laid off by their employers during the pandemic lockdown.

Initially the government paid 80% of the wages of people who couldn’t work, or whose employers could no longer afford to pay them – up to a monthly limit of £2,500.

By the time we arrived at July 2021 employers were required to pay 10% of salaries – with the government’s contribution being lowered to 70%.

And now during August and September (as it comes to an end) the government’s contribution was diluted further where it now pays 60% and employers pay 20%.  (Employers also have to pay employee pensions and National Insurance contributions.)

According to the government website July figures show 1.6 million people were on furlough and says that 11.6 million jobs have been supported since the scheme began.

The Cost

From March 2020 to the end of September 2021, the cost of furlough will come to around the staggering sum of £66bn.

At the start of this pandemic it was thought that more than one in 10 workers would become unemployed.  Instead the unemployment rate is currently less than one in 20.

As the furlough scheme enters its final weeks employers will be deciding what they must do with their furloughed workforce.  In most cases, an employer should have already started the redundancy process if it’s planning to let workers go by 30 September.

The Furlough Scheme in September

The government will pay 60% of wages, up to £1,875 per month, for the hours the employee is furloughed.

As before, employers must top up their employees’ wages.  Employees must receive at least 80% of their wages (up to £2,500) for hours not worked.

Employers can claim furlough pay for employees for September up until the 14 October 2021.  Any amendments must be made by 28 October 2021.

ACAS

ACAS (Advisory, Conciliation and Arbitration Service) is an independent public body which received funding from the government and provides free and impartial advice to employers and employees.

It has very helpful guidance and support if you are an employer looking for help as the furlough scheme comes to an end this month.  Have a look at the links below:

https://www.acas.org.uk/furlough-letter-templates

https://www.acas.org.uk/redundancy

Payroll

If you have any questions regarding the ending of furlough and how it relates to your payroll please call us on 0161 703 8353 and ask for Christine or Fiona – our payroll team.

 

 

 

Proposed reform to the period of taxation for sole traders and partnerships

HMRC has recently put forward proposals to reform the way in which the tax basis period is calculated for the self-employed and partnerships. They have been seeking views from interested parties in relation to these changes up to the 31st August, but it is highly likely they will be implemented for the 2022/23 tax year with no substantive changes.  

What are the current rules?

At present unincorporated businesses are free to choose whatever accounting year-end they wish. These profits are then taxed according to the tax year in which the accounting year-end falls. For example, a business with a year-end of 30 September 2021 would be taxed on those profits in the tax year running from 6 April 2021 to 5 April 2022 (2021/22), with the tax payable on 31 January 2023.

HMRC believes that the current rules have created a complex system that is difficult to understand. For example, when a business starts or a partner joins a partnership, the ‘opening year rules’ must be applied, this can create double taxation of some profits, called overlap profits.

Any profits which have been taxed twice on the commencement of trade can then be relieved in the year of cessation of the business or upon the partner leaving the partnership. HMRC has identified that these rules are often not correctly applied and records of any overlap profits can often be lost as the period between commencement and cessation of a business can be many years.

HMRC also believes that these rules can give an unfair advantage to larger businesses who often have accounting years that are non-coterminous with the tax year. Smaller businesses will commonly have a 31 March year-end for simplification purposes. If a business has an accounting period ending near the start of the tax year this can give up to 21 months before tax is paid on those profits.

What are the proposed changes?

HMRC proposes to tax all unincorporated businesses on a tax year basis regardless of the accounting year-end. There is no requirement to change the accounting year end of the business, just the way profits are taxed.   

For example, if a business has a 30 September 2023 year-end the taxable profits would be calculated for the 2023/24 tax year by taking six months profits from the 30/9/23 year-end and six months profits from the 30/9/24 year-end. If the 30/9/24 accounts have not been prepared prior to the submission date of the 23/24 tax return it is proposed that provisional figures should be used, and the tax return amended once the final figures are known.

That, however, would just seem to confuse matters, so we envisage that accounting year ends will change to 31 March, unless there is a strong commercial reason for a different year-end.

Will there be a transitional period?

HMRC recognised that during the 2022/23 tax year when the new rules are implemented this could see taxpayers paying a significantly increased amount of tax as more than 12 months of profits may be brought into account. It will be possible to offset any overlap profits but, in many cases, these may be considerably lower than current year profits as they were created when the trade was commencing.

Where taxable profits exceed the current year’s profits excess profits can be spread over five years.

This is demonstrated in the following example:

A sole trader has a year-end of 30 June. The profits to 30 June 2022 are £30,000 and for 30 June 2023 are £60,000. They have overlap profits brought forward of £5,000.

Taxable profits for 2022/23 are:

1 July 2021 – 30 June 2022 30,000

1 July 2022 – 31 March 2023 60,000 x 9/12 45,000

Less: overlap profits (5,000)

Taxable profits 2022/23 70,000

As these profits exceed the current year profits of £30,000 the excess of £40,000 can be spread over five years. The minimum amount per year to be added is £8,000 (40,000/5). An election to spread the profits would therefore see 2022/23 taxable profits of £30,000 + £8,000 = £38,000.

£8,000 would then need adding to the taxable profits for the subsequent four tax years.

Making Tax Digital for Income Tax 

These proposals are seen as a forerunner to future reform and Making Tax Digital (MTD) for income tax which is due to be introduced from 1 April 2023. MTD sees all sole traders, partnerships, and landlords with turnover greater than £10,000 required to keep records digitally and submit quarterly updates to HMRC.

HMRC consider that moving to a tax year basis for taxing profits will reduce the number of submissions taxpayers may need to do. For example, a sole trader who is also a landlord may need to make quarterly submissions for both their business and rental profits. Rental income is currently taxed on a tax year basis, if the business was not taxed on a tax year basis they may not be able to combine the two quarterly submissions, greatly increase the admin burden for the taxpayer.

If you think you will be affected by these proposal please get in touch with us by phone or email.  If you already have a 31st March year end then you will probably be unaffected by these proposals.  See the contact information below:

Phone: 0161 703 8353 and ask for Charles or Kendal

Email:  hello@jeffreyahuddart.co.uk

Upcoming changes to Xero subscription pricing

A reminder about the upcoming changes to Xero subscription pricing.

As a cloud company, Xero continually invests in product development.  Like many businesses, they periodically review their pricing to ensure it reflects the value of the product as it evolves, while allowing them to invest in what’s next.

From 23 September 2021, Xero’s plan prices for UK business plan customers will be as follows:

Since the last price increase in 2019, Xero has invested heavily in business critical areas such as cash flow, getting paid faster, automation and security.  This year they’re focused on providing greater support for cash flow management and insight tools, and they’re working hard to ensure their software keeps us all one step ahead of any upcoming government changes to compliance.

If you have any questions please get in touch on:

Email: hello@jeffreyahuddart.co.uk

Phone:  0161 703 8353

All pricing is in GBP and excludes VAT.

 

Re-opening the office and change to business hours

The coronovirus crisis is a world-changing event and each of us is having to deal with its aftermath and the next normal.

We are aware that from a business operational point of view the future is not what it used to be and no-one is quite certain what normal will look like in the coming months but it does feel like a return to what was a pre-covid norm is much closer.

As we return to a new kind of normal we are opening up our office again where you are free to pop in albeit with regard to current guidance on Covid safety measures and respecting each other’s health and safety.

We have been looking at how we address the new level of client demand (as a result of Covid-19) and as a result we are changing our office operating hours.  From Monday 2nd August 2021 our new office hours will be 9am to 4:30pm Monday to Friday.

The front door is open and as you would expect we will be continuing to adhere to current health and safety guidelines regarding Covid-19 both for clients and staff.

Tom Bathgate
2nd August 2021