Minimum wage increase October 2014

Posted on 30/09/2014 By dc_admin

The UK minimum wage increases by 19p per hour on 1st October 2014, for all workers aged 21 and over.

Rates for people under 21, and apprentices also increase by a few pence per hour.

Getting it right

Year	21 and over	18 to 20	Under 18	Apprentice*
2014 (from 1 October)	£6.50	£5.13	£3.79	£2.73
2013 (current rate)	£6.31	£5.03	£3.72	£2.68

*This rate is for apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the National Minimum Wage for their age.

The minimum wage applies to most workers over 16 years of age, in the UK, It does not apply to self-employed people, company directors, volunteers, workers younger than school leaving age and a few others.

Making mistakes

Employers who discover they’ve paid a worker below the minimum wage must pay any arrears immediately. There will also be a penalty and offenders might be named by the government.

HM Revenue and Customs (HMRC) officers have the right to carry out checks at any time and ask to see payment records. They can also investigate employers, following a worker’s complaint to them.

Employer’s must keep records proving that they are paying the minimum wage. Most employers use their payroll records as proof. All records have to be kept for 3 years.

The minimum wage is not just for staff paid hourly. You need to make sure that salaried staff, whose pay may be calculated on a weekly, monthly or annual basis are also being paid within the minimum wage regulations.

More information can be found at www.gov.uk or you can contact us to ask a question.

Payroll changes 2014-15

Posted on 20/02/2014 By dc_admin

Payroll changes 2014-15 are the usual updates to tax codes, tax rates and NIC rates. Good news includes a delay in the implementation of late filing penalties under the RTI system, and a £2,000 reduction to employer’s NIC. On the downside, employers will no longer be able to reclaim SSP paid to employees.

RTI LATE FILING PENALTIES

The penalties for late filing of the FPS files which were due to commence April 2014 have been postponed until October 2014.

The FPS files are the Real Time Information (RTI) reports sent each pay period and are due on or before the pay date. The fines are per late FPS and depend upon the number of staff you have:

Staff Monthly Penalty

1 to 9 employees £100
10 to 49 employees £200
50 to 249 employees £300
250 or more employees £400

The penalty notices will only be sent out quarterly ,so the bill could be quite high when you receive it. Payment is due within 30 days of the notice.

Where an FPS is late for more than 3 months and the information is not included on a later submission a further charge is made – 5% of the Tax/NICs which should have been on the submission.

SSP RECLAIM ABOLISHED

From April 2014 the reclaim of SSP will be abolished. You still need to keep a record of SSP paid in the normal way but there will be no reclaims at all. Reclaims for SMP, SPP and SAP remain the same.

TAX RATES 2014-15

The new standard tax code is 1000L

Tax Bands:

20% £1 to £31,865
40% £31,866 to £150,000
45% £150,001 and above

NIC Thresholds 2014-15:

Payments start from the primary threshold: weekly pay of £153, monthly £663, annual £7,956

Employees deductions are 12% on amounts above the primary threshold, up to £805 weekly/ £3,489 monthly then 2% on all other earnings

Employers liability: 13.8% on all earnings above the secondary threshold (values are the same as the primary threshold mentioned above).

The threshold for statutory payments is £111 per week.

SSP rate £87.55 per week

SMP/SPP/SAP standard rate £138.18

Student loans are recovered at 9% on earnings above: weekly £325.19 , monthly £1,409.16 or annual £16,910.00.

£2,000 NIC ALLOWANCE

HMRC are introducing a £2,000 Employers Allowance to be offset against your Employer’s NIC. Most employers are eligible for this and we will be taking it into account on your monthly PAYE Summaries.

There are a small number of employers who are not eligible and you can check your entitlement by logging on to the following website:

https://www.gov.uk/employment-allowance-up-to-2000-off-your-class-1-nics

Budget 2013

Posted on 25/03/201325/03/2013 By dc_admin

The Budget 2013 introduced a new National Insurance for employers. The increase in personal allowance to £10,000 has been brought forward a year, to 2014. There will be very few changes to tax rates.

Employer’s NI (National Insurance) Contributions

A completely new measure introduced in this budget is the employment allowance. This will be a deduction in employer’s NIC of £2,000 per year for all businesses and charities from April 2014. It is intended that this will be easy to administer, and the Government will be consulting with stakeholders on the practical aspects. It should be easy to administer, and be done through the normal payroll and RTI (Real Time Information) reporting process.

Currently employer’s NI contributions reduce profit and business tax liability. If all else is equal, employers will pay £400 more tax (at a rate of 20%). So the true saving for many employers will be £1,600.

Income Tax

The increase in the personal allowance to £10,000 is being introduced a year earlier than anticipated and will come in from April next year. When there is a rise in the personal allowance this usually means the Chancellor lowers the threshold for the higher rate of tax, so that it only benefits people on lower incomes. There have been no changes to income tax rates.

The basic personal allowance is available to people born on or after 6 April 1948. In the current year, 2012/13, it is £8,105; in 2013/14 (as previously announced) it will be £9,440. Once the personal allowance has reached £10,000 in 2014/15, it will then increase in line with inflation based on the Consumer Prices Index (CPI) in future years, starting from 2015/16.

VAT

The annual turnover threshold for VAT registration will go up from £77,000 to £79,000 from April 2013. The deregistration turnover limit will go up from £75,000 to £77,000.

Corporation Tax

The main rate of corporation tax is already scheduled to decrease to 23% from 1 April 2013. From April 2014 it will go down to 21%, and from April 2015 to 20%. There is no change to the rate for small companies, which remains at 20%.

Capital gains tax

The annual exempt amount in 2013/14 will be £10,900, increased from £10,600 in 2012/13. The exemption for most trustees will be £5,450. There are no changes to capital gains tax (CGT) rates.

Small Company Shareholder/Directors’ Loans

The Government will close three loopholes to counter attempts to avoid the tax charge on loans from close companies to individuals with a share or interest in the company. The measures will have effect from 20 March 2013 and are expected to bring in just under £70m annually in the four years beginning 2014/15.

Later this year the Government will consult on the structure and operation of the tax charge on loans from close companies to their participators (shareholders). If legislation is needed it will be in the Finance Bill 2014.

The full Budget can be accessed at hm-treasury.gov.uk

If you would like any help with budget 2013 changes please contact us.

RTI – Real Time Information

Posted on 20/02/2013 By dc_admin

Real Time Information (RTI) has been introduced to improve the PAYE system by assisting HMRC in gathering critical data on a more frequent basis. It begins on your first pay date after 6^th April 2013, so it is important to act very soon to ensure you can meet the requirements.

This change applies to your business if you have any employees, including those paid below the tax/NIC threshold, those paid just once a year, casual and temporary workers (unless they are paid by an agency). The main changes being implemented are:

Reporting to HMRC: currently your payroll data is reported to HMRC annually on the Employer’s End of Year Return (P35). The 2012/13 tax year is the last time this will be done. From 6^th April 2013, employers will report their payroll data to HMRC every time they pay employees,
Employees paid below the tax/NIC threshold must now be added to your PAYE scheme,
It will no longer be necessary to file P46 and P45 starter and leaver forms: however, new starter information is still needed, and the employee must still be provided with a P45 when he/she leaves.

One of the first things you need to do to, before you even begin to consider the impact of RTI on your business, is talk to your existing software provider. It is important that you find out whether or not your software is currently RTI compliant or will be compliant before April 2013. This is when most employers will start operating the new PAYE process.

Collins Accountancy Ltd uses fully compliant software and provides a full payroll service. If you prefer to process payroll in-house please ask for software recommendations, some options are free.

RTI and payroll

The biggest exercise you may need to do is the data cleansing process and what HMRC refers to as ‘payroll alignment‘.

To minimise rejection due to a mismatch with HMRC records, it is important that the payroll records are reviewed for any missing and incorrect compulsory data. Where this data is not available, it must be obtained from the employee. The next step would be to transfer the amendments onto your computer system using your payroll software.

Using Collins Accountancy Ltd as your RTI provider

The introduction of RTI needs to be properly managed. It is important to know that:

once the return has been filed there can be no more changes to the pay run,
All of the data needed for new starters must be obtained on a timely basis or the new starter may not get paid (in practice this may put you in a difficult position as you may have a legal and contractual duty to pay your employees).

Get help and advice with RTI

For information on Real Time Information visit the HMRC website and select the link which states ‘I confirm that I want to view guidance on operating PAYE in real time’. HMRC publications, such as the Employer Bulletin are usually worth reading too.

If we can help with any of the above please contact us.

RTI, pension auto-enrolment and minimum wage 2012

Posted on 05/10/201210/10/2012 By dc_admin

RTI. Auto-enrolment to pension schemes. An increase to the minimum wage.

There have been a few changes in the news recently. The important ones for employers are the changes to national minimum wage, the introduction of RTI reporting, and the introduction of automatic enrollment of workers to pension schemes.

National Minimum Wage

From 1^st October 2012 the minimum wage rates are:

£6.19 an hour for workers aged 21 and over (an increase of 11p)
£4.98 an hour for workers aged 18-20
£3.68 an hour for workers aged below 18 who are no longer of compulsory school age
£2.65 per hour for apprentices under 19, and 19 or over in their first year of apprenticeship

Payroll changes – RTI

HM Revenue and Customs (HMRC) is changing the way employers report tax and national insurance (NIC) liability. Currently, you (or your payroll provider), calculate tax and NIC on a regular basis. You pay your employees their net wage or salary. You then pay the tax and NIC to HMRC monthly or quarterly. At the end of the tax year, a P35 report is filed with HMRC. The P35 confirms the amounts of tax each employee has paid, and the total tax and NIC deducted and paid to HMRC by the employer.

Under the new system – RTI (real time information) employers send a report to HMRC when every payroll run is completed. Each report will contain employees’ personal and payment details. So there will no longer be a year-end return to file. HMRC will no longer require P46s and P45s to be filed, but you will still need the same information from starters and must give P45 information to leavers.

To prepare for the change you’ll need to make sure your software can file RTI reports, and check that all of your employee details are accurate. If you use a payroll provider, or bureau, they should handle the change for you.

The payroll software that we use is fully compliant with the new regime, so clients can expect to see little difference in the work they need to do.

More information is on HM Revenue and Customs website, or please contact us for help with your payroll.

Pension Auto-enrolment

The introduction of compulsory pension schemes for jobholders has been in the news recently. Currently only large companies must make sure all eligible workers are enrolled onto a qualifying pension scheme. It will be extended to all employers by 2017.

Employers will have to deduct a proportion of the jobholder’s pay, and make an additional employer contribution.

The dates from which employers must start (the staging date), depend on the number of employees you have and your PAYE reference. More information what you need to do, when you’ll need to do it, and what you must not do, can be found on the Pensions Regulator website:

When the time comes to set up your scheme, please talk to an independent financial advisor to find the most cost effective scheme for you and your workers. If you would like help in finding a good financial advisor please contact us.

Management accounting, bookkeeping and forecasting.

Posted on 15/06/2012 By dc_admin

All of the above can help to avoid liquidation of limited companies.

It has been announced that Rangers FC is to be liquidated by HM Revenue and Customs (HMRC), after an attempt to reach a CVA(Company Voluntary Arrangement) failed. HMRC’s decision is based on it’s policy of “not agreeing to a CVA where there is strong evidence of non-compliance by a company with its tax liabilities.”

A CVA is a legally binding agreement between an organisation owed money (creditor), and the company that owes the money. It means that the company can continue to trade, while paying off an agreed proportion of the debt regularly. Any company reaching this stage is likely to have been trading involvently, and there is a risk that the directors could face disqualification, or even prosecution.

In rejecting the arrangement, HMRC is forcing Rangers into liquidating its assets to pay the debt. To do this and continue a football club Rangers is set to reform as a new company, buying the assets from the old. The proceeds of which will be used to partially settle the debt. There are no winners in cases like this. The company’s creditors lose out, as the debts are much higher than the value of the assets. Taypayers lose out, as the goverment will not receive the money owed to the state. HMRC is not the only creditor, and many creditors will not receive a penny of the money owed to them. The former owner of Rangers has the burden of admitting he waited too long to put the company into administration. The owners of the new company have a great deal of work ahead to turn Rangers into a financially viable proposition.

The situation is not restricted to prominent companies, with millions of pounds passing through their bank accounts. Any company, of any size, can drift into insolvency. If your limited company owes more out that it can generate, it could be insolvent. If you run a limited company, you need to keep track of its financial health.

There are several stages to this:

1. Regular bookkeeping, weekly or, at the very least, monthly. With bank accounts reconciled, supplier statements checked, petty cash checked as a minimum.

2. Management accounts, monthly or quarterly. Get them done as soon as possible after the period end. Relying on your accountant to give you the good/bad news up to 9 months after your company’s year end is not good enough. Management accounts can be simple or complex, but add value by giving you valuable information about your business.

3. Acting on the information in your management accounts. Prepare financial forecasts. If you don’t like them, or it looks like your business is going down hill, make changes. Save costs, use your management accounting information to identify poor performance of products and services, and improve them or drop them.

4. Keep reviewing, keep making changes. Employ others when you need to. Outsource if it’s easier or cheaper.

5. Don’t be afraid to make difficult decisions. Large organisations are often criticised for making redundancies quicky, but by acting fast, and losing 1,000 jobs they could be saving the remaining 30,000. Fail to act and all 31,000 could go.

6. Pay creditors on time. They do notice if you’re late, and good payers will be treated well when a problem arises.

The same principles apply to small and large companies. However good you are at your core business activity, don’t overlook the value of managing your finances and accounts.

If you would like any help with bookkeeping, management accounts or forecasting, please get in touch.

Bookkeeping Terms and Definitions

Posted on 29/05/201213/02/2015 By dc_admin

Bookkeeping terms and definitions can be confusing. Especially the debits and credits. Accountants and bookkeepers, like many tradespeople and professionals use jargon. Sometimes we get so used to it that, again like other business people, we forget it’s jargon. So if you’re wondering what it all means, maybe this will help.

Bookkeeping is done (or should be) by any type of business, charity, company and organisation. The words organisation, company and business are used interchangeably in this post, just because I get bored typing the same word repeatedly.

List of Bookkeeping Terms

Amortisation	Similar to depreciation, but applied to intangible assets
Balance Sheet	A financial snapshot of your organisation’s assets (things you own and money owed to you)and liabilities (money you owe to others), at a particular date, prepared under UK accounting rules.
Bookkeeping	recording, organising and filing financial documents. Does not include preparing accounts, tax computations or tax returns.
Capital	This can have several meanings. Capital expenditure is money spent on fixed assets. Capital introduced is money input to a business by owners, investors, or shareholders etc. Working capital is the excess of current assets minus current liabilities, or the amount of cash available to run your business.
Credit	A credit is the opposite of a debit.
Creditors	People and organisations you need to pay in the future.
Current Assets	Stock, bank balances, amounts due to your company within one year. Assets that are not long-term features of your business, and can be coverted to cash relatively quickly.
Debit	A debit decreases your profit/surplus, or increases the assets on your balance sheet (statement of financial position).
Debits and credits	The 2 sides of double-entry bookkeeping. In your accounts, think of it as the opposite of what you see on your bank statement (ie. A credit in your bank account, will be a debit in your accounts). This is because the bank statement shows debits and credits from the bank’s point of view, not yours.
Debtors	People and organisations that owe your company money. These are assets to your company.
Depreciation	A proportion of the cost of a tangible asset, deducted from profit over a number of years. The idea is to spread the cost of the asset over the period that it is used in running the business. Eg. A machine expected to last 5 years would be recorded as an asset, then written off to the P& account (deducted from profit) over 5 years.
Double-entry bookkeeping	Recording the full nature of a transaction. For example, if you buy pens for £5.00 cash, the first bookkeeping entry is to increase your costs by £5.00 (the debit entry), the second is to decrease your petty cash balance by £5.00 (the credit entry).
Fixed Assets	Tangible or intangible property belonging to the business, and used to run the business activities.
Goods	Items bought and sold.
Goodwill	A value in incorporated companies that represents the value of the company over and above the net value of assets minus liabilites, ususally arising when a company is bought by another.
Income statement	Equivalent to a P&L account, but compiled under different accounting rules.
Intangible asset	Something the organisation owns, but is not a physical item eg. A patent, goodwill.
Liabilities	Amounts owing to third parties, current liabilities are due within 12 months of the balance sheet date.
National Insurance	Let’s face it, it’s just another tax.
Profit and loss account	AKA P&L account. A statement of your income (sales, grants received etc.), less costs and expenses, showing your profit for a particular period of time. Prepared under UK accounting rules.
Statement of Financial Position	Equivalent to a balance sheet, but compiled under different accounting rules.
Stock	Items bought for resale, but not yet sold.
Tangible asset	An asset with physical substance, eg. Stock for resale, money in a bank account, buildings, machinery, equipment etc.
Tax	Money you, and/or your company, have to pay even though you don’t want to.
Third party	A person or organisation not connected to your own organisation.
Transaction	An exchange of goods, services, money etc. with a third party, eg selling a chair for cash is one transaction, selling a chair on credit is one transaction, receiving a cheque for the credit sale is another transaction.
UTR	Unique taxpayer reference. A 10 figure number used by HM Revenue and Customs to identify the tax record of an individual (self-assessment tax system) or business.
Working capital	The amount of money available to your business. Current assets less current liabilities.
Written off	Deducted from profit

Easy Business Record Keeping

Posted on 22/05/201213/02/2015 By dc_admin

Easy business record keeping. Possible, or an oxymoron? Are you running a business on the go? If you’re using a smartpone, iPod Touch or iPad, there could be an easy way to record your business expenses.

Several companies have recognised that keeping paper records is a chore you don’t want to face at the end of a busy day, and developed apps to help. Some of these have been around for a while, some are free, and some are simpler than others. You can choose which is best for you.

So, if your business is not VAT registered and you want a simple solution for recording income and expenses, why not try them out?

HMRC lists a few on their website here: http://www.hmrc.gov.uk/softwaredevelopers/mobile-apps/record-keeping.htm

There are many others including https://www.expensify.com/, which can be used by employees to record expenses and submit claims.

Whichever you use, remember to download, back-up or save your data regularly.

Record-keeping and tax update

Posted on 23/02/201129/04/2012 By dc_admin

Record-keeping

HM Revenue and Customs expect taxpayers and businesses to keep good records. Later this year they will be launching a Business Record Checks programme, which will impose financial penalties for significant record-keeping failures.

HM Revenue and Customs can ask to see your business records at any time, but they are providing some help to ensure you get it right. In advance of the programme launch they have introduced two basic fact sheets: one for business bookkeeping http://www.hmrc.gov.uk/factsheet/record-keeping.pdf, and another for records relating to tax returns, http://www.hmrc.gov.uk/sa/rk-bk1.pdf

Free bookkeeping advice is available from Businesslink, and can be accessed here: http://www.businesslink.gov.uk/recordkeeping. Businesslink also provides an online tool to help you decide what information you need to keep. http://www.businesslink.gov.uk/recordkeepingcheck

Offshore Bank Accounts

From 6^th April 2011 anyone avoiding tax by keeping money in offshore accounts could face penalties of up to 200% of any tax that should have been paid. You must ensure that all income and capital gains arising offshore is declared, and the tax paid.

Corporation Tax

From 1^st April 2011 all companies will have to file their corporation tax returns online for any accounting period ending after 31^st March 2010. Accounts and computations must be submitted with the tax return in iXBRL format. Most companies will not notice any difference; many accountants file online already, and the rules for calculating corporation tax remain unchanged. Tax payments will need to be paid electronically.

Collins Accountancy

Bookkeeping & Accounting Services in Gateshead, Newcastle upon Tyne and the UK

Author: dc_admin