DMS Posts

Another change to workplace pensions

Pensions auto-enrolment was phased in slowly, but now every employer must join their eligible staff in a workplace pension unless they opt out. But there’s one last important change before the task is complete. What is it?

Auto-enrolment recap

It’s been a long haul but since early 2018 every employer has had to include eligible staff in a workplace pension scheme and pay into it. That’s the basics of auto-enrolment (AE). To be eligible for inclusion in your firm’s scheme your workers must be between 22 and state pension age and earn more than £192 per week. Once auto-enrolled a minimum contribution must be paid and this is about to take a significant hike.

Employer’s responsibility

The last step of the AE bedding-in process occurs in April 2019, when the minimum contribution rates reach their final level. Making sure the increase is correctly put into effect is your responsibility as an employer and The Pensions Regulator (TPR) can fine you if you get it wrong.

How much?

From 6 April 2019 the minimum total pension contribution rises from 5% to 8% of employees’ earnings – not all earnings necessarily have to be subject to AE (see The next step ). Of this you must pay 3% (up from 2%) and your workers must pay the difference between your contributions and the 8% (or higher figure) or tell you in writing that they don’t want to be included in your pension scheme.

Higher contributions. The actual rate of contributions is decided by your workplace pension policy/contract. This may require you or your employees to pay more than the minimum AE rate. If your policy doesn’t cover the contributions which apply from April 2019, you’ll need to change the policy so that it’s compliant.

Tip. Contact your pension company, financial advisor or scheme administrator about this without delay.

Keeping workers informed

It’s best practice to notify your workers of the new AE rates and now’s the time to do it.

Tip. TPR produces a template letter you can use to send to staff to tell them the contributions are going up. You can adapt it to meet your needs. TPR also provides a helpful flow chart of what steps you need to take in readiness for April (see The next step ).

Dos and don’ts – AE safeguards

As an employer, you have AE safeguarding duties. Not only are there things you must do to comply with AE, there are things you mustn’t. For example, staff may not be happy about the higher AE rates and may be entitled to reduce their contributions below the minimum AE rate rather than drop out of the pension scheme altogether. AE would cease to apply to them or you. Consequently, subject to your pension policy/contract you could reduce your contributions and save some cash.

However, you must be careful that it doesn’t look as if you’re encouraging your staff to drop out. TPR will see this as a breach of the safeguarding rules and hit you with a stiff fine.

Related documents – The Next Step

Uncategorized

EU Exit – Update from HMRC

Dear colleague,

The UK will be leaving the EU on 29 M‌ar‌c‌h 2019. Leaving the EU with a deal remains the Government’s top priority, however the government and businesses should continue to plan for every possible outcome including no deal.

In December, HMRC wrote to VAT-registered businesses that trade only with the EU advising them to take 3 actions to prepare for a no deal EU Exit, including registering for an UK Economic Operator Registration and Identification (EORI) number. You can read the full letter here.

Businesses that only trade with the EU will need an EORI number:

  • to continue to import or export goods with the EU after 29 M‌ar‌c‌h 2019, if the UK leaves the EU without a deal; and
  • before they can apply for authorisations that will make customs processes easier.

If you are a UK business that trades with the EU and do not already have an EORI number then you should register for an EORI number at GOV.UK now. It only takes 10 minutes to apply. These businesses should also decide if they want to hire an agent to make import and/or export declarations for them or make the declarations themselves.

Businesses can find further guidance on customs declarations at Declaring your goods at customs if the UK leaves the EU with no deal. We have also published a new ‘Prepare your business for the UK leaving the EU’ tool on GOV‌.UK to help businesses with their EU Exit preparations that provides further support and guidance at Prepare your business for the UK leaving the EU.

We will continue to support businesses in their preparations for leaving the EU, including registering for an EORI number, as the 29 M‌ar‌c‌h 2019 approaches.

Kind regards,

jharra

Jim Harra

Deputy CEO and Second Permanent Secretary – HMRC

DMS Posts

Deadline for submitting your 2017/18 self assessment return

Deadline for submitting your 2017/18 self assessment return (£100 automatic penalty if your return is late) and the balance of your 2017/18 liability together with the first payment on account for 2018/19 are also due

This deadline is relevant to individuals who need to complete a self assessment tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 NI, capital gains tax and High Income Child Benefit Charge liabilities.

There is a penalty of £100 if your return is not submitted on time, even if there is no tax due or your return shows that you are due a tax refund.

The balance of any outstanding income tax, Classes 2 and 4 NI, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2018 is due for payment by 31st January 2019. Where the payment is made late interest will be charged.

The first payment on account for 2018/19 in respect of income tax and any Class 4 NI or High Income Child Benefit Charge is also due for payment by 31st January 2019.

DMS Posts

Minimum pension contributions will increase on 6 April 2019

The minimum amounts you and your staff pay into your automatic enrolment pension scheme will increase from 6 April 2019.
How this applies to you
If you have eligible staff in an automatic enrolment pension scheme you will need to make sure that at least the minimum amount is paid by you and your staff into the scheme.
If you don t have any staff in an automatic enrolment pension scheme, you don’t need to take any further action.
The increase
The table below shows the minimum contributions payable and the date when they must increase:

Employer minimum contribution Staff contribution Total minimum contribution

 

New rate:

6 April 2019 onwards

 

3%

 

5%

 

8%

 

Current rate:

6 April 2018 to

5 April 2019

 

2%

 

3%

 

5%

What you need to do
It is your responsibility under the Pensions Act 2008, to make sure the right minimum contributions are being paid for your staff. If you are already paying above the increased amounts, you don’t need to take any further action. You should also let your staff know about any increases being applied to their contributions.

DMS Posts

Selling your home – private residence relief slashed

In two stealthy moves, the Chancellor used the 2018 Budget to raise some extra capital gains tax from certain individuals when they sell their home. Could this include you?

Selling tax free

As you probably know, if you make a gain from selling your home it’s exempt from capital gains tax (CGT) because of private residence relief (PRR). Even you haven’t used a property as your home for extended periods, for example if you live elsewhere because of your job, PRR can still apply (see The next step ). In addition, the last 18 months of ownership are always CGT free, regardless of whether you occupy the property or not. This means you could move into a new home before selling the old one without losing any PRR. However, the 2018 Budget included two important changes to the PRR rules.

First change – ownership period

The 2018 Budget reduces the PRR for the final period of ownership to nine months (instead of 18) with effect from April 2020. This means if you buy a new home, move out and the property doesn’t sell within nine months you could face a CGT bill when you do finally find a buyer.

Tip. Special rules currently allow PRR for the final 36 months of ownership if you’re in, or moving into, a care home or have a disability. This won’t change as a result of the Budget.

Annual exemption

If you lose some or all of your PRR and this results in a capital gain a CGT bill won’t always follow. Your annual CGT exemption, £12,000 from 6 April 2019 (if you haven’t used it against other gains) reduces the taxable amount. If there are joint owners they can also use their annual exemption to reduce the tax on their share of the gain.

Second change – letting relief

Currently, if you let your home PRR includes a bonus in the shape of an extra relief which can reduce the taxable amount of any capital gain you make from selling your home by up to a maximum of £40,000 (see The next step ). The Chancellor has decided that this letting relief is to be withdrawn from April 2020 unless you occupy part of your home or share it while letting it.

Check your circumstances

The once simple PRR is becoming more complicated year-on-year. If you’ve occupied a house as your main residence for a while, but you’ve also lived somewhere else, the Budget raises the chance of a CGT bill. In future when you sell your home you’ll need to consider the CGT position if you’ve been absent from your home for one or more extended periods during your ownership.

Trap. While some absences are ignored, this might only apply if you re-occupy your home after the absence.

CGT changes in the pipeline

In an obvious attack on landlords, although it may affect others, the Chancellor confirmed that from April 2020 anyone who makes a capital gain from selling residential property which is not covered by an exemption or relief will have to declare and pay an estimate of the CGT within the following 30 days.

 

DMS Posts

More changes to the taxation of termination payments

On 6 April 2019 the law relating to the taxation of termination payments will change. From that date, you’ll have to pay employers’ NI on any part of the payment that exceeds £30,000. What does this mean in practical terms?

PILON payments

Up until 5 April 2018 the tax rules stated that where an employer had a right or a discretion under the employment contract to make a payment in lieu of notice (PILON) on the termination of employment, the payment would be classed as normal earnings and subject to income tax and Class 1 NI in the usual way. These are payable by the employee but deducted by the employer.

£30,000 exemption removed

Where there was no PILON clause, or a discretion was not exercised, a termination payment was classed as damages, i.e. compensation, for the employer’s breach of contract. In this situation, the first £30,000 of the termination payment could be paid free of income tax and NI due to a statutory exemption. On 6 April 2018 the distinction was removed and all termination payments are subject to income tax and NI, no matter what the employment contract says.

The statutory formula

To work out the amount payable, you must calculate exactly how much of the PILON is post-employment notice pay (PENP). PENP is essentially the basic pay that an employee would have received for any unworked period of notice, minus any contractual PILON they are entitled to receive. Unfortunately, there’s a complicated statutory formula which must be used to calculate the actual PENP figure. You should calculate PENP for all employees whose employment is terminated, including those whose contracts contain an express PILON clause.

A nil PENP

Whilst you must make this calculation in every circumstance, the PENP will always be “nil” where an employee works out their full contractual notice period, i.e. they don’t leave, or are asked to leave, part-way through that notice period.

Tip. Where you need to calculate a PENP using the statutory formula, follow the guidance set out in HMRC’s manual (see The next step ).

More new rules

On 6 April 2019 there will be a further change to the taxation of termination payments (this change was originally due to take effect in 2018 but was delayed). From that date, you’ll also be required to pay employers’ NI on any part of a termination payment that exceeds £30,000. This exemption doesn’t relate to employees’ NI, so you’ll need to amend your payroll procedures accordingly.

Tip. The practical effect of this change is that a termination payment could cost you more overall because you’ll have to pay an additional 13.8% on the balance over £30,000. If you have any costly termination payments on the horizon, you can avoid this additional cost by concluding matters fully before 6 April 2019. Employment must also terminate before this date.

DMS Posts

Advisory fuel rates from 1 December 2018

HMRC have published new advisory fuel rates for company car drivers which will apply from 1 December 2018.

The new rates will be:

Engine size Petrol Diesel LPG Electric*
1,400cc or less 12p 8p 4p
1,600cc or less 10p 4p
1,401cc – 2,000cc 15p 10p 4p
1,601cc to 2,000.cc 12p 4p
Over 2,000cc. 22p 14p 15p 4p

 

You can continue to use the old rates up to 31 December 2018.