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News Bulletins

February 2011 - E-NEWS

Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

• Company cars – advisory fuel rates
• Penalties for late CIS contractor monthly returns
• Changes to paying class 2 National Insurance Contributionst
• Employees could be working for longer
• We’re ready to pay for simpler taxes, claim businesses
• Employers Offered Guidance on Pension Changes
• The Employer’s Charter
• New Parental Leave Plan Unveiled

Company cars – advisory fuel rates

If you have the use of a company car, the chances are that you do not receive any fuel for private use as the separate tax charge is generally well in excess of the real benefit.

You probably therefore pay for all fuel in the company car and then claim reimbursement from your employer of the business use fuel. Published guidelines are issued by HMRC involving advisory fuel rates per business mile. They are reviewed every 6 months, but more frequently at HMRC’s consideration, if fuel prices fluctuate by 5% from the current rate and that is likely to be sustained.

From 1 December 2010 the rates have been changed to those below, based on petrol at 119p per litre:

It is frustrating to find that the rate used from 1 December is 119p per litre when in fact just a few days later the price went up to several pence above that level.

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Penalties for late CIS contractor monthly returns

In many cases from October 2011 the new penalties will be less than charged now. That’s a refreshing surprise, where in particular for new CIS contractors there will be an upper limit to some of the penalties that are charged. This upper limit will apply when new contractors first send a monthly return, if that return and any other monthly returns that are sent at the same time are late.

Although the new penalties do not start until October 2011, any contractor who has been, or is, charged penalties for late filing of a monthly return before that date may ask HMRC to work out how much the penalties would be under the new rules and, if less than the amount already charged, agree that their penalties should be reduced to the lesser amount. If only they took the same line with all penalties within the tax system!

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Changes to paying class 2 National Insurance Contributions

If you are self-employed you will find that from April 2011, payment of your Class 2 National Insurance contributions (NICs) will be due on 31 January and 31 July. This of course is the same as for your income tax bill, and indeed for Class 4 NICs.

If you make payment by internet/telephone banking, CHAPS, Bank Giro, Post Office or post you will receive just two payment requests from HMRC in the year - instead of the current four bills.

If you pay Class 2 NICs via Direct Debit, then to meet the new dates the collection of monthly Direct Debit payments will be delayed by HMRC to bring the payment dates into line. This means that:

• for the first year only, monthly Direct Debits will stop for a short period and then start again
• Class 2 contributions due for April 2011 will be requested from your bank in August 2011
• payments thereafter will be monthly unless you choose to pay 6 monthly from April 2011.

A new option to pay by 6 monthly Direct Debit, collected in January and July each year, will be available from April 2011 for those who do not wish to spread their payments.

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Employees could be working for longer

The Government has confirmed that the default retirement age (DRA) of 65 is to be phased out between 6 April and 1 October 2011.

As a consequence, employers will no longer be able to let employees go simply because they have reached the state retirement age.

The change means that from 6 April 2011, employers cannot issue any notifications for compulsory retirement using the DRA procedure. Between 6 April and 1 October, only people who were notified before 6 April, and whose retirement date is before 1 October, can be compulsorily retired using the DRA. While after 1 October, employers will not be able to use the DRA to compulsorily retire employees.

Commenting on the announcement, Ed Davey, the employment relations minister, said that firms could still dismiss workers if it was felt they were no longer capable of performing their duties.

The minister commented: “As of now, you are still able under the Employment Rights Act 1996 to fairly dismiss someone if you go though the proper processes - and one of the reasons you can dismiss someone fairly includes capability.”

Employers will continue to be allowed to run with a compulsory retirement age for employees provided there is an objective business justification for doing so.

The Government has promised help for employers in dealing with the move. It has pledged to ease the admin burden of statutory retirement procedures. With the DRA dropped, it said, there is no reason to keep employees ‘right to request’ working beyond retirement or for employers to give them a minimum of six months notice of retirement.

Planning for the day that any of us stop working is important, especially if you are a business owner. For practical guidance on how best to look forward to a comfortable retirement, contact us on 023 8046 1200.

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We’re ready to pay for simpler taxes, claim businesses

Small business owners have said they would be willing to dip into their own bank accounts in order to bring about a fairer and less complex tax system.

A poll carried out by the Forum of Private Business (FPB) found that, of those business owners questioned, over a half (57 per cent) would be prepared to pay more for a streamlined tax regime so long as it was easier to understand and delivered genuine rewards.

Some 45 per cent would tolerate higher tax bills if there were an accompanying reduction in the amount of administrative bureaucracy and red tape involved in complying with the rules.

Elsewhere in the survey, a majority of employers (78 per cent) felt that the complexity of payroll taxes and increases in national insurance contributions deterred firms from taking on more staff. A further 45 per cent said the tax system hinders financial planning and 41 per cent believed that it impedes prompt payment. 

A number said they would like to see taxation rates for employees and the self-employed more closely aligned in any reform of the IR35.

Commenting on the findings of the survey, Phil Orford, the FPB’s chief executive, said: “The cost of complying with Britain’s hugely complex tax system is such that, if simplification and profitability result, most businesses believe a little more tax would be a price worth paying. Clearly, if the Government is serious about stimulating small business growth, streamlining tax administration must be a priority.”

The tax system is set to undergo a series of reforms, which means that now may be a good time to look at your own business tax planning. We can assist you in ensuring that you comply with the rules and pay no more tax than you should be paying. Contact Tax Director, Tracy Jenkins on 023 8046 1200.

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Employers Offered Guidance on Pension Changes

Employers are being offered extra help to get to grips with new responsibilities under workplace pensions reform.

As part of its work to maximise compliance with new employer duties to automatically enrol eligible staff into workplace pension schemes, the Pensions Regulator has issued a new edition of a leaflet explaining work-based pension schemes.

This will be followed by a set of detailed guides aimed at audiences including large employers in spring 2011.

Further new content will be produced in the summer for small and micro employers, providing easy-to-use tools covering the key points of what employers will need to do, when they need to do it and the processes involved.

Later in the year the regulator will publish details of its compliance and enforcement strategy, setting out how it intends to maximise compliance with the new employer duties and the circumstances in which it might be expected to use its powers.

Between October 2012 and September 2016 employers will be required to automatically enrol all their eligible jobholders into a qualifying pension scheme and make a minimum contribution of a jobholder's qualifying earnings into the scheme.

LINK: Guidance for employers

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The Employer’s Charter

The Employer's Charter is designed to dismiss some of the myths about what employers can and cannot do in managing their workforce.

It tells employers what they are reasonably entitled to ask and know about employees and what action they can take if there are problems.

LINK: Employer’s Charter

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New Parental Leave Plan Unveiled

The government has announced more details of shared parental leave arrangements designed to help families balance work and life commitments.

Announcing the plans, Deputy Prime Minister Nick Clegg said: “Despite the fact fathers can request flexible working, many feel reluctant to do so. And, when a child is born, men are still only entitled to a paltry two weeks of paternity leave.

“These rules patronise women and marginalise men. So in the coming weeks we will be launching a consultation on a new properly flexible system of shared parental leave that we aim to introduce in 2015.”

As an interim measure, Additional Paternity Leave and Pay regulations agreed by the last government will cover parents of children due on or after 3 April 2011.

Eligible fathers will be able to take up to 26 weeks’ additional paternity leave. The leave may be paid if taken during the period of the mother or partner’s Statutory Maternity Pay, Maternity Allowance or Statutory Adoption Pay. Leave taken after this period has ended would be unpaid.

Paid leave is payable at 90 per cent of earnings up to the same standard rate as Statutory Maternity Pay, which is currently £124.88 per week (rising to £128.73 from April).

Employed mothers currently receive up to 52 weeks of maternity leave, 39 of them paid.

LINK: Parental rights at work

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