- NEST Pensions reform 2012
- Parties for employees
- New tax-free children’s savings account
- Increase in the standard rate of VAT
- VAT rate increase – Shoppers may see price rises
- Government announcements expected on tax issues
- Employer CDrom update
- Shopping on the internet
- Royal wedding Bank Holiday
The introduction of the National Employment Savings Trust (NEST) has been in the press recently following a government review of the scheme. The headlines that employers will have to start making pension contributions for all of their employees from 2012 are somewhat misleading as the majority of employers will not need to comply with the rules from that date. The start date for the roll out of the scheme is October 2012 but this will impact on employers with 120,000 employees or more. For those with a more modest workforce the start date varies, for example those with less than 500 employees the date is 1 January 2014 and for those with less than 50 employees the earliest start date is 1 August 2014.
According to the website
‘The requirement to be NEST compliant starts from October 2012 and will vary dependent on size of business and PAYE reference number. The Regulator will write to all employers around 12 months before their staging date so that they know when to automatically enrol their eligible jobholders. Three months before the employer’s staging date the Regulator will write again to remind them of the new duties and the need to register.’
Employees eligible for automatic enrolment will be:
- those who aren’t already active members of a qualifying scheme
- are aged between 22 years and the State Pension age and
- earn over £7,475 gross a year.
The qualifying scheme may be the existing employer pension scheme if it meets certain conditions, or if an employer does not have a qualifying scheme they will have to set one up or use a NEST pension scheme.
Minimum contributions levels for qualifying schemes
Employees will be able to opt out of the scheme if they so wish. However for those employees within the scheme it is expected that the employer will have to contribute at least 3% of their ‘qualifying’ earnings. These earnings are their basic salary plus commissions, bonuses and overtime between £7,475 and £33,540 a year (2006/07 terms).
Contribution levels will be phased in over a period of time
Employee Pays **
Before October 2016
October 2016 – October 2017
From October 2017
** Less tax relief.
If you would like more details of the scheme please do get in touch.
With the season for office parties fast approaching we thought it would be a good idea to remind you of the tax rules. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.
But what is the tax treatment for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?
Generally, as long as the total costs of employee annual functions in a tax year are less than £150 per attendee (VAT inclusive) there will be no tax implications for the employees themselves. In considering this limit make sure you have included all the costs, which may include not only the meal itself but also any drinks, transport and accommodation that you provide.
If the costs are above the £150 limit then do get in touch so we can advise you how best to deal with them.
Internet link: HMRC guidance
The Government has announced that they will create a new tax-free children’s savings account following the end of Child Trust Fund (CTF) eligibility.
The Government intends the new accounts to be available by autumn 2011.
The new account will have the following key features:
- all returns will be tax-free
- funds placed in the account will be owned by the child and are locked in until the child reaches adulthood
- investments will be available in cash or stocks and shares
- annual contributions will be capped and
- there will be no Government contributions into the account.
The new account, described as a ‘Junior ISA’, will offer parents a simple and tax free way to save for their child’s future.
Eligibility for the new account will be backdated, to ensure that no child born after the end of CTF eligibility will miss out on the chance to have one of the accounts. There will be no CTF eligibility for children born from January 2011.
Internet link: Treasury press release
The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. The reduced rate of 5% and the zero rate will remain unchanged. Businesses need to ensure that they are ready for this change.
For any sales of standard rated goods or services that take place on or after 4 January 2011 businesses should charge VAT at the new rate of 20%.
This means that businesses currently calculating their VAT using the VAT inclusive fraction of 7/47 should, from 4 January 2011, use the new VAT fraction of 1/6.
There are many rules which determine the correct rate of VAT to apply.
Goods/services provided before the change
The new rate generally applies to all VAT invoices issued by a business on or after 4 January 2011. However, where a business issues an invoice on or after 4 January 2011 and the goods or services were provided prior to 4 January 2011, the business may apply VAT at 17.5%.
Goods provided after the change
If a business has received a payment or issued an invoice before 4 January 2011 but the goods will be provided (or services delivered) after 4 January 2011 then the supplier has a choice, either:
- to leave the VAT charged at 17.5%; or
- to account for VAT at the new 20% rate.
Electronic tills and accounting software
Electronic tills and accounting software will also need to be adjusted to reflect the new rate. This will be a particular issue for those tills which are set up to provide VAT information.
Most accounting software packages do have a facility to change the rate of VAT or create an additional rate of VAT. It may be preferable to create a new 20% rate, rather than delete the 17.5% rate, as some businesses (especially those who use cash accounting) will need the old standard rate for certain transactions for some time to come.
HMRC have issued lots of guidance which can be found at the link below. If you would like help dealing with the change please do get in touch.
Internet link: HMRC guidance
With the standard rate of VAT set to increase to 20% from the current 17.5% it is a good idea to be aware of the rules on the correct rate of VAT you should be charged on purchases around the busy New Year period.
When buying goods or services on or after 4 January from a retail business such as a shop, restaurant or hairdressing salon, all purchases should be subject to 20% VAT.
Businesses that are passing the VAT increase on to customers will increase their current prices by just over 2%. The exact calculation is 120/117.5. It is up to each individual business to decide whether it wants to pass the VAT increase onto its customers in this way.
If however you pay for something you have taken away (or the supplier has delivered) before 4 January 2011 then the sale took place before 4 January 2011 and you should be charged VAT at 17.5%.
It is common for retailers to give refunds, particularly in the period after Christmas. If you are given a refund on or after 4 January 2011 for a sale made before 4 January 2011 this will be made at the old VAT rate. If you want to exchange goods, for example a jumper for another size or colour, you may find the gross cost has increased and you have to pay more. The replacement item will have been sold at the new VAT rate.
Internet link: HMRC website
On Monday 29 November the Office for Budget Responsibility (OBR) will publish its updated forecast for the economy. The Chancellor of the Exchequer will respond to that forecast in a statement to the House of Commons.
We are unsure whether or not the Chancellor will announce significant tax measures which are usually announced around this time of year in a Pre-Budget Report. A number of important announcements are expected around the end of November and early December. We will update you next months on significant changes.
Internet link: http://www.hmrc.gov.uk/budget-updates/index.htm
HMRC are advising employers that make use of the Employer CDrom that they have made some important updates to the software. Users should install this update even if they have installed the previous September 2010 update.
Internet link: Employer CDrom
As we fast approach what is for many the seasonal time for giving, some of us will be shopping online. HMRC have some useful guidance on the rules for VAT and/or duty on purchases from overseas.
Internet link: HMRC guidance
Following the announcement of the engagement of Prince William to Catherine Middleton the date of the wedding has been announced as Friday 29 April 2011. The day has been declared a Bank Holiday.