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National Minimum Wage reminder for summer staff

We would like to remind any students and seasonal staff that work part-time, for example, in a summer job, to ensure they are being paid the National Minimum Wage (NMW). All workers are legally entitled to be paid the NMW. This includes temporary, seasonal staff, who often work short-term contracts in bars, hotels, shops and warehouses over the summer.

HMRC helped some 155,000 people recover more than £16 million in pay which was due to them. HMRC is reminding workers to check their hourly rate of pay and to also check any deductions or unpaid working time. The most common causes of minimum wage underpayment are deductions and unpaid working time, such as travelling time between work locations and training time.

The current National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2021. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The hourly rate of the NMW (for 21-22-year-olds) is £8.36. The rate for 18-20-year-olds is £6.56, and the rate for workers above the school leaving age but under 18 is £4.62.

Employees that are not being paid correctly can make an official complaint through GOV.UK or contact the ACAS Pay and Work Rights Helpline on 0300 123 1100.

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Associated company rules

As announced in the Budget earlier this year there will be two rates of Corporation Tax from 1 April 2023. When the new rules take effect, taxable profits up £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate. Taxable profits more than £250,000 will be taxed at 25%.

The introduction of the two new rates will once again make the issue of associated companies important to consider. Under the new rates, profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.

A company is an ‘associated company’ of another company if one of the two has control of the other, or both are under the control of the same person or persons.

The £250,000 limit will be divided by the total number of associated companies. For example, if two companies are deemed to be associated, both companies would pay the main CT rate of 25%, from 1 April 2023 at half the usual threshold, namely at £125,000 rather than £250,000.

HMRC’s manuals make it clear that a company may be an associated company no matter where it is resident for tax purposes.

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Stage 4 COVID roadmap implemented 19th July

The Prime Minister, Boris Johnson, spoke to the nation and confirmed that the vaccines have significantly weakened the link between coronavirus cases and hospitalisations and deaths. This has allowed the government to confirm that many COVID restrictions will be lifted in England on 19 July, known as Freedom Day.

The main changes will see an end to social distancing, facemasks will no longer be mandatory, and the opening of all venues currently closed with no capacity limits. The Prime Minister stressed that whilst many official restrictions will be removed, it is expected that we will exercise our own personal judgement regarding precautions we should continue to take.

The press release from the Prime Minister’s office stated:

‘Limits on social contact will end, meaning there will be no restrictions on indoor or outdoor gatherings. Weddings, funerals and other life events are able to take place without limits or restrictions.

All venues currently closed will be allowed to reopen, including nightclubs, and there will be no legal requirement for table service in hospitality settings.

Face coverings will no longer be legally required in shops, schools, hospitality, or on public transport although guidance will be in place to suggest where people might choose to wear one, such as where you come into contact with people you don’t usually meet in enclosed and crowded places.’

There are also expected to be changed to the requirement for fully vaccinated people to have to self-isolate if they are identified as having been in contact with someone who tested positive.

Relaxing restrictions as case numbers continue to climb is no doubt a risky move. It will be interesting to see if the public accepts personal responsibility in dealing with the pandemic or if restrictions will need to be reintroduced at some future date.

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Tax credits renewal deadline reminder

The 31 July 2021 is the reporting deadline for families and individuals that receive tax credits. By this date, they will need to tell HMRC about any changes to their circumstances or income and to renew their tax credit application. As in previous years, there is likely to be a last-minute rush and it may be difficult to contact HMRC by phone. Claims can be renewed by post, phone or online. At the beginning of July, there were still some 440,000 claims that had to be renewed.

Once the deadline has expired, anyone who has not yet renewed their tax credits should still ensure they do so as soon as possible as otherwise their payments may be stopped, and monies received since last April may have to be repaid. We would strongly advise any of our readers still to renew their tax credits to do so as a matter of urgency.

Over 2.5 million renewal packs were sent out by HMRC between late April and early June. A renewal is required if the pack has a red line across the first page and it says, ‘reply now’. If the pack has a black line and says ‘check now’, recipients will need to check the details are correct. If the details are correct the tax credit awards will be renewed automatically.

Taxpayers are not required to report any temporary falls in their working hours because of coronavirus. However, other differences that could affect entitlement to tax credit claims such as changes to living arrangements, childcare, working hours, or income (increase or decrease) should be reported to HMRC.

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Changes to furlough scheme from 1 July 2021

The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme is open to all UK employers to access support to continue paying part of their employees’ salary for employees that would otherwise have been laid off during this crisis.

The end date for CJRS has been extended multiple times since the scheme was launched and in the Spring Budget 2021, the Chancellor announced a final extension until 30 September 2021. Employees can receive up to 80% of their salary for hours not worked subject to a monthly maximum of £2,500 until the scheme ends.

Since 1 July 2021, employer contributions towards the cost of unworked hours have been put in place. Employers are required to contribute 10% towards wages for hours not worked during July rising to 20% in August and September 2021.

This means that since 1 July 2021, government support has been lowered to 70% of wages up to a reduced £2,187.50 cap. Employers will pay employers’ NIC, pension costs plus 10% of wages for hours not worked (up to £312.50) to a total cap of £2,500 for hours not worked.

From 1 August until 30 September 2021, government support will be lowered further to 60% of wages up to a reduced £1,875 cap and employers paying 20% of wages for hours not worked up to £625.

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Resilience

One of the lessons we should take away from the COVID experience – in a business context – is the ability to recover quickly from unexpected challenges.

Firms in the hospitality and entertainment sectors are excused as they have had no power to act in their own best interest due to government lockdown directives.

The rest of us, to varying degrees, have either managed to weather COVID disruption or been forced out of business.

Financially, if your business had significant cash reserves or other assets that could be converted to cash, then it would be in a much better place to survive COVID disruption than firms who had stripped out cash reserves to support the lifestyle costs of the owners or that were already in a parlous financial state due to difficult trading challenges prior to the COVID outbreak.

There will always be a trade-off between retaining profits as a rainy-day fund, investing funds in business development or withdrawing funds to support personal goals.

COVID has woken us up to the value of resilience, one more factor that we will be wise to consider when planning our businesses development from now on.


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Taxable benefit charge – returning office equipment

A taxable benefit charge can apply when employees return office equipment they used to work from home. There was a significant rise in the provision of office equipment to employees working from home due to the COVID-19 pandemic. Qualifying home office equipment is that deemed necessary for an employee to work from home and can, for example, include a laptop, mobile phone, office desk and chair and other necessary computer accessories such as webcams.

Taxable benefit charges are as follows:

– If you supplied your employees with office equipment so they could work from home, and you did not transfer ownership, there is no tax charge when they return the equipment to you.
– If you transfer the ownership of home office equipment to an employee at any stage of their employment, a benefit charge generally arises on the market value of the equipment at the time of the transfer, less any amount made good by the employee.
– If your employee has agreed to purchase home office equipment for use whilst working at home due to COVID-19 and you reimburse the exact expense, unless you have specified that your employee must transfer ownership to you, the ownership of the equipment rests with your employee. There is no benefit charge on the reimbursement.
There is also no benefit charge if you allow your employee to keep the equipment as it is something that they already own.

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Tax Diary July/August 2021

1 July 2021 – Due date for Corporation Tax due for the year ended 30 September 2020.

6 July 2021 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2021 – Pay Class 1A NICs (by the 22 July 2021 if paid electronically).

19 July 2021 – PAYE and NIC deductions due for month ended 5 July 2021. (If you pay your tax electronically the due date is 22 July 2021).

19 July 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2021.

19 July 2021 – CIS tax deducted for the month ended 5 July 2021 is payable by today.

1 August 2021 – Due date for Corporation Tax due for the year ended 31 October 2020.

19 August 2021 – PAYE and NIC deductions due for month ended 5 August 2021. (If you pay your tax electronically the due date is 22 August 2021)

19 August 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2021.

19 August 2021 – CIS tax deducted for the month ended 5 August 2021 is payable by today.

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