Workplace Pension Reform

Pension Auto-Enrolment has finally arrived! The first tranche of employers have already complied with the inaugural 1^st October 2012 staging date. Their auto-enrolment schemes went ‘live’ on this date.

Stakeholder pensions introduced by the government in October 2001 did not work. Thousands of designated schemes are receiving no contributions from employer or employee. Employers who did not designate a Stakeholder were not fined.

Auto-enrolment will be very different. The government is on a mission to promote pensions in the workplace. It has proved difficult to avoid the face or voice of Theo Paphitis over the last few weeks!

This time, there will be minimum employer contributions, and there will be hefty fines for employers not meeting their staging dates or not fulfilling their duties.

This list, though not exhaustive, gives an indication of the burden placed on employers:

• Assess the workforce to identify the different categories under auto-enrolment
•  Three categories: eligible jobholder; non-eligible jobholder; entitled worker
•  This enables calculation of the cost to the company in pension contributions
• Decide whether to ‘phase in’ contributions
• Decide whether to offer salary exchange
• Decide whether to deploy temporary ‘postponement’
• Establish a pension scheme that complies with auto-enrolment regulations
• If a pension scheme is already in place, can it, or should it be adopted for auto enrolment?
• Communicate with each worker on a category specific basis
• Once identified, immediately enrol ‘eligible jobholders’
• Immediately enrol ‘opt-ins’
• Establish robust administration, payroll and compliance procedures and systems
• Manage the opt-outs, opt-ins, refunds and re-enrolment process
• Register the scheme with The Pensions Regulator
• Maintain records and a compliance audit trail for possible inspection by the Regulator
• Continually assess the workforce to identify changes to a worker’s category/rights

What is an eligible jobholder?

A UK worker aged between 22 and State Pension Age – earning £8,105 or above (2012/13)

Minimum employer contributions?

The simple answer is that, regardless of workforce size, an employer must a minimum 3% of an employee’s gross earnings between £5,564 and £42,475 (2012/13). Phasing in of contributions is available over a 5/6 year period.

  

Cost to the employer

It is widely accepted that the cost of putting the necessary people, systems and procedures in place will for many smaller employers outweigh the cost of employer contributions.

Employer reaction

The majority of employers we are talking to have no appetite for taking on the processes listed above. They are too busy with the daily pressures of trying to maintain profit and cash flow in these difficult times for trading.

How can we help?

Ward Williams Financial Services Ltd is the financial services division of Ward Williams Chartered Accountants.

As such, we help their corporate clients establish efficiently run pension schemes. The increased level of processing, monitoring and payroll functionality required is going to test even the most efficiently run businesses. Working alongside accountants gives us valuable access to knowledge and experience in these areas, particularly payroll.

Let us take the strain for you, so that you can get on with running your business.

Contact Paul Nathan at Ward Williams Financial Services:

01932 830664 / 01895 236335

www.wardwilliamsfs.co.uk

IR35 back on the political agenda

IR35 is back on the political agenda due to MPs on the Public Accounts Committee being concerned about thousands of public sector and BBC workers being paid “off payroll”.  The IR35 tax legislation applies where an individual is working for an end-user where the relationship, if it were not for the imposition of a limited company, would be one of employment.

The number of IR35 investigations has more than doubled in recent years from 23 in 2010/11 to 59 in 2011/12.  Whilst these figures look low compared with the 1,000+ investigations in 2003/04, HMRC are recovering significantly higher amounts of tax, £1.25m in 2011/12 compared with just £219,000 in the previous year.

Given the recent publicity HMRC are now under increasing pressure to concentrate on IR35 and now intends to increase the number of IR35 enquiries to at least 230 a year.  HMRC also intends to carry out a risk-based review of the 2,400 public sector cases found in the Treasury’s Review and the 25,000 cases identified at the BBC.

With IR35 high on HMRC’s agenda it is more important than ever for individuals using personal service companies to take professional advice.

For further information/advice on this subject area please contact our Corporate Tax Manager, Sarah Brock:  sarah.brock@wardwilliams.co.uk

Beat the 60% Tax Trap at the launch of Ward Williams' Business Advisory Clinic

Come and meet the team and tap into the knowledge at Ward Williams!

When: Wednesday 7^th November, 8am - 9am

Where: Cafe Rouge, Weybridge (85 Queens Road, Weybridge, Surrey, KT13 9UG. Nearest car park is York Road Car Park, free of charge before 10am, please find map here)

We kick-start our first clinic with a 10 minute presentation on ‘The 60% tax trap’ by our Financial Services expert, Paul Nathan who will show you some simple, sensible solutions to reduce your income tax and corporation tax bills.

We have a wealth of knowledge for all your business needs, so please feel free to quiz one of our team about any of the following topics or whatever business concerns you may have:

·         Business & Personal Financial Planning

·         HR & Employment Law

·         Corporate & Personal Tax

·         Management Training

·         Outsourcing (Accounts/Bookkeeping/Payroll)

Places are limited, register your interest by emailing: emma.zovich@wardwilliams.co.uk before Friday 26^th October

Client Spotlight - Vocality: Learning to sit on your hands

What is a CEO? Look up online and you’ll see a plethora of descriptions. When I was learning how to transition into being an effective CEO, I looked at them all, but really, the one that gelled with me was this one: http://www.paladinandassociates.com/articles/what-does-a-ceo-do/. There are key words that ring out for me. Facilitating. Care. Problem solving. Objectives. Strategy...

Click here to read the full article: http://www.wardwilliams.co.uk/documents/Client_Spotlight_-_Vocality.pdf

Pension Law Reform - Auto Enrolment

The London Olympics has finally come and gone. Pension auto enrolment follows hot on its heels and comes into force on 1 October 2012.  

The date by which employers must comply with the auto enrolment regulations is called the ‘staging date’. Staging dates are being phased in over the next 5½ years. The largest employers are leading the way with a staging date of 1 October 2012, followed by medium-sized employers and finally small and micro employers.

All ‘eligible jobholders’ must be auto enrolled no later than 3 months after the staging date.

Why auto enrolment?

The government is on a mission to make sure employees have access to a workplace pension. However, unlike Stakeholder pensions, employer pension contributions will be compulsory under this new legislation, which is designed to encourage a retirement savings culture in the UK.

Fines

The government has introduced a scale of fines for employers who fail to meet their staging dates, or fail to comply with their auto enrolment obligations. Dependent upon the size of employer and extent of non-compliance, these fines could be as much as £10,000 a day.

Furthermore, whilst employees will be permitted to ‘opt out’ of auto enrolment, there will also be heavy fines for employers found guilty of inducing employees to ‘opt out’.

So it is clear to see that the government means business this time and is fully committed to seeing auto enrolment become a success.

The Workforce

As well as identifying your ‘eligible jobholders’, you will also need to identify your ‘non-eligible jobholders’ and ‘entitled workers’. All three categories of worker will need to be informed of their different pension rights.

Non-eligible jobholders and entitled workers will have to be continually monitored to make sure they are auto enrolled as and when they become eligible jobholders...

To read more visit http://www.wardwilliams.co.uk/documents/Pension_Law_Reform.pdf

Holiday Homes in France

Earlier this year tax was once again in the news with newspaper headlines such as “French tax grab on holiday homes” (The Telegraph) or “Holiday homes in France hit with massive tax hikes” (Daily Mail). 

In fact these headlines may be misleading and those who have holiday homes in France may be interested to know that the outcome of these changes, included in the French Budget announcement made on July 4^th 2012, is more likely to change the balance of tax paid between France and the UK rather than adding to the total.

This is because it is likely that the new tax which is now being charged to, among others, UK residents on their letting income from French property, will be eligible for credit against their UK tax liability. The French rate of tax on rental income was announced to be 35.5% so if you are a 40% UK tax payer you will effectively pay 4.5% to the UK Revenue and 35.5% to the French. Where the French property is not let, the new tax will not apply.

French tax on gains from the sale of property in France was announced to be 34.5% which nominally is in excess of the top UK rate of capital Gains tax of 28%. However, the amount subject to French Tax is normally reduced where the property has been owned for three years or more and not charged at all where the property has been owned for more than 22 years. So it is possible that the effective French tax rate could be similar to or lower than the UK rate and provided that credit is given for French tax paid, there would be little or no UK tax due.

All owners of French property should review their position and, with the help of their accountants and tax advisers, see just how much these new provisions will affect them. It may not be quite as bad as they think.

For further information/advice on this topic please contact Ward Williams: 

01932 830664, www.wardwilliams.co.uk