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June 2015

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To June’s Tax Tips & MYOB News. 

In this newsletter we are focussing on Pensions Auto Enrolment Schemes which are now imminent for some employers. .

If you need further assistance just let us know or you can send us a question for our Question and Answer Section.

June 2015
· Auto Enrolment – an update
· P11Db Payment
· June Question and Answer Section
Auto Enrolment – An Update
From January 2016 to April 2017 small employers will have to start ‘auto-enrolling’ their employers into a pension scheme. We have written to our clients with their details of starting or ‘Staging’ date. This is the latest news about the scheme.

The Requirement – ‘eligible’ employees
Every employer with at least one member of staff now has to put employees (who meet certain criteria) into a workplace pension scheme (by their Staging date) and the employer must contribute towards it.

The criteria for ‘Eligible’ employees are that they :
•    earn over £833 a month;
•    are aged 22 or over; and
•    are under State Pension age.

Other Employees may choose to ‘opt in’ if they wish. Even if your ‘employees’ are not currently eligible you still need to set up a pension scheme. Once the scheme is set up, a percentage (amount depends on type of scheme) of the employers earnings which are liable to NI, will be deducted, before tax.  Together with employer contributions, these contributions will be diverted into the pension scheme.  Deduction levels will eventually reach 8% of the element of total pay roughly reflected by the NI band.

No Tax Saving for Basic Rate Tax Payers 

In most cases there will be little tax saved as a result of Auto Enrolment schemes.

If the employer contribution is parked in a pension scheme it is free of basic rate tax and both classes of NI. When the pension is eventually paid it is largely subject to basic rate tax. The situation is worse with an employee contribution. In this case the employee will save the Employee NI and PAYE. However the contribution will be subject to Employer NI.

There will be a tax saving is for employees who are currently higher rate tax payers and will become standard rate taxpayers after retirement.  However this is unlikely to benefit small business owners/ directors and most of their employees.  And there are already ways for owners/ directors to legitimately avoid NI.

Lessening Your Responsibility
Given the very limited benefit of these pensions we recommend that employers limit their responsibility as far as possible. Consider whether these could apply to you.
  • Small businesses with only one employee can completely opt out.  If this is your business we will prepare an email to the Pensions Regulator to get your business released from auto enrolment responsibility.
  • Even if you have to set up a scheme you do not need to enrol staff in it unless they are ‘eligible’ (see criteria above).  For our clients we will monitor who is eligible through your payroll.  If you are a director of a company you can plan for your salary to be at or below £833 pm.
  • If employees make contributions from their wages they have a series of opt-out opportunities. We recommend that employers deduct nothing from employee pay – this avoids the complication of having to think about employee opt outs.
Choosing a Pension Provider 
Our priority is to choose schemes which are convenient for our clients and are therefore unlikely to trigger fines from the Pensions Regulator.  The cheapest provider available appears to be NEST, but this will have only five implementation managers. The support for employers is likely to be weak.  We are therefore more likely to recommend Scottish Life which will have approximately 60 implementation managers. We are still evaluating the Pension Provider we wish to recommend. 

How we can help you
We will work out what auto-enrolment will cost you, and which employees will be covered. There are significant penalties for employers who fail to enrol employees on time. So by default we shall add your employees to the calculation for you.  We will not let the auto-enrolment timetable overtake you. We reserve the right to propose an extra charge to cover this work.

Pensions Regulator
For those who need to set up a pensions scheme we will register with the Pensions Regulator on your behalf.  We will set up your primary contact (usually business owner) and ourselves as secondary contact.  We shall then prepare registrations with a pensions provider. The payroll will also be prepared.

What Next?
All our Clients will shortly receive an email list with their current list of staff and their status for auto enrolment.  Please check this through and let us know if there are any errors.  We will also send a reminder of your staging date. Please do not reply to the Pensions Regulator yourself.  
P11Db Payment top
June Question and Answer Section top
You will have to pay tax if you give a director or your employees certain staff benefits which are taxable.

Common examples are:
•    a car or van that your employee can use for private motoring (even if they don’t)
•    free fuel for their private motoring (which is charged at a heavy fixed rate for even one drop)
•    free, or low cost, living accommodation, unless it is needed because of your job
•    tickets and vouchers that your employee can use to get free or cheap goods or services
•    staff loans beyond £10,000.

Where we have been informed of the details our clients will have already received a draft P11D and a P11Db to report these cases.  The P11Db charges you, the employer, for the National Insurance on the taxable benefit. 

The HMRC wants payment of the P11Db handled in a particular way.  They ask: ‘To allocate your payment correctly please use your 13 character Accounts Office reference followed by 1513.  For example if your Accounts Office reference is 123PA00123456, you would use 123PA001234561513.’  ‘Adding 1513 is important because 15 tells us the payment is for the tax year ended 5 April 2015, and 13 lets us know the payment is for Class 1A NIC.’ 

The payment must be made by 19th July to:
Accounts Office Cumbernauld
Sort Code: 08 32 10
Account number: 12001039
Account Name: HMRC Cumbernauld.
Q. I work as a self-employed air-conditioning engineer, which involves servicing and maintaining air-conditioning units and occasionally fitting new units. I would like to take advantage of the flat rate VAT scheme for small businesses, but I am confused as to what business category to choose. Do you have a suggestion? Answer

Q. Following the relaxation of the pension rules in April I took a cash lump sum from my pension scheme but the pension company deducted tax from the payment. I have no other income in this tax year so I shouldn’t have to pay any tax. How do I get that tax back? Answer

Q. My father employs a care-worker to provide personal care for his disabled wife in their home. The cost is significant, including NIC and PAYE. Is there anything he can do to reduce the cost? Answer
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Clearbooks.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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