Category: Savings

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RTI for PAYE – What is it all about?

 

HMRC’s new system of reporting PAYE and what it means for you and your business.

 

From 6 April 2013 you will have to start reporting PAYE information in real time. You may see this referred to as Real Time Information – or RTI. HMRC have introduced this new system for reporting PAYE for large and small business including Limited Companies with the main objective to enable more accurate PAYE reporting. The more accurate the information the better the chance that employees will be on the correct tax code and thus ideally, less mistakes from HMRC will be made.

What this really means is that HMRC will receive information on employers PAYE per pay period, rather than receiving it all at once at the end of the tax year. By receiving Pay As You Earn information in real time, HMRC have the opportunity to pick up on and amend any errors as they occur, rather than trying to reconcile a backlog of errors and inconsistencies at the end of the tax year. This decreases the likelihood of you being lumped with an unexpected penalty.

RTI is only relevant to employers, so if you operate as a sole trader, with no employee’s, the changes do not apply to you. As the director of a Limited Company however, you do have to report your PAYE salary, if you take one, when it is paid to you as an employee of your Company.

What do you have to do?

 

As an employer, each time you pay an employee, you already keep payroll information. After 6 April 2013 you will still operate PAYE in the same way but you must submit the payroll information you already keep to HMRC on or before the day you pay your employees. Your payroll software will generate the new reports you need and submit payroll information online, (please check with your current payroll software provider now to ensure all is in order). These will include details of:

  • the amount you paid your employee(s)
  • deductions, such as Income Tax and National Insurance contributions (NICs)
  • starter and leaver dates if applicable

You need to include the details of all employees you pay, including those who earn below the NICs Lower Earnings Limit (LEL), for example students.

 

You no longer submit end-of-year forms P35 and P14 and the starter and leaver process is simplified. You continue to give your employee a form P45 (employee parts) when they leave but you no longer send forms P45 (part 1) or P46 to HMRC. Instead you must report all starter and leaver information via your payroll software each time you pay someone. When you run payroll, your software gathers the PAYE information you send to HMRC, based on the payroll entries you make.

You can use any RTI-enabled commercial payroll software (there are some free packages available) or HMRC’s Basic PAYE Tools package which is designed for employers with nine employees or fewer. You submit your PAYE information online to HMRC using commercial payroll software or HMRC’s Basic PAYE Tools, if it’s suitable for you. You do this via the Government Gateway, the online entry point to government services. You cannot use HMRC’s PAYE Online Returns and Forms direct from the HMRC website to send this PAYE information.

 

It’s very important you use accurate employee details, such as full name, home address, date of birth, National Insurance number and gender before the new PAYE real time is introduced within your business. By doing this you will:

  •  ensure employees pay the correct Income Tax and NICs
  • make it easier to match the information you send with HMRC’s record of your employee
  • reduce the number of employee queries you receive from HMRC

 

The best way to check these details are correct is to verify them against a birth certificate, passport, driving licence or official document from HMRC or the Department for Work and Pensions.

 

 

RTI will be beneficial for you because your remittance advice will be accurate and the information held by HMRC will all be correct meaning no nasty surprises, no confusion and hopefully faster processing from the HMRC.

 

For further information on RTI payroll please feel free to contact us on info@jsrcharteredaccountants.co.uk,

See also http://www.hmrc.gov.uk/payerti/getting-started/index.htm

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2012 Autumn Statement

 

George Osborne delivered his 2012 Autumn Statement yesterday and we have summarised the key points below:

INDIVIDUALS

  • The Personal Allowance is to increase from £8,105 to £9,440 from April 2013 for those aged under 65. This is part of a plan to ultimately increase the Personal Allowance to £10,000.
  • The band of income tax rate at 20% is being reduced from £34,370 to £32,010 from April 2013
  • The threshold for 40% income tax is to decrease from £42,475 to £41,450 in 2013/14 but will increase by 1% in 2014/15 and 2015/16 to £41,865 and £42,285
  • The 50% band currently applies where taxable income exceeds £150,000 but the rate will fall to 45% next year.
  • New universal credit for Income Tax is coming into effect next year as previously announces
  • The Capital Gains Tax annual exemption is to increase by 1% to £11,100
  • The Inheritance Tax exemption is to increase in 2015/16 from £325K to £329K
  • No new tax was implemented on property
  •  From 2014/15, pensions lifetime allowance is to reduce from £1.5m to £1.25m and annual allowance from £50K to £40K. This restriction of pensions tax relief is a £1bn tax rise for high earners
  • The ISA limit extended from April 2013 to £11,520
  • The Basic State pension is to increase by 2.5% next year which is a rise to £110.15 per week
  • Tougher measures on welfare fraud are announced. Changes to welfare benefits will save £3.7bn in 2015/16
  • Child benefit is to increase by 1% for 2 years with effect from April 2014

BUSINESSES

  • Main rate of Corporation Tax cut by 1% to 21% in April 2014 (was set to be 22%), currently set at 23% for April 2013
  • Increase in Annual Investment Allowance for capital allowances from £25K to £250K from 1 January 2013 for 2 years. This is a huge boost for expanding businesses
  • A number of tax avoidance loopholes are to be closed immediately, and anti avoidance will be further tackled by an increase of 2,500 in the number of tax inspectors
  • New general Anti Avoidance Rule still be introduced in April 2013
  • £5bn to be received over 6 years from undisclosed Swiss bank accounts of UK residents
  • Temporary doubling of small business rate relief was to end 2011 – already extended to April 2013; now extended further to April 2014
  • Tax relief for employee shareholder scheme to be introduced
  • Consultation on new tax incentives for shale gas

OTHER ISSUES

  • The planned 3p rise in fuel duty from January 2013 is now cancelled.
  • Extra £5bn capital investment to be made in infrastructure – Northern Ireland will get its share
  • Broad band investment in various areas across UK
  • Extra £600m for scientific restructure in UK
  • £270m to be made available for improvements in further education in UK
  • £1bm to be made available to expand schools and build 100 new free schools and academies in UK
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Possibly a little more “something for nothing” -Enhanced Capital Allowances on Energy Saving Equipment

Previously I pointed out the potential savings that can be made and the finance available from The Carbon Trust for replacing current lighting, heating, cooling equipment etc with an energy efficient equivalent. In that article I mentioned that the cash flow savings delivered through reduced payments to your utility supplier can finance the loan repayments. This is not the whole picture. There is still a little more meat to add to the bones on this topic.

HRMC have in recent years attempted to encourage business to invest in green technology/ equipment. This has primarily been delivered through the Capital Allowance scheme.

The ‘incentive’ as provided by HMRC is the availability of Enhanced Capital Allowances to achieve tax relief on the acquisition and installation of certain certified energy saving equipment.

Check the following link to confirm that any potential equipment acquisition qualifies for Enhanced Capital Allowances before you buy http://etl.decc.gov.uk/etl/find/

The application of these Enhanced Capital Allowances effectively allow the business to claim tax relief on the full cost of acquisition and installation of this equipment in year one.

Example – assume the business spends £10,000 on energy efficient equipment and its subsequent installation. The business can then claim a reduction in its taxable profits to the extent of £10,000. This is applicable to either limited company, sole trader, or partnership businesses.

There is a further aspect to the Enhanced Capital Allowances for limited companies that we will look at next time.

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Something for nothing? …

Fossil fuels, energy efficient equipment and The Carbon Trust

 

Having recently been involved in a review of utility expenses with some of our SME clients I came to challenge the notion that “you can’t get something for nothing in this life”.  Well, on the basis of some number crunching, a lot of meetings and discussions and the like with various others, it would appear that it is in fact possible to get something for nothing.

 

The technology upon which energy efficient lighting, heating, cooling etc. is based has developed so rapidly over the last, say 10 years that if your equipment was installed around that time, or before, then it just might be the case that you could change your lighting, heating/ cooling equipment “for nothing”.

 

In one of the cases that we have been looking into, as I referenced above, we have moved beyond the paper review of the costings, and are now looking at the physical equipment that is being proposed.

 

In that case the lights are ‘burning’ for approximately 50 hours per week.  It would appear that new energy efficient LED based lighting can be introduced to provide a ‘similar level of lighting’ but delivering between 65% – 70% efficiency gain on the current lighting.

 

The Carbon Trust currently provide interest free loans to SME’s based in Northern Ireland and Wales.  These loans are typically repaid over the first 3 – 4 years after installation.

 

The projected cashflow savings (through reduced payments to the electricity supplier) being delivered through the installation of these LED lights, in the case we have looked at, is greater than the monthly repayment of the Carbon Trust loan – albeit only by a small margin during the loan repayment period.  However, once the loan is repaid in full the savings all yours!

 

For more information on Carbon Trust and their interest free loan see their website: http://www.carbontrust.com/client-services/northern-ireland

 

 

Our next article will look at the Enhanced Capital Allowances position and their impact on the acquisition of energy efficient equipment.

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