The new tax year is fast approaching again! To ensure your business has a successful 2017, it is imperative that your to-do list is always up to date with all new and relevant obligations that employers face. Read the check list below to ensure your businesses success.
• The Apprenticeship Levy
Effective from April 2017, companies with an annual pay bill (earnings that are subject to secondary Class 1 National Insurance Contributions) in excess of £3m per year will pay the levy at a rate of 0.5%. A large pay bill will result in a large levy to pay so we suggest you calculate the financial effects this will bring to your company!
Each employer will also receive an annual allowance of £15,000 to be offset against the levy.
Question: If you are liable to pay the Apprenticeship Levy, do you know how to make the most of using your ‘Levy pot’ to reinvest back into your company?
• Off-Payroll Rules (The IR35 reform)
From April 2017 the rules regarding treatment to employment intermediaries (typically Personal Service Companies) who are caught by IR35 will change where the end-user is a public authority (‘the off-payroll rules’).
The responsibility for deciding whether the off payroll rules apply sits with the “fee-payer” who is the entity who pays the PSC and so, could be either the public authority, an recruitment agency or third party, such as an employment intermediary.. The fee payer is also responsible for deducting and paying associated employment taxes and National Insurance Contributions to HMRC where the off-payroll rules are found to apply.
The 5% deduction within the calculation of the “deemed employment payment” for IR35 will remain available where the end-user is a private authority, but will no longer be available where the end user is a public-sector authority.
It is important that you assess your contracts if you provide labour, via PSCs, to a public authority to determine how this may impact you. If services caught under the new rules is carried out prior to April 6th but payment for the services is made on or after April 6th, then the new rules will apply to the engagement.
Remember: if your business has to start applying the deemed employment payments to PSCs, then your annual pay bill for the purposes of the Apprenticeship Levy will increase.
• Gender pay gap reporting
The Equality Act (Gender Pay Gap Information) Regulations 2016 put an onus on employers with more than 250 employees will need to publish a gender pay gap report onto their websites with set metrics to be reported such as mean and median pay calculations and variances in bonuses. The first report will be due in April 2018 which uses pay gap data from April 2017.
The failure to report on the Gender Pay Gap will also result in enforcement action taken by the Equality and Human Rights Commissions and will be considered as an “unlawful act”. Information will be available to the public and will remain accessible via the company website for three years following the date of release. ‘Employee’ is also specially defined for the purposes of the gender pay gap, to encompass as many individuals as possible. The term “employee” will refer to any individual who is employed by the relevant employer and also those working via a contract of apprenticeship or a contract individually to carry out work.
• New National Living Wage/National Minimum Wage rates
As of the 1st April 2017, the new rates for NLW/NMW will be as follows:
The National Living Wage for 25-year-olds and over will increase by 30p from £7.20 for to £7.50.
The adult rate (21-24) will increase to £7.05 an hour which is 10p more than the current rate of £6.95.
The Youth Development rate which affects 18-20-year-olds will increase to £5.60 per hour which is 5p more than the current rate of £5.55.
The under 18-years-old rate will also see an increase up to £4.05 per hour which is 5p more than the current rate of £4.00.
The Apprentice Rate will receive an increase to £3.50 per hour which is 10p more than the current rate of £3.40.
In addition to the new rates, naming and shaming has been proving to hold no remorse made apparent with the largest list of NLW/NMW offenders released to date this February. The new lists now include offenders who breach the NLW.
The reputational risks are extremely deterring alone, but the added pressure of a possible financial risk as a result of a HMRC visit means that complying with the NLW/NMW rates is essential to running a successful business.
• Reporting on Payment Practices
As of the 6th April 2017, businesses who fall within the scope of being a “large company” will have to publish a report (twice a year) on their payment practices. The report aims to improve corporate culture by ensuring that companies use fair payment terms and conditions and suppliers are paid on time.
The reporting requirements include:
· Standard payment terms, including any changes to these in the last reporting period
· Average time taken to pay invoices
· Proportion of invoices paid beyond agreed terms
· Proportion of invoices paid within 30 days or less, paid between 31 to 60 days and paid beyond 60 days
· Amount of late payment interest owed/paid
· Whether financial incentives were required to join or remain on supplier lists
· Process of resolving disputes over invoices and payments
· The availability of: e-invoicing, supply chain finance, preferred supplier lists
· Membership of a payment code
Reporting on payment practices may seem like another headache but with KPP’s help, you can ensure that your business is ready for all its reporting duties ahead of April 2017.
• Flat Rate VAT percentage
As of the 1st April 2017, a new rate of 16.5% will be implemented for business who use the Flat Rate VAT Scheme (‘FRS’) should they have ‘limited costs’. These businesses will also be defined as “limited cost traders”.
On the 5th December 2016, Government released draft legislation “The Value Added Tax (Amendment) Regulations 2017” that amend the VAT Regulations 1995 to introduce the new 16.5% rate; updated the guidance “Tackling aggressive abuse of the VAT Flat Rate Scheme – technical note; and published the policy paper “VAT: tackling aggressive abuse of the Flat Rate Scheme”.
The draft legislation, if accepted without change, will amend the VAT regulations 1995 and in doing so will mean that where a business is using the FRS and fits the criteria of being a limited cost trader, they must use the 16.5% rate regardless of the business activity currently registered with under the FRS.
• Holiday pay to be calculated on commission
The Supreme Court has confirmed through the cases of Lock v British Gas that commission should be included within holiday pay calculations. The Supreme Court has refused British Gas the right to appeal.
It is becoming more and more apparent that holiday pay should be calculated on all taxable pay and so should include any payments relating to commission, bonus and overtime (and not just a worker’s basic pay). If a worker was to submit a claim for a shortfall in holiday pay then the above named cases would take precedent. We recommend you ensure that you treat your worker’s holiday pay payments in line with these cases as going to an Employment Tribunal will be time consuming and costly for your business.
• Modern Slavery Act
The Modern Slavery Act 2015 was passed into law in March 2015 and aims to increase awareness of modern slavery and labour exploitation and requires businesses to consider their approach in tackling labour exploitation with the aim of eradicating it. It puts the onus on employers to be transparent in relation to what has been done and to check whether or not modern slavery occurs within their business and/or supply chain.
Certain businesses (UK businesses supplying goods or services, with a total annual turnover of £36m or more) must comply with Part 6, Section 54 of the legislation by producing a Slavery and Human Trafficking Statement each financial year that details the steps that the business has taken within that year to ensure human slavery is not taking place, or a statement that the business has not taken such steps. The statement must be uploaded to your website, regardless of whether your statement details you have taken no steps. The statement should be uploaded as soon as possible after the end of the business’ financial year.
Do not be frightened – KPP Accountants can help you clear your to do list with ease!