If you would like further information about the new register of persons of significant control or the implications of keeping your statutory information on the public register, please do contact us. We are able to provide comprehensive assistance with company secretarial matters such as:
- the maintenance and safekeeping of the company registers
- the processing and filing of minutes
- the preparation and filing of resolutions
- the completion and filing of statutory forms
- the filing of the annual accounts
- filing online
Despite that a private limited company is not required anymore to appoint a company secretary, still there are a number of statutory procedures that companies must continue to comply with. If your company is in Hayes, Bromley, Kent and London areas we, at Adiva Accountants in Hayes would be pleased to discuss company secretarial duties with you. Please do not hesitate to contact us at Adiva Accountants in Hayes.
In the recent years increasing levels of fraudulent filing of information is reported by Companies House. Often the fraud starts with changing the company’s registered office by submitting the appropriate form to Companies House. After the change of address has been accepted, the fraudsters can change directors or file false accounts. All this happens without the company having a clue that they have been hijacked. The fraudsters can then buy goods or obtain credit based on this false information.
To avoid this Companies House is keen that companies file their information online. This can be a very secure method, particularly if the company signs up for the enhanced security arrangements offered by their PROOF (protected online filing) system. This system prevents the paper filing of certain forms, making it very difficult for the fraudsters to hijack your company.
Many of the more common types of information can be submitted online by first registering at www.companieshouse.gov.uk. Alternatively, Companies House currently has a series of over 200 statutory forms to allow paper filing.
The company must ensure that their record at Companies House is always up to date. This record contains current details of various statutory matters.
The company secretarial duties would extend to ensuring that, for example:
- The company’s annual accounts are filed on time at Companies House. For a private limited company, this must be within 9 months of the end of the accounting year. A fine will be levied if the accounts are late.
- Once each year Companies House will send each company a confirmation statement showing a snapshot of the information they hold. The company must ‘check and confirm’ that the information held at a given due date is accurate. The information must be checked, and amended if necessary, within 14 days. If this information is returned late or not returned at all, the company, director(s) and secretary (if appointed) may be prosecuted. This confirmation statement replaced the annual return from June 2016.
- All changes to the way the company is organised need to be notified to Companies House. And this within a specified period of between 14 and 28 days, depending on the change. The annual confirmation statement cannot be used to change this information and a separate form should be used. The most common forms include:
- changes in directors, secretaries and their particulars
- a change of accounting reference date
- a change of registered office
- allotments of shares
- If a company does not complete its confirmation statement, the Registrar might assume that the company is no longer carrying on businesses. Steps might be taken to strike it from the register.
- The current version of the company’s Articles of Association is filed whenever a change in the company’s internal rules is made.
The lender or borrower should notify Companies House within 21 days when a company gives security for a loan. This is done by filling in the appropriate form and paying the statutory charge. Without timely registration, the charge will be void. That means the loan will still be repayable but the security given will not be valid. This does not apply to property acquired which is subject to a charge.
Companies should ensure that any charges created are registered and that the company’s credit profile is protected. This is by removing the charge from the register as soon as the loan is repaid.
Meetings and resolutions
The company law sets out procedures for conducting certain aspects of company business. This is done through formal meetings where resolutions will be passed. When resolutions are passed, the company is bound by them.
The company secretarial role here would be to ensure that proper notice of meetings is given to those who are entitled to attend. The proceedings should be recorded and copies of resolutions which affect the way the company is run are sent to Companies House. This should be done within the relevant time frame.
Members and auditors are entitled to a notice of company meetings. A general meeting notice of at least 14 days is required. Notice can be in writing, by email or by means of a website. However, a private limited company is no longer required to hold one. Unless the company’s Articles of Association make express provisions for holding an Annual General Meeting.
A company with an existing express provision for an AGM might want to abolish this requirement. Then a special resolution is needed to change the articles of the company.
There are two types of resolutions that may be passed. The ordinary resolutions, which are passed by a simple majority of the members. Or the special resolutions, which are passed by a 75% majority of the members. In general, resolutions will be voted on by any members present at a meeting.
Private limited companies can take most decisions by written resolution. Such a resolution does not require a hard copy and can be passed by email. However, these resolutions need to be passed by a majority of all members of the company, not just by those who return the voting form.
Whether they are taken at a meeting or by written resolution, it is important that companies retain copies of all important decisions taken in the management of the company. In cases when these decisions change the way a company is run, a copy needs to be filed at Companies House.
The company secretary
A company secretary, or the person responsible for company secretarial duties, will have regular dealings with Companies House. Companies House is where public records about the company are held. Most communications with Companies House are through Companies House Webfiling or their Software filing facility. Companies House is moving towards 100% online filing.
The duties of the company secretary or the person responsible for company secretarial matters are not defined specifically within company law. But they may be divided generally into three main areas:
- maintaining statutory registers (keeping the company’s records up to date)
- completing and filing statutory forms (keeping the public record up to date)
- meetings and resolutions (making sure the company abides by both its internal regulations and the law)
Maintaining statutory registers
All companies must maintain up to date registers of key details, these include:
- a register of members
- a register of directors
- a register of charges
- a register of persons of significant control
A person with significant control is an individual who ultimately owns or controls more than 25% of a company’s shares or voting rights. Or who otherwise exercises control over a company or its management.
The details in these registers include, for example, names, addresses, dates of appointment and resignation (for directors) and for members, the number and type of shares held. This is not an exhaustive list.
The general public has the right to inspect these registers, which must be made available at the company’s registered office. Or at a single alternative inspection location (SAIL) which must also be recorded at Companies House.
Directors may choose to keep their residential addresses private and to record a service address for them. In these circumstances, the company has to keep an additional register. It will show the directors’ residential addresses which is not open to inspection by the general public.
Maintaining the statutory information at Companies House
Private companies may also choose to keep some of the information normally kept in the statutory registers at its registered office or SAIL on the public register at Companies House. This will include their registers of directors, directors’ usual residential addresses, secretaries, members and persons of significant control. While this election is in force the company does not need to keep its own separate statutory registers updated.
The general public can access company information through Companies House instead of visiting the registered office, whilst this election is in force. This will include some information, such as members’ addresses or directors’ full dates of birth, which is not generally available on the public record for private companies.
If your company is in Hayes, Bromley, Kent and London areas we, at Adiva Accountants in Hayes, can provide assistance with company secretarial matters. Please do not hesitate to contact us at Adiva Accountants in Hayes.
There is no longer a requirement for all companies to appoint a company secretary. The private limited companies do not generally need to appoint a company secretary to deal with this paperwork. This is unless they either wish to do so, or their Articles of Association requires them to do so.
The public limited companies must still have a company secretary who must have specialist, up to date knowledge of company law.
The company secretary is an officer of the company. Due to that they may be criminally liable for company defaults. For example, failing to file a document in the time allowed, or to submit the company’s annual return.
If a private company decides not to have a company secretary, then first it should check its Articles of Association. This is to ensure that its own regulations do not require it to appoint one. After that the company should inform Companies House of the resignation of any existing company secretary.
Where a private company chooses not to have a company secretary, any item that would normally be sent to the company secretary is treated as being sent to the company. Any duties which would normally be the responsibility of the company secretary will be carried out either by a director or a person authorised by the directors.
If your company is in Hayes, Bromley, Kent and London areas we, at Adiva Accountants in Hayes, can provide assistance with company secretarial matters. Please do not hesitate to contact us at Adiva Accountants in Hayes.
A certain amount of information about a company must be publicly available. It includes the company’s annual accounts, registered office address and details of directors, company secretary and members. Providing and updating this information has historically been the job of the company secretary. If your company is in Hayes, Bromley, Kent and London areas we, at Adiva Accountants in Hayes, can provide assistance with company secretarial matters.
The company legislation provides an opportunity for a business organisation to benefit from the protection of limited liability. That is done by separating the legal persona of the organisation from the individuals who own it.
For both travelling and subsistence expenses to be treated as an exempt expense, it is necessary to have been incurred in business travel. This is also the condition in the use of business mileage rates for cars and vans.
A business journey is one which either involves travel:
- from one place of work to another or
- from home to a temporary workplace or vice versa
However, journeys between an employee’s home and a place of work which he or she regularly attends are not business journeys. These journeys are ‘ordinary commuting’ and the place of work is often referred to as a permanent workplace. This means that the travel costs to a permanent workplace have to be borne by the employee.
The term ‘temporary workplace’ means that the employee attends the place for a limited duration or a temporary purpose. However, some travel between a temporary workplace and home may not qualify for relief. This is if the trip made is ‘substantially similar’ to the trip made to or from the permanent workplace. The HMRC considers as ‘Substantially similar’ a trip using the same roads or the same train or bus for most of the journey.
There will be many variations of types of journeys undertaken by employees so ensuring that it is a business journey is critical. More so as the term ‘travel expenses’ includes the costs of travel together with any subsistence expenditure and other associated costs that are incurred in making the journey (e.g. toll or congestion charges).
The new regime
Regardless of whether the employers use scale rates or specific reimbursement, the new regime requires them to have a checking processes in place. If there is a lack of evidence that amounts paid to employees represent business expenses, the business may incur penalties for errors in completion of P11Ds. In some cases, if the expenses are non-business expenses the employer may be responsible for PAYE and NIC underpayments.
If approved benchmark or bespoke rates are used, the employers must have a checking system in place. This is to ensure that the employee is incurring and paying the amounts in respect of expenses of the same kind, and that the tax relief would be allowed. Exemption is also conditional on neither the payer, nor anyone operating the checking system, suspecting or reasonably being expected to know or suspect that the employee had not incurred an amount in respect of the expense.
The HMRC have issued guidance on what checking systems they will expect employers to operate. We can assist you with this matter or in applying for bespoke rates so please contact us for more information.
The business mileage rates
The main travel and subsistence expenses for many employees are their costs in using their own car or van for business travel. Many employers and their employees use the statutory mileage allowances known as ‘authorised mileage allowance payments’ (AMAPs). These are scale amounts that employers can pay to employees using their own vehicle for business travel. The scale rate for cars and vans is 45p per mile for up to 10,000 miles in the tax year and 25p per mile above this. AMAPs are a separate statutory regime and do not come within the new exemption regime.
If the employer provides a vehicle to the employee, the fuel advisory rates can be used to reimburse fuel costs incurred in travelling on business. These rates are updated quarterly throughout each tax year.
If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can advise you on the business mileage rates. Please do not hesitate to contact us at Adiva Accountants in Swanley.
The dispensation system instead of the employee’s actual costs in certain circumstances allowed amounts based on scale rates to be paid or reimbursed. The scale rates are generally for travel and subsistence expenses. They consist of round sum allowable amounts for specific circumstances.
There were two key types of scale rates available for use by an employer:
- ‘benchmark’ rates
- ‘bespoke’ rates
As part of the changes, these options are still available as detailed below.
The benchmark rates
The benchmark rates are a set of maximum reimbursement rates for meals. These round sum amounts have now been included in Regulations. So, where relevant qualifying conditions are met, they can be used by employers for payment or reimbursement of employees’ expenses.
These rates apply only if the employee incurs expenditure in the course of ‘qualifying business travel’ as follows:
- one meal allowance per day paid in respect of one instance of qualifying travel, the amount of which does not exceed:
- £5 where the duration of the qualifying travel in that day is 5 hours or more
- £10 where the duration of the qualifying travel in that day is 10 hours or more, or
- £25 where the duration of the qualifying travel in that day is 15 hours or more and is on-going at 8pm or
- an additional meal allowance not exceeding £10 per day paid where a meal allowance a. or b. is paid and the qualifying travel in respect of which that allowance is paid is on-going at 8pm.
The bespoke rates
These are rates negotiated and specifically agreed with HMRC in writing. The business has to apply to HMRC, if it wants to pay bespoke rates for meals or other types of expense.
There are transitional arrangements for bespoke scale rates. This means that employers can continue to use any existing rates agreed since 6 April 2011. This till the fifth anniversary of that agreement subject to re-confirming information to HMRC.
If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can advise you on the benchmark and bespoke scale rates. Please do not hesitate to contact us at Adiva Accountants in Swanley.
In order for a reimbursed expense to be treated as an exempt payment, an employer needs to put himself in the position of the employee. The employer then needs to decide whether that expense would have qualified for full tax relief to the employee. There is no explicit requirement in law for a checking system, but to an employer will have to operate a checking system.
An employer should consider the following:
- setting out a corporate policy of which type of expenses are reimbursable and the need for those expenses to be reasonable
- requiring the completion of a standard expense claim forms
- the need for any expense claim to be supported by a receipt
- making checks on expense claims
- requiring a senior person to authorise the claims
Receipts are required as it is expected that HMRC will expect for a checking system. And also, that there is evidence an expense has actually been incurred by the employee.
HMRC have introduced an exemption regime for employee expenses. If the necessary conditions are met, the expenses are tax exempt and non reportable on form P11D. If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can provide guidance on these changes.
This factsheet covers below the operation and reporting of expenses and benefits. There is a new exemption regime for such expenses. As long as the necessary conditions are met, there is no need to report these items on P11Ds. To meet these conditions the business must be satisfied that the employee would be entitled to full tax relief on expenses reimbursed to the employee.
The new regime
In the past when an employee incurred expenses they were treated as earnings. Then the employer reported them on the annual form P11D. The employee was then allowed to make a claim for tax relief to the extent that the expenses were business expenses. Later dispensations were introduced as a way of simplifying the process. So, the employers could apply to HMRC to dispense with the need to report certain expenses on the P11D. This removed the need for the employees to make claims.
If the HMRC were satisfied that the employee would have been entitled to full tax relief on that payment or benefit, the dispensation was given. Many employers applied and used dispensations, but many smaller or unrepresented employers did not do so.
From 6 April 2016, all existing dispensations came to an end and businesses will no longer be able to apply for a dispensation. A new exemption has been introduced instead. This means that businesses will not have to pay tax and NIC on paid or reimbursed expenses payments, or put them on a P11D. The new exemption places the onus on employers to determine whether employee expenses are fully deductible for tax purposes.
The types of expenses
The main types of expenses to which the exemption applies are:
- travel and subsistence
- fees and subscriptions
- business entertainment
All other non-allowable expenses will still be reportable on a P11D and/or subject to PAYE (and possibly NIC). Same as before employees will be able to claim tax relief in respect of unreimbursed business expenses.
This new exemption will not apply to expenses or benefits provided under a relevant salary sacrifice. This includes any arrangement where an employee gives up the right to receive earnings in return for tax free expenses payments. Or where the level of their earnings depends on the amount of any expenses payment.
If your company operates in Swanley, Bromley, Kent and London areas, Adiva Accountants in Swanley can advise you on the changes to P11Ds. Please do not hesitate to contact us at Adiva Accountants in Swanley.
The operation of PAYE under RTI can be a difficult and time consuming procedure for those in business. If your business is in Addington, Bromley, Kent and London areas and you would like to discuss any aspect of RTI in more detail, please do contact us at Adiva Accountants in Addington.
HMRC applies penalties where employers fail to meet their RTI filing and payment obligations. So, late filing penalties apply to each PAYE scheme, with the size of the penalty based on the number of employees in the scheme. Monthly penalties of between £100 and £400 may be applied to micro, small, medium and large employers as shown below:
- 1-9 employees – £100
- 10-49 employees – £200
- 50-249 employees – £300 and
- 250 or more employees – £400
Regardless of the number of returns submitted late in the month, each scheme is subject to only one late filing penalty for each month. There will be one unpenalised default each year with all subsequent defaults attracting a penalty. HMRC have confirmed that, they will not issue late filing penalties automatically when a deadline is missed. Instead they will ‘take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.’
Additionally, HMRC charge daily interest too. Interest is charged on all unpaid amounts from the due and payable date to the date of payment. They may also charge penalties to employers who fail to pay their PAYE liabilities on time. These penalties are ‘risk assessed’ and range between 1% and 4% of the amounts paid late. The first late payment will not attract a penalty.
The Real Time Information requirements are wide ranging and can be a burden on the employers. If your business is in Addington, Bromley, Kent and London areas we, at Adiva Accountants in Addington, can help you to set up and run the payroll for you.
We cover below details of how payroll information has to be submitted to HMRC under Real Time Information (RTI).
RTI requires the employers or their agents to make regular payroll submissions for each pay period during the year. These submissions detail payments and deductions made from employees each time they are paid. The two main types of returns which an employer needs to make are detailed below.
Full Payment Submission (FPS)
The Full Payment Submission (FPS) must be sent to HMRC on or before the date employees are paid. This submission details pay and deductions made from an employee. You can make only one FPS submission a month.
Employer Payment Summary (EPS)
Employers may also have to make a further return to HMRC each month (EPS) to cover the following situations:
- where no employees were paid in the tax month
- where the employer has received advance funding to cover statutory payments
- where statutory payments are recoverable (such as SMP, OSPP and ShPP) together with the SMP NIC compensation payment or
- where CIS deductions are suffered, which could be offset (companies only)
HMRC will offset the amounts recoverable against the amount due from the FPS to calculate what should be payable. The EPS needs to be submitted to HMRC by the 19th of the month. This way it can be offset against the payment due for the previous tax month.
The payments to HMRC
Please note that under RTI, HMRC are aware of the amount due to them on a monthly/quarterly basis. This will be part of the information reported to HMRC through the FPS and EPS returns.
So, HMRC will expect to receive the PAYE and NIC deductions less the amounts recoverable, each month or quarter.
Year end procedures
At the end of the tax year a final FPS or EPS return must be made to advise HMRC that all payments and deductions have been reported to HMRC. This is called Final submission.
It is not possible under RTI to put through wages at the year end of the business and assume this has been paid throughout the year. So, you cannot utilise a family member’s national insurance lower earnings limit which gives them a credit for state pension and statutory payment purposes. So, wages should be paid regularly and details provided to HMRC through the RTI system on a timely basis.
There are scenarios where it is impractical to report in real time. So, the regulations allow up to an additional seven days for reporting the payment in specified circumstances.
Please do contact us at Adiva Accountants in Addington, if you would like any further help or advice on payroll procedures.
Many business owners find the payroll procedures difficult and time consuming. If your business is in Bromley, Kent and London areas we will be happy to show you how to operate PAYE correctly, or to carry out your payroll for you. So please do not hesitate to contact us at Adiva Bromley Accountant.
The Automatic enrolment process makes the employers to automatically enrol ‘workers’ into a work based pension scheme. The scheme must start from the ‘staging date’. The main duties are:
- assess the types of workers in the business
- provide a qualifying automatic enrolment pension scheme for the relevant workers
- write to most of their workers explaining what automatic enrolment into a workplace pension means for them
- automatically enrol all ‘eligible jobholders’ into the scheme and pay employer contributions
complete the declaration of compliance and keep records
HMRC impose penalties on employers who fail to:
- make the online submissions on time
- pay the liabilities on time
- keep the necessary records
- operate PAYE or NI correctly
- make the correct statutory payments
- provide HMRC or the employees with the relevant forms on time
It is very important that the employers comply with all the regulations.
You will need to complete the following forms or maintain the equivalent digital records:
P11 Deductions working sheet
This form (or a computer generated equivalent) must be maintained for each employee. It details their pay and deductions for each week or month of the tax year.
P60 End of year summary
This form has to be completed for and given to all employees employed in a tax year.
P45 Details of employee leaving
This form needs to be given to any employee who leaves and details the earnings and tax paid so far in the tax year. New employees should let you have the form P45 from their previous employer.
When a new employee starts, you will need to advise HMRC so that you can pay them under RTI. Some of the necessary information may be obtained from the P45 if the employee has one from a previous job.
The tax and NI should be paid to HMRC by the 19th of the month following the payment. Tax months run from the 6th to the 5th of the month. So, if an employee was paid on 25 July (tax month being 6 July to 5 August) the tax and NI would need to be paid over to HMRC by 19th August.
If the PAYE and NI are paid electronically, they would need to be paid over to HMRC by the 22nd of the month following the payment.
If the average monthly payments are less than £1,500, the employers are allowed to pay quarterly rather than monthly.
Large employers, with more than 250 employees, must pay tax and other deductions electronically.
If your business is in Bromley, Kent and London areas we, at Adiva Bromley Accountant, can help you to set up and run the payroll for you.
NI is payable by the employee and the employer on the employee’s gross pay for a particular tax week or month. Different from tax, NI is calculated on a non-cumulative basis. Also, the NI can be calculated using the HMRC Basic PAYE tools or other payroll software.
You can use the calculators provided on HMRC’s website or other payroll software, to be able to calculate the tax and NI due in respect of your employees.
The tax which is due for a particular employee is calculated by reference to their gross pay with a deduction for their tax-free allowance. The tax-free allowance would reflect their circumstances (using their coding notice and the pay date). The remainder of the pay is subject to tax and this is calculated using the Basic PAYE tools or other software.
Tax is generally calculated on a cumulative basis, looking at the individual’s circumstances for the tax year to date.
We will cover below what you need to do to set up and run your payroll. If your business is in Bromley, Kent and London areas we, at Adiva Bromley accountant, can help you to set up and run the payroll for you.
If you want to set up a Pay As You Earn (PAYE) scheme with HMRC it is necessary to contact the New Employer’s Helpline on 0300 200 3211. Alternatively, you can register online via the GOV.UK website.
As an employer, you will be responsible for operating PAYE and National Insurance (NI). You need to be aware of certain statutory payments you may have to make from time to time. These statutory payments include:
- statutory sick pay (SSP)
- statutory maternity pay (SMP) and
- ordinary statutory paternity pay (OSPP)
- shared parental pay (ShPP)
The GOV.UK website has a vast amount of information detailing the operation of PAYE together with online calculators. These can be accessed as part of the HMRC Basic PAYE tools.
You can request HMRC to send you several booklets and tables to enable you to make the relevant deductions and payments to your employees. However, the majority of employers use the HMRC Basic PAYE tools or other payroll software.
The reporting of Real Time Information
Employers, or their agents, are generally required to make regular online payroll submissions for each pay period during the year. These submissions should be done on or before the date they are paid to the employees. They detail payments and deductions made from employees.
More detailed guidance and information on operating your payroll under Real Time Information can be found by clicking here.
If your business is in Bromley, Kent and London areas we, at Adiva Bromley Accountant, can help you to set up and run the payroll for you.
Knowledge of NICs matters is vital, whether you are an employer or an employee, employed or self-employed.
HMRC have wide anti-avoidance legislation and enforcement powers available to them. Therefore, it is important to seek professional advice, so that all compliance matters are properly dealt with.
If your business is in Bromley, Kent and London areas, we would be delighted to advise on any National Insurance compliance matters. So please contact us at Adiva Accountants London for further advice.
The NICs liability for a self employed is lower than for an employed individual with profits of an equivalent amount. So, there is an incentive to claim to be self-employed rather than employed.
Are you employed or self-employed?
This can be a complex area and there may be many situations where the answer is not that clear.
If the following factors apply to you, it is possible that you are employed rather than self-employed:
- the ’employer’ is obliged to offer work and the ’employee’ is obliged to accept it
- a ‘master/servant’ relationship exists
- the job performed is an integral part of the business
- there is no financial risk for the ’employee’
Please seek professional advice as early as possible and in any case prior to obtaining a written ruling from HMRC.
When HMRC discovers that someone has been wrongly treated as self-employed, they will re-categorise them as employees. In these circumstances, HMRC are likely to seek to recover arrears of NI contributions from the employer.
Enforcement, penalties and interest
In order to identify and collect arrears of NICs, HMRC carry out compliance visits. HMRC may ask to see the records supporting any payments made.
Additional NICs that may be due for both current and prior years can be demanded by HMRC. These arrears may be subject to interest and penalties.
The Employment Allowance can be offset against the employer Class 1 NIC liability. The amount of the Employment Allowance was £2,000 for 2014/15 and 2015/16 and has increased to £3,000 for 2016/17. This allowance is available to many employers.
There are some exceptions for employer Class 1 liabilities including liabilities arising from:
- a person who is employed (wholly or partly) for purposes connected with the employer’s personal, family or household affairs
- the carrying out of functions either wholly or mainly of a public nature (unless charitable status applies), e.g. NHS services and General Practitioner services
- employer contributions deemed to arise under IR35 for personal service companies.
The employment allowance is limited to a total of £2,000 (£3,000 for 2016/17), where there are ‘connected’ employers. If one company controls the other company, then the two companies are connected with each other.
The allowance is claimed as part of the payroll process. The employer’s NIC liability is not payable until the Employment Allowance limit of £3,000 for 2016/17 has been reached.
Employment Allowance recent changes
From April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.
Contributions payment deadline
The Class 1 NI contributions are payable at the same time as PAYE. Class 1A contributions are by 19 July (22nd for cleared electronic payment) after the tax year in which the benefits were provided.
So, it is important to distinguish between earnings and benefits.
The Class 1 earnings will not always be the same as those for income tax. Earnings for NI purposes include:
- salaries and wages
- bonuses, commissions and fees
- holiday pay
- certain termination payments
There can be issues in relation to the treatment of:
- expense payments
If expense payments are specific payments in relation to identifiable business expenses, they will generally be outside the scope of NI. However, round sum allowances give rise to a NI liability.
In general benefits are not liable to Class 1 NICs. However, there are some important exceptions including:
- most vouchers
- stocks and shares
- other assets which can be readily converted into cash
- the payment of an employee’s liability by an employer
As directors are employees, they must pay Class 1 NICs. However, directorships can create various NICs problems. For example:
- directors may have more than one directorship
- directors’ fees and bonuses are subject to NICs when they are voted or paid, whichever is the earlier
- overdrawn directors’ loan accounts can give rise to a NICs liability
We can advise you in any specific circumstances.
If you are an Employer in Bromley, Kent and London areas, and want to claim the Employment allowance, please contact us at Adiva Accountants London for further advice.
The self employed
NICs are due from the self-employed as follows:
- Flat rate contribution (Class 2)
- Amount based on the taxable profits of the business (Class 4)
Class 2 NIC used to be collected by direct debit. But from 6 April 2015, the liability to pay Class 2 NIC arises at the end of each year, and is collected as part of the final self assessment payment.
The amount of Class 2 NIC due is calculated based on the number of weeks of self-employment in the year. The rate of Class 2 NIC is £2.80 per week for 2015/16 and 2016/17. Class 2 NIC will be paid alongside the income tax and Class 4 NIC.
For those with profits below a threshold (£5,965 in 2016/17) no longer have to apply in advance for an exemption from paying Class 2 NIC. If they want to protect their benefit rights, they have the option to pay Class 2 NIC voluntarily at the end of the year.
From April 2018, the government will abolish Class 2 NIC.
For tax year 2015/16, Class 4 is payable at 9% on profits between £8,060 and £42,385 (in 2016/17 between £8,060 and £43,000). Additionally, there is a further 2% on profits above £42,385 (in 2016/17 above £43,000).
Flat rate voluntary contributions are payable under Class 3 of £14.10 per week for tax years 2015/16 and 2016/17. These contributions give an entitlement to basic retirement pension. If someone is not liable for other contributions, may pay Class 3 in order to maintain a full NICs record.
The Class 3A Voluntary National Insurance
For the people who reach State Pension age before 6 April 2016, a new class of voluntary NIC (Class 3A) has been introduced. This gives an opportunity to boost their Additional State Pension by topping it up by up to £25 per week.
The amount of the contribution depends on the age and sex of the individual. Please clink on the following link to find a useful calculator to determine the cost of contributions to be made. www.gov.uk/state-pension-topup
Class 3A NIC can be made from 12 October 2015 up to 5 April 2017.
If you are self employed and need help with NICs, please contact us at Adiva Accountants London for further advice.
Employees are liable to pay Class 1 NIC on their earnings. Additionally, a further secondary contribution is due from the employer.
For tax year 2016/17 employee contributions are only due when earnings exceed a ‘primary threshold’ of £155 per week (£8,060 a year). The amount of NIC payable is 12% of the earnings above £155 up to earnings of £827 a week (£43,000 a year) the Upper Earnings Limit (UEL). Additionally, there is a further 2% NIC charge on weekly earnings above the UEL. Secondary contributions (Employers NIC) are due from the employer of 13.8% of earnings above the ‘secondary threshold’ of £156 per week for 2016/17 (£8,112 a year). However, there is no upper limit on the employer’s contributions, so 13.8% is paid on everything above £156 a week.
Under 21s Employer NIC
For those under the age of 21, the employers NIC are reduced from the normal rate of 13.8% to 0%. However, the above exemption will not apply to earnings above the Upper Secondary Threshold (UST) in a pay period. The UST is set at the same amount as the UEL. This is the amount of pay at which employees’ NIC fall from 12% to 2%. The weekly UST is £827 a week (£43,000 a year) for 2016/17. So, the employers will be liable to 13.8% NIC beyond this limit. However, the employee will still be liable to pay employee NIC.
Apprentices under 25 NIC
From 6 April 2016, the same as for under 21s, employer NICs are 0% for apprentices under 25 who earn less than the upper secondary threshold (UST) which is £827 per week (£43,000 a year). On pay above the UST, employers are liable to 13.8% NIC. Employee NICs are payable as normal.
An apprentice needs to:
- be working towards a government recognised apprenticeship in the UK which follows a government approved framework/standard
- have a written agreement, giving the government recognised apprentice framework or standard, with a start and expected completion date.
In order to identify the apprentices, the employers need to assign them NIC category letter H. This ensures that the correct NICs are collected.
When the apprenticeship ends, or the employee turns 25, the employer needs to ensure that they amend the contributions letter.
Benefits in kind
If the employers provide benefits such as company cars for employees, they have a further NIC liability under Class 1A. Contributions are payable on the amount charged to income tax as a taxable benefit.
Most of the benefits are subject to employer’s NI. The current rate of Class 1A for the benefits provided is the same as the employer’s secondary contribution rate of 13.8%.
If you need help with NICs, please contact us at Adiva Accountants London for further advice.
The National insurance contributions (NICs) regime is quite complex. It represents a significant ‘tax’ on employers, employees and the self employed alike. If your business is in Bromley, Kent and London areas we, at Adiva Accountants London, can help you on NICs and any other problems.
National insurance contributions (NICs) are essentially another tax on earned income. Income is divided into different classes: Class 1 contributions are payable on earnings from employment. While the profits of the self-employed are liable to Class 2 and 4 contributions.
After the income tax the national insurance is the largest source of government revenue. We will cover below the areas you need to consider and identify some of the potential problems. Please contact us at Adiva Accountants London for further specific advice.
So, if you are struggling to keep up-to-date with paperwork, consider doing what you can, and hire us to do your bookkeeping on a regular basis.
If your business is in Bromley, Kent and London areas we would be delighted to help you do the bookkeeping, so please contact us at Adiva Accountants London.
If you run a limited company, even if you own it 100%, the business’s money is not your own. As a director, unless they are a legitimate business expense, you can’t spend the company’s money on your own personal expenses.
As a self employed person, you take drawings from your business, but you should still keep a separate bank account. So, keep your accounts clean by keeping your personal finances separate from the business ones.
- Check bank statements
You should spend time checking your bank statement every week or at least once a month. This will not only alert you of fraud or a mistake by your bank. But will give you a better understanding of where you are spending the money. All successful businesses have great credit control and spend their money smartly. So, make this a habit from day one.
- Put time aside to do your bookkeeping regularly
When you start your first business, you are so busy that you would often do your bookkeeping late. That is not good, as if you’re tired simple tasks will take longer, and you’re more likely to make mistakes as well.
So, if you need to do bookkeeping outside of working hours when you could be earning money, then why not consider letting us handle this burden for you.
If you still want to do the bookkeeping yourself, you may find that using a suitable accounts software package takes much of the trouble away. We highly recomend KashFlow online accounts system, which you can access anytime and anywhere. This is very helpful for a busy new business owner.
- Get help with your finances
This is an area where you shouldn’t save on professional help. If from the beginning you get the finances right, it will save you money and trouble on the long run.
- Cash book
These are the payments into and out of your bank account. If you keep it up-to-date, after a few months you’ll be able to use it as a forecasting tool, rather than just a historical record.
- Sales invoice file
If you use an accounting package to do your bookkeeping, you can use it to issue and store invoices. However, if you do the invoices manually using Word, or other program keep a record on file. You should store your invoices in chronological order. To help your credit control, you should keep the invoices which haven’t yet been paid at the front of the file.
- Purchase invoice file
It would be useful to make notes on invoices about when you paid them and how (BACS, cheque, cash etc). Youi should file them in chronological order. This will make your life easier when you need to find information.
- Get an invoice or receipt for everything you buy
The longer you are in business, the higher are the chances of a VAT or tax investigation by HMRC. You don’t have to worry about them as long as you have a professional accountant like Adiva Accountants London on your side. Obviously you have to keep all your paperwork too.
You should get into the habit of keeping a piece of paper for every transaction you make. So, if you buy something online always print off the invoice. It’s always easier to collect invoices as you go along, than to try to find them many years later.
If your company in Bromley, Kent and London areas requires a bookkeeping service, why not contact us today at Adiva Accountants London.
Not many people who start a new business are keen to do all the paperwork. Nobody’s idea of fun involves spending time adding up and recording receipts or invoices. Unfortunately, it’s a necessary evil and something you need to do to be able to stay on top of your new business. So, being disorganised and putting off paperwork just isn’t an option. Unless you let Adiva Accountants London do bookkeeping for you. If you’re late getting essential information to HMRC, they will fine you. And it will get worse, the longer you leave it. Also, being on top of your book-keeping will help you control the cash flow of your business.
Adiva Accountants London provide a full bookkeeping service to businesses throughout Bromley, Kent, London and nationwide. Please do not hesitate to contact us at Adiva Accountants London.
Every business should manage their bookkeeping properly. Bookkeeping involves recording the financial transactions such as sales, receipts and payments.
We can create income statements and balance sheets for your business in line with government requirements. Bookkeeping information is needed for creating financial statements for the business in the main areas:
- Income Sheet
- Balance Sheet
- Cash Flow Statement
- Statement of retained earnings
If your company in Bromley, Kent and London requires a bookkeeping service, why not contact us today at Adiva Accountants London. We will be happy to show how bookkeeping service offers a perfect way to manage your business and to keep it profitable too.