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Ad Valorem

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Archives for May 2020

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We have prepared the below to highlight key areas in tax year 2020/21. If you have any questions regarding the information below please contact us at enquiries@advaloremgroup.uk.

TAX CODES
The personal allowance for 2020/21 has remained the same being £12,500 with a tax code of 1250L.

NEW EMPLOYEES
HMRC require either form P45 or Starter Checklist when processing a new employee as this determines the tax code to operate.  Therefore, in order to process/pay any new employee, we will need either one of these forms.

RIGHT TO WORK CHECK
The notes below are for your information and the link will advise you accordingly.  https://www.gov.uk/legal-right-work-uk

As an employer, it is your responsibility to ensure your employees have the legal right to work in the UK.  An employer who employs an illegal worker and has not undertaken a prescribed right to work check, will be liable for a civil penalty of up to £20,000 per illegal worker.  It is also a criminal offence to knowingly employ an illegal worker, or to employ a worker despite having reasonable cause to believe they may be illegal.   This offence could lead to a custodial sentence and an unlimited fine.

STUDENT LOAN THRESHOLDS
Plan Type 1 – £19,390 (9% over threshold)
Plan Type 2 – £26,575 (9% over threshold)
Postgraduate – £21,000 (6% over threshold)

STATUTORY MATERNITY PAY (SMP) – 39 PAID WEEKS
STATUTORY PATERNITY PAY (SPP) – 2 CONSECUTIVE PAID WEEKS ONLY
This will increase from £148.68 to £151.20 subject to qualifying earnings.
Eligible smaller companies will still be entitled to claw back 100% plus 3% compensation against their monthly PAYE/NI liabilities.  Larger companies remain at 92%.

STATUTORY SICK PAY (SSP)
This will increase from £94.25 to £95.85 subject to qualifying earnings.

DIRECTOR’S NATIONAL INSURANCE
For directors who pays themselves a monthly salary of £719, this has now increased to £732, with the increase in the secondary NIC threshold. Please note for the time being this increase will not apply to furloughed directors.

EMPLOYMENT ALLOWANCE
The employment allowance has been increased from April 2020 to £4,000 for eligible employers.
The following link provides further information relating to the employment allowance and your eligibilty – https://www.gov.uk/government/publications/employment-allowance-increases-for-national-insurance-from-april-2020/employment-allowance-increases-for-national-insurance-from-april-2020

NATIONAL MINIMUM WAGE
The hourly rates from 1 April 2020 will increase as follows:

25 and over £8.72
21-24 £8.20
18-20 £6.45
Under 18 £4.55
Apprentice £4.15

The apprenticeship rate only applies to apprentices aged:

  • Under 19
  • 19 or over who are in the first year of their apprenticeship

Apprentices aged 19 or over in their second year of apprenticeship must receive the national minimum wage or national living wage rate their age entitles them to.

AUTO ENROLMENT
There is no change to the auto enrolment pension contribution thresholds

Date effective Employer minimum contribution Staff contribution Total minimum contribution
6 April 2020 3% 5% 8%
6 April 2019 3% 5% 8%
6 April 2018 to 5 April 2019 2% 3% 5%

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We are in the process of sending out our annual P11D checklists summaries to our clients to gather information about any taxable benefits that may have been provided over the 2019/20 tax year.

What are taxable benefits?

If you provide certain benefits to any company employees or directors then they may generate a taxable benefit that need to be reported to HMRC.

Below are some examples of taxable benefits:

Ø  Business Mileage – if paid above HMRC approved rates

Ø  Company Cars & Vans

Ø  Interest free loan

Ø  Private medical / Dental insurance

Ø  Assets provided for personal use

Ø  Personal payments – e.g. school fees, gym membership, home phone charges

  

Ø  Company credit cards provided for personal use

Ø  Living Accommodation

Ø  Relocation Expenses

Ø  Trivial benefits – there are different limits for employees and Directors

Ø  Shares at less than Market Value

Ø  Mobile Phones

 

Business Mileage

If the company pays mileage for business use of a personal car ABOVE 45p per mile for the first 10,000 miles and 25p thereafter please provide details of the number of miles paid and the rate applied for each employee.

Company Cars

If company cars have been made available to employees or a member of their family to use privately, please let us know and we will request further details

Company Vans

If the company provided a van to employees or a member of their family to use privately and paid for the fuel.

Please note that personal use does not include:

  • Home to site trips that are exclusively for business (including very small detours such as to buy a newspaper)
  • Very few small, local personal trips such as to take a mattress to the tip (limited to no more than 2 per year)

Interest Free Loan

If an employee has been provided with a loan which exceeds £10,000 in the year then please let us know and we will request further details.

Assets provided for personal use

If employees are provided with assets which they can use for personal use (which are not listed elsewhere in this blog) please let us know and we will request further details.

This includes furniture provided in company accommodation.

Please note that this does not include:

  • The use of an asset where private use is not significant
  • 1 mobile phone per employee that is in the company name

Living Accommodation

If employees have been provided with living accommodation that is owned or rented by the company please let us know and we will request further details.

Relocation Expenses

If any expenses have been paid by the company for the relocation of an employee above £8,000 then please provide details of the amounts paid for each employee.

Mobile Phones

As above 1 mobile phone provided per employee that is in the company name is not a taxable benefit.

If you reimburse any calls that have been made on an employees personal mobile phone then this is a taxable benefit and we will need details of the amounts paid for each employee.

Trivial Benefits

There is a statutory exemption for ‘trivial benefits’ given to an employee.

A trivial benefit is one that:

  • Costs £50 or less to provide (including VAT)
  • If it is a retail store voucher that is not convertible into cash
  • Isn’t a reward for service e.g. Birthday, Christmas, Wedding anniversary etc.
  • Isn’t in the terms of the employee’s contract
  • Is not reimbursed

There is no limit on the number of trivial benefits that can be provided in the tax year for an employee.

Where the individual is a director of a close company the total value of trivial benefits cannot exceed £300 per annum.

Examples of common trivial benefits are:

Ø  Christmas Hampers

Ø  Fireworks

Ø  Vouchers for high street stores

Ø  Tickets to the theatre

Ø  Tickets to a football game

Ø  Wedding Anniversary champagne

 

How are these benefits reported?

Details of these benefits have to be entered into a software which will generate forms P11D & P11D(b).

A P11D is generated for each employee and needs to be distributed to each individual by the employer by 6th July 2020, the amount that is reported will be included in the employees’ tax code which will be updated once HMRC have received the submission.

A P11D(b) is generated for each company which reports the total taxable benefits from all employees. This has to be submitted to HMRC by 6th July 2020. There will be Class 1A NIC due on this amount which is calculated at 13.8%. This is payable by the employer and must be paid by 19th July 2020 (if payment is made via cheque) or by 22nd July 2020 if payment is being made electronically.

 

If you have provided any of the above items or have any queries then please contact us and we will be able to inform you whether anything needs to be reported to HMRC.

(E) enquiries@advaloremgroup.uk or (T) 01908 219100