Minimum Wage Increases

From 1st April 2018 both the National Living Wage ( NLW ) and the National Minimum Wage ( NMW ) will be increasing. These rates are the legal minimum that you must pay your workers. An employee can report an underpayment of wages via a straightforward online form, and also make a claim at Tribunal for the underpayment. The Tribunal fees have also now been removed, meaning it will cost an employee nothing to commence the claim.

The NLW will rise from £7.50 per hour to £7.83 per hour. This is an increase of 4.4% and is the biggest rise since 2008. The NLW applies to workers aged 25 and over.

The NMW increases as follows :

  • a) workers aged 21-24 : from £7.05 to £7.38 per hour
  • b) workers aged 18-20 : from £5.60 to £5.90 per hour
  • c) workers over compulsory school age but not yet 18 : from £4.05 to £4.20 per hour
  • d) apprentice rate  :   from £3.50 to £3.70 per hour  

All employers MUST ensure that they comply with this legislation to avoid back payments, penalties, Tribunal claims, and being named on the Government Register for all to see!

Cryptocurrencies

Bitcoin and other cryptocurrencies are becoming increasingly popular, especially with the high growth in value of Bitcoin over the last year or so ( I should at this point mention that the value of Bitcoin and cryptocurrencies can go down as well as up !!! ). The tax implications are still being thought through, although HMRC business brief 9/2014 outlines HMRC’s approach to the taxation of cryptocurrencies.

If someone buys Bitcoin to hold as an investment, or sets up a business to take payment in Bitcoin, then that person MUST keep proper accounting records, and report any gain or income to HMRC.

Another alternative is that Bitcoin falls into the realms of gambling, where there is no tax implications. For a transaction to be a gambling transaction, the person must be acting in a personal capacity and the other person in the transaction simply held differing views as to which direction the currency would move in. There would be no stake, and there would be a clear winner and a clear loser.

Our own opinion is that HMRC will seek to attribute a clear taxable position on any cryptocurrency activity, and it is therefore essential that all clients keep us informed of any activity they have in cryptocurrency, and they must keep adequate records of all such activity.

As always, investors in cryptocurrencies should seek professional advice and make sure they understand the risks and consequencies of any venture into this area.

Salary Sacrifice and Cars

Company car salary sacrifice arrangements have changed from 5th April 2017, if the car has CO2 emissions of 76g/km or more.

If a salary sacrifice arrangement on such a car began, or changed, after 5th April 2017, then PAYE and NI must be deducted on the greater of the car benefit in kind, or the salary given up in exchange.

HMRC have recently confirmed that the amount of salary sacrificed to be used for the comparison is the figure for the car only. So, you must ignore any part of the salary sacrifice which relates to other costs such as fuel, maintenance, and other attributable services.

When structuring a salary sacrifice on a car, you should ensure that the documentation separately identifies the constituent amounts for the car and the other costs.

Abolition of Class 2 NIC’s – Delayed

HM Treasury has confirmed that the abolition of Class 2 NIC’s has been delayed by 12 months, and will now take effect in April 2019.

Once Class 2 NIC’s are abolished, self employed persons with profits below the small profits threshold will have to pay Class 3 NIC’s in order to build up an entitlement to state benefits such as the state pension.

Directors Tax Returns

HMRC say that it is necessary for a company director to file a self assessment tax return. The guidance issued by HMRC says that a company director should submit a tax return each year without prompt from them. They may impose a penalty for a late tax return.

Following a recent tax case ( M Kadhem TC5929 ) this guidance is not correct. The judge in the Tribunal case said that the guidance issued by HMRC which stated ” as a director of a limited company you must……register for self assessment……and send a personal self assessment tax return “, did not have the force of law and a taxpayer was not obliged to follow it.

Consequently, where there is no tax liability arising, an appeal should be submitted against any late penalty notices issued by HMRC for a late tax return, simply because you were a company director.

Auto Enrolment Update

As from 1st October 2017 there is no longer a staging date for auto enrolment purposes. Where a new PAYE scheme is set up after this date, then the employer’s legal duties with regards auto enrolment start immediately from the first pay date for employees.

It is still possible to postpone the employer’s duties for a period of 3 months from the start of employment.

For all new employers we would strongly recommend that you seek professional advice on the subject of auto enrolment to avoid potential penalties.