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Financial Monitor (June 2008)Pension Plans for Employees At present, employers must offer their employees the opportunity to join a designated stakeholder pension scheme unless other pension arrangements are in place or the employer has less than five employees. However, less than 40% of eligible employees choose to participate. The Government has confirmed that, from 2012 employers will be required to operate ‘automatic enrolment’, so that all employees, aged between 22 and State retirement age and earning more than the income tax personal allowance, will be made members of the stakeholder pension scheme unless they specifically opt out. The standard contribution for employees will be 4 per cent of earnings and the employer will be required to pay a minimum of 3%. Business Journeys in Company Cars Where an employer provides a company car, but the employee pays for the fuel, the employer may pay a mileage allowance for business journeys. HMRC accepts that payments not exceeding the ‘advisory fuel rates’ are reimbursements of expenses, not subject to income tax or Class 1 National Insurance contributions. The ‘advisory fuel rates’ are now reviewed every six months and on 30 May 2008 HMRC announced that most of the rates would be increased for journeys taking place on or after Tuesday, 1 July 2008. However, in view of the recent rapid rise in fuel prices, employers may if they wish implement the higher rates for journeys taking place on or after Sunday 1 June 2008. The new rates are (old rates in italics):
* Including petrol hybrid cars These rates may also be used to reclaim input VAT in respect of fuel used for business journeys (remembering that receipts to cover the amount reclaimed are now required). Where the employer pays for all the fuel used for both business and private travel, the usual scale charge can be avoided if the employee is required to reimburse the cost of fuel used for private journeys at the ‘advisory rates’ (unless, exceptionally, the car used has an engine exceeding 3000cc). The ‘advisory fuel rates’ scheme does not apply, in any circumstances, to business or private travel in a company-owned van. Level or inflation linked annuities Those who are retiring may be considering buying an annuity with their pension fund in order to provide a pension in retirement. Specialist advice needs to be taken to decide whether purchasing an annuity is the correct course of action, but assuming that it is, then a decision will need to be made as to whether to acquire a level annuity or an index-linked annuity. As inflation is predicted to rise it may be thought prudent to acquire an index-linked annuity. However, even at 3.8% pa inflation, a 65 year old male would have to wait until his 79th birthday before his index-linked pension equals his pension on a level annuity basis. Indeed he will have to live until 90 to receive more in pension on an index-linked basis than on a level basis. A level annuity will often, therefore, be the best alternative. Penalties – late filing of company accounts Penalties for late filing of company accounts are being increased for accounts filed after 1 February 2009. The penalties for public and private companies are as follows:
If there is a failure to comply with the filing requirements in two successive years then the penalty in the second year is double those shown above. The above penalties also apply to Limited Liability Partnerships but they are not yet subject to the doubling of penalties for successive failures. The filing deadlines are currently 7 months from the year end for a public company and 10 months from the year end for a private company. These time limits will be reduced by 1 month to 6 months and 9 months for financial years beginning after 5 April 2008. Penalties – late filing of tax returns HM Revenue and Customs (HMRC) are proposing to increase penalties for late filing of returns and to introduce more severe penalties for late payment of tax. The current fixed penalty of £100 will be increased to £200 if the return is not filed within one month of the due date and up to 100% of tax owed for later filing. A fixed penalty of £100 for non-payment of tax on the date due plus tax geared penalties for late payment more than one or two months after the due date are also proposed. Higher penalties will also be introduced for taxpayers who repeatedly file or pay tax late. In addition daily fines may be applied for late filing. Currently these need the approval of a General or Special Commissioner and are only applied rarely but HMRC propose that they be allowed to apply such fines without the approval of the Commissioners. The proposals are quite draconian and whilst not wishing to condone late filing or late payment the proposed penalties are excessive and shift the balance unfairly in the Revenue’s favour. Holding property in a company Those buying property abroad are often advised to purchase through a company in order to avoid local inheritance tax or other charges. To avoid the potential for a benefit in kind charge when properties available for private use are bought abroad through a company legislation has been introduced which exempts such companies from the benefit in kind provisions. The property can be held for occupation or letting but the exemption will only apply if:
The provisions will be retrospective and will exempt the benefit however long the property has been owned. Stamp Duty on share transfers Share transfers with a consideration or value less than £1,000 are no longer liable for Stamp Duty. A share transfer form is required and a declaration will need to be made that the transaction is exempt and it is then filed with the statutory records. Whilst this results in a saving of only £5 it does remove an administrative burden. Tips and the minimum wage Restaurant and bar workers will have been pleased by a recent Employment Appeal Tribunal decision which ruled that tips could not count towards a worker’s earnings for the purposes of making wages meet the minimum wage payment requirements. Thus employers must pay the appropriate minimum wage without reference to the amount of tips employees receive. Opportunities from the Olympic Games 2012 Opportunities for contracts for work on the Olympic Games are now available online at Supply2.gov.uk. Many contracts obtained to date have been won by small and medium sized enterprises. If you consider your company makes supplies which may be required for the Olympic Games register online now. The site also covers other opportunities for contracts worth up to £100,000 offered by the public sector.
Whilst every care has been taken in the preparation of these notes we can accept no responsibility for errors or omissions contained in them or for any loss arising from their use unless we have been consulted professionally prior to any action being taken. UHY Wingfield Slater A member of the UHY Hacker Young Group of independent UK partnerships. A member of UHY, an international association of independent accounting and consulting firms. |
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