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Financial Monitor (September 2008)Employment Law and Practice There are a number of myths that continue to catch out employers. Some of the most common are:- Monthly paid employees only require a month’s notice when being dismissed – the Employment Rights Act 1996 sets out the minimum notice periods which are:- Over 1 month but less than 2 years’ service – one week’s notice An employee legally only has to give one week’s notice regardless of the years of service, so it is common for contracts of employment to set longer periods. An employer can sack someone on the spot for gross misconduct – this would be highly risky as it leaves the employer open to an unfair dismissal or breach of contract claim. Even an employee caught stealing must be given the opportunity to provide an explanation before a decision is made. Formal procedures must be followed in all cases. An employee with less that one year’s service can be dismissed for any reason – it is true that an employee without one year’s service cannot make an unfair dismissal claim. However, there are more than 20 issues for which employees with less than one year’s service can make claims to the Employment Tribunals, including all forms of discrimination. Care is needed. We can make an employee redundant because he is too expensive – in all redundancy cases you need to show that the work has ceased or diminished, ie. it is the job that goes even if some of the work is redistributed and there has to be a formal procedure to ensure that the most appropriate person(s) are made redundant. Cost is best left out of the redundancy discussion although of course it is the background reason. Legal advice should be obtained before making any employees redundant. VAT Returns VAT returns have, since VAT was introduced, been submitted to a VAT office in Southend on Sea. With effect from the July 2008 quarter, returns are now submitted to an office in Shipley, the address for which is VAT Controller, VAT Central Unit, BX5 5AT. However, EC sales lists and Intrastat returns still have to be submitted to the Southend on Sea office. Please ensure the forms are sent in the correct prepaid envelope provided. Financial Services Compensation Scheme We have all become more aware recently of the Financial Services Compensation Scheme which provides full cover for deposits of up to £35,000 in Banks which fail. However what is less well known is that the £35,000 is per registration and some well known providers are covered by one registration and therefore share the limit. Some of the most popular shared registrations are: Co-op Bank and Smile. Entrepreneurs’ Relief This new relief enables the capital gain payable on the sale of businesses and certain assets used in a business to be charged at a tax rate of 10% rather than the new rate of 18%. The relief applies to assets, such as property, owned privately by a partner or shareholder which is used in the business. However, the relief is not available if a full market rent is charged to the business. This is a common method of passing national insurance free income to a director/shareholder or partner in a tax efficient way. However, before deciding to remove the rent charge it should be remembered that Entrepreneurs’ relief has a lifetime limit of £1 million and only applies to assets sold at the same time as the business is sold or ceases or within three years thereafter. If there is no such intention to sell the property or is likely that the £1 million allowance will be utilised by other business sales then rent can continue to be charged. Annual Investment Allowance The new Annual Investment Allowance introduced in April allows businesses to claim 100% tax allowance for expenditure on most purchases of plant and machinery, equipment and vehicles, other than motor cars up to a total of £50,000 in a year (pro rata from 5 April 2008, ie. year end 31/12/08 £37,500 can be claimed). The Conservatives have indicated that they will abolish this allowance and reduce the corporation tax rate for small companies to 20%. The next election will be no later than May 2010 and a Conservative victory is a possibility. It may be wise therefore, to bring forward such capital expenditure providing of course it is commercially prudent to do so. Some Employee Benefits that are Tax Free The provision of the following benefits are tax free for the employee and could be considered by employers in conjunction with a salary sacrifice scheme: Provision of canteen facilities but this does not require employers to operate their own facility, they can arrange for catering to be provided off-site or be brought to the business premises by outside caterers. However, if provided, this facility must be made available to all employees working on the same site. Provision of car parking facilities – these do not need to be provided at the employer’s premises but can be in a nearby multi-storey car park. In addition this benefit can be offered to selected employees. Sale of Properties in Spain Individuals not resident in Spain but who sold property in Spain between August 2004 and 31 December 2006 may have been overcharged tax. Income tax of 35% was charged in some cases instead of the capital gains tax rate of 15% paid by Spanish nationals on capital gains. If you believe you may have paid too much tax please contact us, but be aware that any claim needs to be made within four years of the property sale so time is running out. Further details are available at www.spanishtaxreclaim.co.uk BIG help for Small Firms in Sheffield As part of Sheffield City Council’s £26 million “BiG: Make it your Business initiative”, the BiG Business Loan Fund will provide support to develop start-up and existing ventures. Run by South Yorkshire Investment Fund, the fund offers loans of between £1,000 and £5,000 for new ventures, and up to £15,000 for businesses that have completed six months trading. Loans are available for Sheffield-based sole traders, partnerships, or owner managed companies that are either starting a new business or looking to develop an existing one, but are struggling to raise finance because their venture is too early-stage or due to their poor credit history. BiG Business Loans can be used for:
Contact us if you would like further information on this funding.
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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