News Archive - November 2012
Universal Credit to hit small businesses and start-ups, MPs warn - 22.11.2012
Small businesses, the self-employed and start-up companies could all struggle with major upcoming changes to the welfare and benefit system and the way PAYE data is reported, a report by MPs has warned.
Under the new Real Time Information (RTI) system, most employers will need to report their employees' PAYE payments - such as tax and NICs - on or before each pay day, as opposed to at the end of each tax year. RTI will be crucial to the Government's new Universal Credit programme, which will calculate welfare claims and tax credits according to real time earnings.
According to the report published by the Work and Pensions Select Committee, the additional administration involved in RTI and Universal Credit could impose a 'significant and unnecessary burden on the self-employed', while ready access to the internet may cause problems for others.
The Committee also argue that the proposed minimum income rules for the Universal Credit could act as a disincentive to entrepreneurship.
Although a pilot of the Universal Credit system will begin in the north west of England in April 2013, MPs are calling for the 'ambitious' full national roll-out due in October 2013 to be delayed.
Commenting on the report, Anthony Thomas, chairman of the Low Incomes Tax Reform Group (LITRG) said there was a serious 'lack of realism about the extent of digital exclusion among the business community.'
"There are also far-reaching consequences for claimants and small businesses alike of erroneous data creeping into the systems, which could seriously impact their operation in practice."
According to the LITRG, the requirement of RTI to report employee earnings on or before the date of payment was unrealistic for many small businesses, particularly where employees are paid on an ad-hoc basis.
"Self-employed claimants will face substantially greater burdens to starting and growing their own business than now, which is worrying," he added.
"Those requiring some support from the welfare system to get a self-employment business going will need to prepare accounts for the DWP each month on a completely different basis from those it has to prepare for HMRC once a year. This will impose extra bureaucratic burdens and material additional time and financial cost, which are likely to deter claimants from starting up and
building their own businesses. This is not the right way to go about encouraging new business start-ups."
Under the new Real Time Information (RTI) system, most employers will need to report their employees' PAYE payments - such as tax and NICs - on or before each pay day, as opposed to at the end of each tax year. RTI will be crucial to the Government's new Universal Credit programme, which will calculate welfare claims and tax credits according to real time earnings.
According to the report published by the Work and Pensions Select Committee, the additional administration involved in RTI and Universal Credit could impose a 'significant and unnecessary burden on the self-employed', while ready access to the internet may cause problems for others.
The Committee also argue that the proposed minimum income rules for the Universal Credit could act as a disincentive to entrepreneurship.
Although a pilot of the Universal Credit system will begin in the north west of England in April 2013, MPs are calling for the 'ambitious' full national roll-out due in October 2013 to be delayed.
Commenting on the report, Anthony Thomas, chairman of the Low Incomes Tax Reform Group (LITRG) said there was a serious 'lack of realism about the extent of digital exclusion among the business community.'
"There are also far-reaching consequences for claimants and small businesses alike of erroneous data creeping into the systems, which could seriously impact their operation in practice."
According to the LITRG, the requirement of RTI to report employee earnings on or before the date of payment was unrealistic for many small businesses, particularly where employees are paid on an ad-hoc basis.
"Self-employed claimants will face substantially greater burdens to starting and growing their own business than now, which is worrying," he added.
"Those requiring some support from the welfare system to get a self-employment business going will need to prepare accounts for the DWP each month on a completely different basis from those it has to prepare for HMRC once a year. This will impose extra bureaucratic burdens and material additional time and financial cost, which are likely to deter claimants from starting up and
building their own businesses. This is not the right way to go about encouraging new business start-ups."
Government announces parental leave reform - 14.11.2012
Parents will be able to share up to a year's parental leave under plans announced by the Government that will 'revolutionise' lives at home and work.
Under the reform, mothers will continue to receive their entitlement to 52 weeks of maternity leave, but parents will have greater flexibility to 'mix and match' this period.
Mothers will be able to take a recovery period of the first two weeks after birth, but then decide on whether to return to work, take time off together or share the remaining year's leave. At present, fathers are entitled to two weeks of statutory paternity leave.
Nick Clegg said: "The changes will allow fathers to play a greater role in raising their child, help mothers to return to work at a time that's right for them, and create more flexible workplaces to boost the economy."
It is hoped that more women will be retained in the workplace and face less of a 'career penalty' for taking an extensive period of time off. According to the deputy prime minister, employers will also benefit from a more flexible and motivated workforce, but business groups are sceptical.
Dr Adam Marshall, director of policy at the British Chambers of Commerce (BCC), said the Government's proposals risked sparking friction between parents and employers, 'raising unrealistic expectations about the level of flexibility most businesses will be able to accommodate.'
Minister for employment relations, Jo Swinson, said that current arrangements were old-fashioned, inflexible and gender-biased.
"People should have the right to choose how they balance their work and family commitments," she said.
It is expected that parents will be required to provide a self-certified notice for flexible leave entitlement, eight weeks prior to when they intend to take it.
Elsewhere, additional proposals will see the right to request flexible working extended to all employees including grandparents wanting to take time off to care for grandchildren.
The Government plans to introduce the changes to flexible working by 2014 and to flexible parental leave by 2015.
Under the reform, mothers will continue to receive their entitlement to 52 weeks of maternity leave, but parents will have greater flexibility to 'mix and match' this period.
Mothers will be able to take a recovery period of the first two weeks after birth, but then decide on whether to return to work, take time off together or share the remaining year's leave. At present, fathers are entitled to two weeks of statutory paternity leave.
Nick Clegg said: "The changes will allow fathers to play a greater role in raising their child, help mothers to return to work at a time that's right for them, and create more flexible workplaces to boost the economy."
It is hoped that more women will be retained in the workplace and face less of a 'career penalty' for taking an extensive period of time off. According to the deputy prime minister, employers will also benefit from a more flexible and motivated workforce, but business groups are sceptical.
Dr Adam Marshall, director of policy at the British Chambers of Commerce (BCC), said the Government's proposals risked sparking friction between parents and employers, 'raising unrealistic expectations about the level of flexibility most businesses will be able to accommodate.'
Minister for employment relations, Jo Swinson, said that current arrangements were old-fashioned, inflexible and gender-biased.
"People should have the right to choose how they balance their work and family commitments," she said.
It is expected that parents will be required to provide a self-certified notice for flexible leave entitlement, eight weeks prior to when they intend to take it.
Elsewhere, additional proposals will see the right to request flexible working extended to all employees including grandparents wanting to take time off to care for grandchildren.
The Government plans to introduce the changes to flexible working by 2014 and to flexible parental leave by 2015.
Poor web skills costing the UK economy £19 billion per year - 13.11.2012
Small businesses that sell their products online and use the internet to market themselves could boost their combined annual turnover by £18.8 billion, a report into the lack of digitisation in the UK has found.
According to data, both business and personal use of the internet could improve with 16 per cent of Britons still not online, including 4.5 million in the British work force.
The report by Booz and Company said that the UK was falling short of its full economic potential because of a failure to embrace digital technology.
In business, just one third of SMEs have a digital presence and only 14 per cent sell their products or services online. This compares to 30 per cent in Norway.
Meanwhile, use of social media by small businesses also needs to improve. While 18 million Britons use social media to interact with brands, only one per cent of small businesses sell their products via the same channel.
However, while the figure greatly improves for larger firms that have the resources to invest in such a rapidly developing technology, smaller firms do not have to be left behind : "Companies do not have to start from scratch to introduce information
technology," the report said.
"Off-the-shelf programs allow firms of all sizes to benefit from global digital marketing campaigns, advanced customer analytics, and seamless payments processing."
Elsewhere, a report by Lloyds Banking Group found companies who use the internet across their business report significant benefits including rapid growth, reduced costs and improved customer service.
"The leaders of SMEs already know that digitisation will lead to greater growth," Booz and Company added.
"But UK SMEs must first invest in the skills needed to exploit digitisation and create growth. Otherwise, they will be forced to outsource more jobs, widening the skills gap at home and jeopardising the turnover potential of digitisation."
We can design and construct your website, please contact us for more information.
According to data, both business and personal use of the internet could improve with 16 per cent of Britons still not online, including 4.5 million in the British work force.
The report by Booz and Company said that the UK was falling short of its full economic potential because of a failure to embrace digital technology.
In business, just one third of SMEs have a digital presence and only 14 per cent sell their products or services online. This compares to 30 per cent in Norway.
Meanwhile, use of social media by small businesses also needs to improve. While 18 million Britons use social media to interact with brands, only one per cent of small businesses sell their products via the same channel.
However, while the figure greatly improves for larger firms that have the resources to invest in such a rapidly developing technology, smaller firms do not have to be left behind : "Companies do not have to start from scratch to introduce information
technology," the report said.
"Off-the-shelf programs allow firms of all sizes to benefit from global digital marketing campaigns, advanced customer analytics, and seamless payments processing."
Elsewhere, a report by Lloyds Banking Group found companies who use the internet across their business report significant benefits including rapid growth, reduced costs and improved customer service.
"The leaders of SMEs already know that digitisation will lead to greater growth," Booz and Company added.
"But UK SMEs must first invest in the skills needed to exploit digitisation and create growth. Otherwise, they will be forced to outsource more jobs, widening the skills gap at home and jeopardising the turnover potential of digitisation."
We can design and construct your website, please contact us for more information.
Quarter of small businesses unaware of PAYE shake-up - 5.11.2012
A quarter of small firms are oblivious to major upcoming changes to the pay-as-you-earn (PAYE) system which will alter their payroll reporting duties to HMRC, a survey by the Federation of Small Businesses (FSB) has found.
Designed to simplify and modernise the way PAYE payments are recorded, Real Time Information (RTI) will require almost all employers and pension providers to report their employee's PAYE payments such as tax and NICs on or before each pay day, as opposed to the end of each tax year.
According to the survey, only 16 per cent of the 1,700 small firms questioned were fully aware of RTI - heralded as the biggest shake-up to the PAYE system in 60 years - with 25 per cent having never heard of it.
In addition to simplifying the reporting of new starters and leavers, RTI will also be crucial for the Government's new Universal Credits programme, which will calculate welfare claims and tax credits automatically on real time earnings.
However, two thirds (66 per cent) of respondents are not confident that RTI will achieve these aims. Furthermore, while the majority of employers and pension providers will join RTI from April 2013, with all employers adhering to the new system by October 2013, 60 per cent of firms claim they have not had any communication from HMRC.
Chairman for the FSB, John Walker, said it had 'real concerns' for businesses and the success of the Universal Credit due to the lack of awareness.
"There are a number of steps that a business must complete before they can provide Real Time Information to HMRC so it is critical that those affected know about it. Of the very small number of firms that are aware of the change, 30 per cent have had to buy new software for their business."
"HMRC needs to act now so that all small firms can prepare their business as they only have six months in which to do it."
"Without adequate communication and education from Government, small firms won't be able to prepare. It just isn't fair if they're then penalised for not complying," he added.
HMRC kicked off its RTI awareness campaign last month by writing to more than 1.4 million employers about the upcoming changes. It is encouraging businesses to prepare their PAYE systems by cleaning their employee data, contacting HMRC,
and by considering possible changes to internal processes.
We can help your business comply with PAYE duties.
Designed to simplify and modernise the way PAYE payments are recorded, Real Time Information (RTI) will require almost all employers and pension providers to report their employee's PAYE payments such as tax and NICs on or before each pay day, as opposed to the end of each tax year.
According to the survey, only 16 per cent of the 1,700 small firms questioned were fully aware of RTI - heralded as the biggest shake-up to the PAYE system in 60 years - with 25 per cent having never heard of it.
In addition to simplifying the reporting of new starters and leavers, RTI will also be crucial for the Government's new Universal Credits programme, which will calculate welfare claims and tax credits automatically on real time earnings.
However, two thirds (66 per cent) of respondents are not confident that RTI will achieve these aims. Furthermore, while the majority of employers and pension providers will join RTI from April 2013, with all employers adhering to the new system by October 2013, 60 per cent of firms claim they have not had any communication from HMRC.
Chairman for the FSB, John Walker, said it had 'real concerns' for businesses and the success of the Universal Credit due to the lack of awareness.
"There are a number of steps that a business must complete before they can provide Real Time Information to HMRC so it is critical that those affected know about it. Of the very small number of firms that are aware of the change, 30 per cent have had to buy new software for their business."
"HMRC needs to act now so that all small firms can prepare their business as they only have six months in which to do it."
"Without adequate communication and education from Government, small firms won't be able to prepare. It just isn't fair if they're then penalised for not complying," he added.
HMRC kicked off its RTI awareness campaign last month by writing to more than 1.4 million employers about the upcoming changes. It is encouraging businesses to prepare their PAYE systems by cleaning their employee data, contacting HMRC,
and by considering possible changes to internal processes.
We can help your business comply with PAYE duties.
Business record checks re-launched for SMEs - 2.11.2012
Fewer SMEs may be subject to spot checks on their business records under a new approach to HMRC's business record checks (BRC) programme.
A pilot programme for BRCs began in April 2011 with the aim of ensuring all business records meet statutory requirements and that tax returns are able to be completed accurately and within time limits.
The alterations follow a review of the initial pilot by trade and professional bodies that heavily criticised the initiative, which subjects SMEs to spot checks on their records and can issue fines of up to £3,000.
Around 3,431 checks were carried out up to 17 February 2012 as part of the pilot. It found 36 per cent of businesses with issues surrounding record keeping, of which 10 per cent had serious enough issues to warrant a follow up visit from HMRC.
Although the review found evidence the programme was effective in improving record keeping practices amongst SMEs, it recommended better targeted checks and wider availability of education and support.
The pilot was suspended from 3 February until 31 October to allow HMRC to redesign the process.
Under the new approach, HMRC will now contact businesses deemed at 'high risk' of keeping inaccurate records by letter to arrange a short telephone questionnaire. It will then confirm whether further action is required; businesses with 'some identified issues' will be offered self-education options, while only those at 'high risk' will be referred for a business record check visit.
The redesigned checks process has now been launched and will be rolled out across the UK on a region by region basis between late November 2012 and February 2013.
Commentating on the re-launch, the Chartered Institute of Taxation (CIOT) criticised HMRC and warned that small businesses are still at risk of penalties.
President of the CIOT Patrick Stevens said: "HMRC have still not provided a satisfactorily clear reasoning to justify their belief that they can charge penalties in-year before the return goes in for keeping records below the standard they consider is adequate."
"It is important that the approach taken with different kinds of businesses is appropriate. It is unrealistic to expect smaller businesses to have perfect records written up every day," he said.
We can help to keep your business records accurate and up to date. Please talk to us to find out more.
A pilot programme for BRCs began in April 2011 with the aim of ensuring all business records meet statutory requirements and that tax returns are able to be completed accurately and within time limits.
The alterations follow a review of the initial pilot by trade and professional bodies that heavily criticised the initiative, which subjects SMEs to spot checks on their records and can issue fines of up to £3,000.
Around 3,431 checks were carried out up to 17 February 2012 as part of the pilot. It found 36 per cent of businesses with issues surrounding record keeping, of which 10 per cent had serious enough issues to warrant a follow up visit from HMRC.
Although the review found evidence the programme was effective in improving record keeping practices amongst SMEs, it recommended better targeted checks and wider availability of education and support.
The pilot was suspended from 3 February until 31 October to allow HMRC to redesign the process.
Under the new approach, HMRC will now contact businesses deemed at 'high risk' of keeping inaccurate records by letter to arrange a short telephone questionnaire. It will then confirm whether further action is required; businesses with 'some identified issues' will be offered self-education options, while only those at 'high risk' will be referred for a business record check visit.
The redesigned checks process has now been launched and will be rolled out across the UK on a region by region basis between late November 2012 and February 2013.
Commentating on the re-launch, the Chartered Institute of Taxation (CIOT) criticised HMRC and warned that small businesses are still at risk of penalties.
President of the CIOT Patrick Stevens said: "HMRC have still not provided a satisfactorily clear reasoning to justify their belief that they can charge penalties in-year before the return goes in for keeping records below the standard they consider is adequate."
"It is important that the approach taken with different kinds of businesses is appropriate. It is unrealistic to expect smaller businesses to have perfect records written up every day," he said.
We can help to keep your business records accurate and up to date. Please talk to us to find out more.
