Tag Archive | "payroll"

HMRC implements new contractor PAYE fix

All you limited company contractors, you can breathe easy: the taxman has handed down a PAYE reprieve that exempts you from the new RTI rules.

Her Majesty’s Revenue & Customs has been causing headaches with their new Real Time Information scheme, and if you work through your own limited company you’ve likely been pulling your hair out – especially if you get paid annually. Well it’s your lucky day: HMRC has decided to begin granting requests to change your PAYE status to exempt you from having to submit a return every month and simply do it once a year.

The taxman had to put a few new systems in place before they could offer this service to limited company contractors, but now they’ve got it up and running. Not a moment too soon, if you ask me; for what it’s worth, limited company contractors have enough on their mind without having to muck about with RTI on top of everything else in their hectic lives.

Of course, HMRC is still not making it necessarily all that easy to keep up with this, as they’ve decided to not inform employers as to when they actually accept these requests and change your tax status. I swear I don’t know what it is but the taxman just enjoys taking one step forward just to take two steps back, don’t they?

I swear it’s like the taxman just loves making things difficult and more confusing for as many people as possible. This whole RTI thing has been a nightmare from the very beginning, especially for employers; any firm that didn’t have computerised payroll software that was capable of interfacing with HMRC over the internet had to upgrade when it went into effect this past April, and maybe it’s just me but if I was a business owner I would have a lot more important things on my mind that having to learn a whole new payroll accounting system just to satisfy the whims of some passel of government bureaucrats!

Yes, I know what you’re saying: RTI is supposed to make income tax and National Insurance payments more accurate. Well, what the government calls ‘more accurate’ sounds like ‘a big pain in the arse’ to me, and with the amount of additional red tape this new initiative is generating, I think you’d be hard-pressed to prove me wrong, now wouldn’t you?

Posted in newsComments (0)

Every employer needs to prepare for PAYE changes in New Year

It doesn’t matter how large – or how small – your firm may be when it comes to the new Real Time Information system being implemented into PAYE next year.

The new system, which will go into effect from April of this year, is the first major change made to the national insurance and PAYE system since 1944, when the system was originally introduced. The changes are being made to improve PAYE accuracy, says Her Majesty’s Revenue & Customs, as the taxman will receive earnings information every time an employer pays one of their workers no matter the frequency of pay period.

He new changes are not all good news, industry experts say, as while accuracy will improve under the new system, there are a whole host of issues that must be dealt with by employers before the new RTI system goes into effect. The system requires specialised payroll software that is compatible with HMRC’s systems, as PAYE and NI payment information will be sent electronically over the internet every time an employer makes a payment, and payrolls need to be aligned in order to match the payroll records of employers with the information held by HMRC.

Any firm, especially small firms, that currently do not make use of payroll software should begin doing so immediately, industry experts recommend, as there are a scant four months before RTI goes live. Ensure that your payroll software will be RTI compliant, these experts add.

Posted in newsComments (0)

New PAYE reporting scheme will be ‘impossible’, firms say

According to local chartered accountants, many firms have come forward to protest how the new PAYE Real Time Information scheme will be  ‘impossible’ for them.

The burdens the new RTI scheme, which is on track to be implemented next April and will require employers to send tax information electronically to Her Majesty’s Revenue & Customs every time an employee receives a pay cheque, will be nigh insurmountable for many smaller firms, accountants warn.  These companies are going to be hard pressed to remain in compliance with these requirements, which have been categorised by critics as highly unrealistic on the part of the taxman.

The Humberside And District Society of Chartered Accountants’ president, John Gilleard, commented on the impending PAYE system, remarking that the impact RTI will have on smaller firms is quite concerning, especially since it is small and medium-sized businesses that drive economic recovery in the UK. However, the protests have fallen on deaf ears, and while HMRC is currently paid either quarterly or monthly under current PAYE rules, now the taxman will collect National Insurance Contributions and Income Tax simultaneously with workers receiving their pay via an electronic return, and if these new electronic payments are not made either before or the same day employees receive their payments, their employers may be subject to rather steep fixed penalties as a result.

The RTI system, which is currently undergoing a pilot scheme, shows no signs of slowing down or being postponed, leaving SMEs with roughly four months to prepare themselves. This includes upgrading their payroll software in order to comply with the new scheme.

Posted in newsComments (0)

Take steps to avoid late payments from clients

There’s all kinds of benefits to be reaped from becoming a freelancer or a contractor, but it comes with its share of problems – one of which is getting paid regularly from clients, who can be notorious for taking forever to get back to you.

It can lead to all kinds of complications if you don’t get paid on time; you can run into trouble paying your own bills if your cashflow isn’t constant, unlike a permanent worker, where you get a regular pay cheque. However, there are things you can do in order to encourage clients to pay regularly and on time and thus avoid any such untoward occurrences.

The Association of Chartered Accountants’ senior SME advisor, Manos Schizas, spoke out recently on the benefits of organisation when it comes to sending out invoices and collecting payments. It’s incredibly important to set up a collection and invoicing routine and then sticking to your routine, which includes sending polite reminder notices well before the payment is due, Mr Schizas remarked, especially when there are some client who keep an eye out for disorganised freelancers in order to take advantage of by paying late.

The SME advisor warned that there are even some clients who may use the fact that your payment and collections sytem is disorganised as a rationalisation for not paying you on time. The best way to avoid such a fate is to ensure you’re presenting yourself as a hard target for such activity, which will discourage opportunistic customers from trying to pull a fast one on you.

Other advice given by Mr Schizas included gaining a greater understanding of how each of your clients handles their payment system. Once you know what each client needs in regards to invoicing, you can tailor each invoice you submit to them to integrate with their systems much more seamlessly, he added.

Posted in newsComments (0)

Largest firms exempt from Real Time Information deadline

Her Majesty’s Revenue & Customs has recently confirmed that the UK’s largest firms will be able to arrange a personal ‘migration’ date when it comes to transitioning to the Real Time Information PAYE scheme.

The new PAYE scheme, designed with an eye towards more accurate tax information making its way to the taxman, will begin to be rolled out by April of next year and will effect some 6 million employees and around 250,000 employers. However, HMRC has given any company with more than 5,000 people on payroll an additional six months to join RTI at their leisure, allowing each individual firm the ability to schedule their own RTI start date any time between April and October 2013.

The amount of error and fraud should decrease significantly due to the new system, according to the taxman. HRMC also has the expectation that there could be as much as a £300 million reduction on employer burden once the entire economy has joined RTI, though there are many business owners that have lamented the extra red tape they now need to cut through on every pay period instead of just once at the end of the year.

The ability for larger firms to schedule their join date for RTI stems from a Parliamentary commission this past July that expressed concerns about the costs of the programme and whether April of 2013 would provide enough time for companies with a large number of employees to prepare. However, David Gauke, the exchequer secretary, disagreed quite strongly with the committee’s decision, insisting that the plans were both on budget and on time.

Posted in newsComments (0)

Some HMRC online services will be unavailable this weekend

Contractor accountants are warned that HMRC will be carrying out upgrade work to its website this weekend.

The Revenue website was down at the beginning of last month to enable essential maintenance and upgrade work. However, it now appears that thus work was more complicated than expected.

Luckily the work will not affect employers who need to submit their payroll end of year returns before the May 19 deadline. Corporation tax, self-assessment and CIS will not be affected either, but it will not be possible to register for HMRC’s online VAT service while the upgrade work is taking place.

HMRC likes to give taxpayers as much notice as possible of any proposed disruption to its services.

Although the VAT online registration service will be offline from 16:00 on Saturday until 01:00 on Sunday morning, businesses will still be able to file their VAT returns. Anyone who wants to enrol for VAT Online during the downtime will be able to do so through the Government Gateway. http://www.gateway.gov.uk/

The VAT on e-services page will also be unavailable for 10 minutes while the upgrade takes place. HMRC has not revealed which ten minutes.

The other services that will be affected are obscure ones such as Electronic Binding Tariff Information and the Rebated Oils Enquiry Service.

It’s obviously important for HMRC to keep it’s services up-to-date and weekends are probably the most sensible time to do upgrades and maintenance. Let’s hope that everything goes to plan and the work doesn’t cause widespread disruption.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Unplugged – no computer, no internet, possible? by photosteve101

Posted in newsComments (0)

Contractor accountants should prepare for payroll year-end

It’s payroll year-end time again and some accountants will have a list of key tasks that need to complete for their clients.

HMRC has published a checklist of all the various PAYE deadlines for this year on its website. The first important deadline is April 19th. This is the date by which postal payments of outstanding PAYE and Class 1 national insurance contributions must reach HMRC.

People who use electronic payments must make sure their payment reaches HMRC’s bank account by the 22nd of April. However, HMRC has warned that because the 22nd falls on a Sunday this year, payment will need to be in its account by the 20th unless your bank operates a faster payments system that allows transactions to clear on Sundays.

The next date for the diary is the 19th of May. This is the deadline for submitting Employer Annual Return P14 and P35 forms. Employees should be given their P60 form no later than the last day of May.

The majority of employers are required to file their end of year returns online. Similar to the system of online self-assessment filing, the first step of the process is to register on the Revenue’s website. This needs to be done at least a week before the deadline date in order to leave enough time for the activation code to arrive.

People who use accounting software to process their payroll will find that their program does most of the work for them. Employers should already have received information about any changes they need to implement to their payroll package and it would be a good idea to check these over as soon as possible.

The major software providers, such as Sage, keep their telephone support lines open longer during the payroll year-end period but even so, the lines are often extremely busy and there can be problems getting through to somebody if you have a problem.

Don’t let yourself get caught out at the last minute. Start preparing for payroll year-end as soon as possible!

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: check list by Artois Bibliothèques

Posted in newsComments (0)

We can glean some interesting insights from this débacle

There’s been a wonderful example this week of exactly the kind of problem we contractors are faced with when trying to get our point across. A government agency, SLC– which is basically a private firm owned by HMG – was having some operational issues, so they brought in an expert, a Mr Lester, to sort them out. He was proving to be quite good at it, so they offered him a two year deal. Which he accepted. So far, so good.

The original work was done as a bog-standard interim management role: the guy was not employed, he did the job and charged a fee. When the two year deal turned up, he said fine, can you continue to pay me gross to my existing Limited Company and I’ll sort out the rest.

And then it all starts to go a bit wrong.

Someone – doubtless someone with just enough knowledge to be dangerous – asks exactly why Mr Lester has been allowed to avoid paying his taxes. Shock horror! Let’s do a TV programme on it!! This is outrageous!!! Lets’ have a witch hunt and track everyone else doing the same thing!!!!

Yes well, hang on a minute. Firstly we have zero evidence what taxes Mr Lester is paying, since he’s not obliged to disclose that information. There’s no evidence he isn’t paying quite a lot in tax; certainly, like many well paid contractors, a lot more than the average worker. He may even (say it quietly) have declared his earnings under IR35. Who knows?

His is a perfectly straightforward and entirely legal way to operate his company, to share his income with his other half and generally behave like the other 1.5 million freelance workers in the country. Like that chap who earns a million or so a year from public speaking. You know the one, David Milliband, sometime brother and elected, serving MP. Or indeed, the unloved Mr Brown who does the same with his outside earnings, although in his case they all go to charity.

It’s also interesting to note that various senior people had to sign off the arrangement whereby Mr Lester was paid gross. One might think that they had a handle on such things, but I could be wrong. And it’s all a bit moot now anyway, since Mr Lester has done the honourable – if arguably unnecessary – thing and gone on the payroll like the rest of the wage slaves.

But we can glean some interesting insights from this débacle.

Firstly, there are clearly a lot of senior people, including some who are actually in charge of such things, who don’t have a Scooby about how contractors work and how they are paid. Basically they do not trust a usually intelligent and highly skilled worker to arrange his affairs so that all taxes due are paid in full and on time.

Secondly we have once again seen the conflation of avoidance and evasion. Yes you can be against avoidance, but it’s not illegal; quite the opposite, in fact, it has long been sanctioned as an acceptable practice. You want evasion? Fine, so make whatever it is illegal and you’ve got it, but being tax efficient is avoidance, not evasion, and perfectly fine.

And finally, someone can’t actually count. Mr Lester will finish his contract and leave. No pension, no golden handshakes, no extended period on full pay while he finds a new job. That’s quite a chunk of public money saved over a full time employee. In fact, if you do the sums based on the figures that have been published, this tax saving exercise of moving Mr Lester on to the payroll will actually cost several tens of thousands more that if they’d simply left things alone.

But hey, nobody ever accused either HMG or the fourth estate of being financially competent, did they.

And what grates is the underlying point that people who should know better simply fail to recognise that there are freelance contractors among us. People who keep the wheels turning, who make few demands on the state, who represent an efficient and cost-effective workforce. People who are a long way removed from those who create companies for no other reason than to avoid paying taxes on earnings that they wouldn’t have got at all were they not already on the public payroll. You know who you are.

So bring on the witch hunt. But please, break the habits of a lifetime and point it at the right target…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Getting insight by Miran Rijavec

Posted in alan's blogComments (0)

Would PAYE Pooling benefit small businesses?

Accountants may be interested to know that HMRC is considering changing the PAYE system so that employers who are closely connected can be treated as a single entity for the purposes of PAYE. If such a move were implemented, it would reduce both costs and processing time.

HMRC has now issued a consultation document that discusses how PAYE Pooling might operate and requesting feedback from interested parties. The scheme would be optional and organisations would be able to decide whether they wanted to come under a pool reference of several employers.

The new pool reference would cover all employee tax records, and the Revenue would treat the pool of companies as a single entity for PAYE. Moving to a ‘PAYE pool’ would not have any direct affect on an organisation’s employees. They would still retain the same employer and their employment contracts should remain the same.

HMRC has not published its definition of ‘connected employers’ in the context of PAYE Pooling, but a spokesperson for the Revenue said it expects to be able to apply different criteria for public bodies and private businesses. As far as private entities go, HMRC will be seeking some commonality in ownership and business, whilst for public sector bodies it would be looking for those that were grouped together under a particular health authority or local council.

The Revenue has also made it clear that payroll agents would not be eligible to join the new system.

The PAYE Pooling consultation runs until the 15th of December.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: pool 102 by deeuutee

Posted in newsComments (0)

HMRC – now it’s getting personal…

You probably hadn’t noticed but I tend to write quite a lot about the faceless hordes that we affectionately refer to as Hector. Yep, our friend the taxman. Not my favourite person, although, perhaps grudgingly, you have to accept that they are merely doing their job and the real problem is the hopelessly complicated mare’s nest of tax law they are trying to implement. Which is down to a series of inept politicians (isn’t that a tautology?), not least one particularly dim specimen of the breed.

But now it’s getting personal.

I mentioned last week that I’m being chased for a CT bill that was paid, in full and on time. I just checked my online account again and it’s gone up, since they are adding interest to a debt I don’t actually owe. Nor have they responded to my accountant’s attempt’s to find out what’s happening. And the really worrying part is that aspect enquiries are usually triggered by non-payments and poor returns, so not only do they owe me money but I am waiting or another letter where they will offer to look over my records and make sure all is in order.

And then to add insult to injury, I managed to overpay my PAYE last year. Not by any great amount, and I’m still not sure how we managed it – most likely a side effect of restarting a payroll after a 14 month break, not that I really care that much – but the accountant wrote to them to tell them somewhere around last September.

Nothing happened. Gosh…

But today I get a letter from Hector (to be précis, a D. Wrightson) Form P35D, Overpayment Review. Page one is the exact same calculation my accountant sent them last year. Bottom right hand corner is the box “Apparent Overpayment”.

“Apparent”? Are your accounting systems that pitiful that you don’t actually know? Does my accountant telling you the precise amount not indicate that just perhaps it actually is a real honest-to-God overpayment?

Anyway, I have to fill out page 2 of the form. A list of things I may have got wrong. (Hint: none of them). A tick list of which one is actually incorrect. ( Guess what?) And then the last option, “I confirm the return is correct. My explanation is as follows”. Say what? You owe me money, and I have to explain to you why I overpaid you else you won’t give it me back?

And the last sentence is a lulu. Basically “Once I have received your reply, I will make any necessary adjustments and if necessary arrange for any payments to be offset… “

Hey, it is bloody necessary, it’s my money and I don’t want to offset it against anything, I want it back in my bank account where it belongs.

Let’s be clear about this: HMRC is not a service, even at the pitiful level they manage to achieve, it’s a tax collection agency. The only money that is theirs is the amount they are owed. Everything else in excess needs to be paid back, quickly, since it’s not yours and I would rather I got the interest than you. Oh yes, just to add insult to injury, there is no hint of interest being added. Hell no, they only charge that on money they aren’t owed, not on money they do.

Earlier this week a Parliamentary committee had some critical things to say about HMRC’s performance, or rather lack of it. Nice to know they’re keeping up with reality, isn’t it…

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Why is this being protected in my fire safe? by someToast

Posted in alan's blogComments (0)

Coalition should rethink the new compulsory pension scheme

The FSB thinks that micro firms should not need to comply with the government’s new pension scheme that comes into effect in 2012.

Under the new plans, all businesses need to enrol their employees in a pension scheme automatically but this would cause an undue burden on firms with 10 staff members or less, according to the Federation.

The FSB also believes that the government set up pension schemes do not meet the requirements of SMEs and that the time and money spent on their administration would be damaging.

Mike Cherry from the FSB said that whilst they welcomed plans that encourage people to save for the future, the new automatic payroll pension scheme will cause administrative headaches for smaller businesses.

To back up their comments, the FSB conducted research that revealed that 70% of business owners are not confident about selecting a pension plan for their employees due to its complexity. To solve this problem, the FSB suggests that a default scheme is set up and anyone who is currently not in a pension scheme should be enrolled.

The REC, on the other hand, is concerned about the auto-enrolment issues for recruitment agencies using temporary workers. The Confederation would like there to be a six month qualifying period before a worker is enrolled into a pension scheme. They point out that the bureaucracy involved in setting up a new scheme for a worker who is only temping for a few weeks will not be off-set by savings benefits.

The REC intends to work with the coalition to make sure the pension reforms will work for everybody concerned.

In addition to the qualifying period, the REC is calling for an option that allows workers to opt out of the scheme before enrolment and the maintenance of the National Employment Savings Trust which all employers can access.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Credit crunch bites! by Iain Farrell

Posted in newsComments (0)

  • Switch Accountants for FREE

    Switch Accountants for FREEAt K&B Accountancy Group we have introduced a simple and straightforward approach to changing accountants. We’re offering contractors, consultants and freelancers the opportunity to switch to K&B Accountancy Group for FREE without the need to pay for any ‘catch up’ or retrospective accountancy fees for the previous year’s accounts and corporation tax return* *T&Cs apply

our top 5 twitter posts


contractor accountants


twitter Join the conversation
Free Telephone Advice