Government Support for All Businesses – COVID19 Virus

We are sure that you are aware of the support that the Government have put in place during the current COVID19 virus to date, however we want to ensure that you are fully up to date and aware of support available to you. We write to let you know that we are posting updates as they come in on our Facebook Page ‘BFMS Accountants’ and will also be updating our website ‘latest news’ page.

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Photo by Illiya Vjestica on Unsplash

Plan ahead for changes to off-payroll working rules

From 6 April 2020, the off-payroll working rules as they currently apply where services are provided through an intermediary to a public sector body are to be extended to the private sector. From that date, private sector organisations which are medium-sized or large and which engage workers who provide their services through an intermediary, such as a personal service company, will need to carry out a status determination. If, ignoring the intermediary, the worker would be an employee of the organisation, the off-payroll working rules apply and the organisation (or fee-payer if different) must deduct tax and National Insurance from payments made to the worker’s personal service company. The organisation must also pay employer’s National Insurance. Where these rules apply, the worker’s intermediary will no longer need to work out the deemed payment under the IR35 rules – instead the worker will effectively be ‘on-payroll’.

The rules do not apply where the end client is a small private sector organisation. As now, the worker must determine whether IR35 applies and work out the deemed payment and pay tax and National Insurance if it does.

Speak to us to understand how the changes to the off-payroll working rules will affect you and what you need to do to prepare.

Ensuring Minimum Wage compliance

UK law gives rights to employees and ‘workers’, a minimum wage among them. Employers are obliged to pay minimum rates – there are no exceptions for smaller employers. For those aged 25 or over, this is called National Living Wage (NLW). For those below this age, it is National Minimum Wage (NMW). For convenience, we use ‘minimum wage’ as a generic term.

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Living Wage Introduced 01.04.16

From 01.04.16 the Government are introducing a new mandatory National Living Wage for all workers aged 25 and older. This will be £7.20 an hour.

The National Minimum Wage will continue to apply to employees under the age of 25.

For employers in sectors such as retail and hospitality where many workers are paid at the National Minimum Wage this increase will be significant. For example:-

An employee working 40 hours per week will receive an increase of £1,040 per annum so for a business with 25 employees who are all eligible for the new rate, the costs start at £26,000 per annum.  In addition to this increase both the Employers National Insurance Contribution and the Work Place Pension Contribution must be recalculated to ensure that employers realise what costs they will be facing.

To compensate for the increase, the Government have also introduced a rise in the employment allowance from £2,000 to £3,000 to reduce some employers National Insurance Contributions.