Tax Corner: The new year is an ideal time for an employer health check
QUESTION: We started a family business 10 years ago, while we started out small, in recent years we have had to recruit more staff and expect to grow further in the next 12 months. As a growing employer, is there anything we should be aware of?
ANSWER: While your focus in recent years has been growing your business, you may not have given much thought to your payroll systems.
Given HMRC have increased their activity on employer compliance reviews in recent years, along with the potential penalties applicable to non-compliance, now is the ideal time to review your practices to ensure you are meeting all your obligations as an employer.
Initially, you will need to consider if those who work for you are employees or self-employed sub-contractors, as this will impact whether you need to deduct taxes from payments you make to them. This is usually a question of fact and not something you or a worker can opt for the most favourable treatment.
Payments to employees should be reported to HMRC via a registered payroll scheme, appropriate software will ensure you are deducting the correct income tax and national insurance contributions as well as making submissions on time.
If you are providing any benefits to employees or reimbursing their expenses, you will need to consider whether these also need reported to HMRC.
Some employee benefits and reimbursements can be provided tax-free, such as free lunch in staff canteen or reimbursing a business expense incurred by the employee, but others are taxable, and need reported.
There are detailed rules for the most common benefits such as company cars, travel costs, use of assets, social functions, employee uniforms, etc. that you will need to refer to if you provide any benefits.
In addition to getting the correct tax treatment when paying workers, employers need to be compliant with National Minimum Wage (NMW) requirements.
Many would assume that this is as straight forward as making sure the hourly rate of pay is above the rates set each April 1 and without realising it are inadvertently underpaying workers.
Getting NMW wrong can be costly as not only can the fines be up to 200 per cent of the underpayments identified but there can be a reputational damage as businesses can be ‘named and shamed’. Errors are commonly made when the following factors come into play:
• Shift workers;
• Set-up and travel time required before start;
• Shut-down time required;
• Required clothing/equipment not provided by employer;
• Unreimbursed costs;
• Significant birthdays missed;
• Salary sacrifice and deductions from pay.
You may also need to consider your procedures for ensuring non-nationals have the correct documentation to work in the UK.
Finally, UK employers are required to provide a workplace pension scheme, often referred to as Auto Enrolment, and make contributions for employees if they meet the requirements.
It is important to seek professional advice if you are unsure about any of your duties as an employer.
KellyAnne Murtagh (firstname.lastname@example.org) is senior manager at FPM Accountants Ltd (www.fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.