NEWSLETTER Feb 
21
It’s been a busy month and there’s lots to update you with. This month’s newsletter includes details of our new payroll system, some ideas to save cash and tax, information on the Vat deferral scheme (you must read this if you owe VAT from Summer 2020) and IR35 changes so read on for more details:
New Payroll System
The rollout of the new system is well under way and for those of you that have migrated across I really hope you like it. Don’t forget you can invite your team to download the app, manage their holidays and even keep their employment contracts and other HR stuff so that they can you can refer to them easily.
If Judith hasn’t contacted you yet, she will be getting in touch soon.
Minimum Wage increases
Don’t forget the minimum wage goes up by 2.2% to £8.91 from 1 April 2021 for workers over the age of 23 (lowered from 25)
Trivial Benefits (https://www.gov.uk/expenses-and-benefits-trivial-benefits)
If you are a director of a limited company then you can pay yourselves up to a maximum of 6 £50 vouchers per tax year. These are tax free as long as you follow the guidance above so make sure you don’t forget to buy them. You can also buy these for your team if you are feeling generous.
Working from home allowance:
As this year has seen most of us working from home for at least some of the year, you and your team can claim tax relief at a rate of £6 per week. This is worth £62.40 for 20% tax payers and £125 for 40% tax payers. If you already have a home office re-charge in place then you can’t claim this as well. You can give this link to your employees so that they can claim : https://www.gov.uk/tax-relief-for-employees/working-at-home
Spring Budget
The Chancellor’s spring budget is on Wednesday 3rd March so we will keep you updated on the details as and when they are available. A potential extension to the furlough scheme, Vat reduction extensions for hospitality and details of any tax rises on the horizon may all be announced.
VAT payment deferrals
The online portal to spread VAT deferred from Summer 2020 will be open from 23rd February 2021. You can now defer at least some of the VAT owed until January 2022 with interest being charged from 1st April 21 at 2.6%. If you don’t join the scheme to formally defer the debt then HMRC will impose penalties for late payment. We can’t arrange this deferral plan for you – you have to do it yourself. Further details are here (https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19) and we will issue further guidance on using the portal on 23rd February.
IR 35 CHANGES
Are you the sole shareholder / director contracting your services via a limited company?
If so, HMRC’s IR35 (disguised employees) rules may apply to you.
Here’s a brief summary of what you need to do and the changes coming from 6th April 2021:
Currently:
- The IR35 rules consider the ‘true’ basis of your work relationship with your client (regardless of the limited company you operate from) – is it more like an employer / employee relationship?
- You have an obligation to assess each of your client contracts to see if the IR35 rules apply
- The assessment is broadly looking for key employment indicators associated with your contract e.g. control / direction by client, right of substitution, provision of equipment, financial risks and rewards etc.
- You can make an assessment using the HMRC ‘Check Employment Status for tax’ (CEST) tool using this link: https://www.gov.uk/guidance/check-employment-status-for-tax. The assessment can be printed and saved as evidence of your status for that contract should HMRC request this from you.
- In simple terms, if you fall under IR35, payroll taxes will need to be operated for the income you earn from that particular contract.
From 6th April 2021:
- If your contract is with a medium or large-sized company* (you may need to ask your client to confirm on this), your client will now be responsible for assessing your IR35 status rather than you.
- They will provide you with a Status Determination Statement (SDS) and will operate payroll taxes on your fees if the rules are deemed to apply.
- If your contract is with a small company, you retain the obligation to make the IR35 assessment for yourself.
HMRC say that 90% of businesses are failing to apply IR35 – they have their eyes on this topic. Make sure you do too!
*Company size will be classed as medium or large if 2 out of the following apply:
Turnover: more than £10.2 miliion
Balance sheet assets: more than £5.1 million
Employees: more than 50
If you are unsure, we are here to help and a further blog will be published on this in the near future. Please call us if you think you may be affected by this.