New pension rules

Another set of regulations is set to fall on the shoulders of all employers. This time it’s a compulsory pension scheme for all employees.

This new pensions law is due to be introduced over four years from October 2012. The largest employers (120,000 or more employees) will be forced to sign up first. Those who employ less than 50 workers will be required to take part in the scheme from a date sometime in 2014 to 2016. The exact date will depend on your PAYE reference number.

Only one-man companies will be exempt, otherwise every employer who has workers in the UK will be required to enrol those workers in a pension scheme. There will be exceptions for workers aged under 22, over state retirement age or paid less than £7,475. Employees will have to take an active decision to opt out and sign a form to do so. The employer will not be permitted to induce employees to opt out, or to screen out potential employees who do not wish to opt out of the pension scheme.

Employers and employees will be required to make contributions to the pension scheme totalling 8% of the workers band (approx £5,000 to £33,000) earnings, including tax relief given on the employees’ contributions. The employer must contribute at least 3% of the workers’ earnings. This level of compulsory contributions will be imposed gradually over five years to 2017.

Employers can use an existing pension scheme, set up a new one, or failing this, use the new pension scheme established by the Government called NEST (National Employment Savings Trust). Where an existing scheme is used the employer will have to certify that it meets all the requirements for compulsory pension saving. Every employer will also be required to register with the pensions regulator.

To prepare for these new regulations talk to your pension scheme provider, if you have one. If you don’t have a workplace pension scheme you need to plan to set one up as this can take sometime to implement, and to start budgeting for the costs! An Independent Financial Advisor can explain all this and may be able to recommend more cost effective alternatives to the NEST scheme.

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Annual Investment Allowance is reducing

From April 2012 the amount of capital expenditure that qualifies for 100% year one write off is reducing from £100,000 to £25,000.

Business owners might want to bring forward plans to invest in machinery, before the qualifying amount is reduced.

This allowance is called the Annual Investment Allowance (AIA).
It enables all businesses to reduce their profit by the amount spent on plant and machinery (excluding cars) up to a maximum amount, currently £100,000 but set to reduce to £25,000.

Where an accounting period spans 1 April 2012, the maximum amount of AIA is calculated on a pro rata basis
eg 6 months @ £100,000 +
6 months @ £25,000 = £62,500

There are also allowances for environmental equipment, known as Enhanced Capital Allowances (ECA). The relief under these will continue to be 100% on the amount spent. The categories of expenditure are:
Energy Saving Equipment. The equipment must have been certified as meeting energy efficiency criteria
Water-efficient Equipment. Again the equipment has to have been certified as reducing water use, improving quality, or saving energy
Electric Cars and Low (up to 110 g/km) CO2 emission cars

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VAT on salary sacrifice schemes

Due to a recent European Court of Justice ruling, HMRC now consider that the provision of a benefit via salary sacrifice to employees constitutes a supply of services for consideration and is therefore subject to VAT.

Benefits that will be affected include:

* Cycle to work schemes.
* Face value vouchers.
* Childcare vouchers.
* Food and catering provided by employers.

To give employers time to make the necessary changes to their record keeping HMRC will not require output tax to be accounted for on salary sacrifice supplies until 1 January 2012.

VAT clampdown

HMRC believe that there are a number of businesses that should be registered for VAT, and so far, they have not registered. They are in the process of sending out 40,000 letters to traders who they believe may be in this category.

HMRC are offering businesses that “come clean” and notify HMRC of an intention to register before the end of September 2011, reduced or nil penalties. Subsequently formal applications have to be submitted on VAT form 1 before 31 December 2011.

The current VAT registration threshold is £73,000. If you have already passed this annual limit in the last twelve months, are about to, or expect to in the next 30 days, you might like to respond to this offer.

Penalties for late registration can be up to 100% of additional VAT due.

Fast Food Outlets

HMRC believes that there are a number of fast food outlets that are deliberately falsifying their records and miss-declaring their true sales levels in order to avoid paying their correct taxes.

They have set up yet another specialist task force to tackle this avoidance.

Penalties will be levied in addition to recovery of unpaid taxes. Those businesses discovered may also face criminal prosecution.

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