December 19, 2018

Are you worried about RTI? Do you know what it is?

As from 6th April 2013 all employers will need to tell HMRC every time they pay someone. This is known as Real Time Information (RTI). Whether it is the usual staff getting their monthly pay, or a casual member of staff getting cash for helping you out for a couple of days, the taxman needs to know.

If you run your own payroll, the chances are you are using software to do the calculations. It is likely that it will also file the necessary forms on line for you but it is worth checking.

The logic behind this change is that HMRC will be able to link multiple employments together as they are happening and make sure the correct tax code is being used. This should stop so many employees getting bills sometime 3 years after the tax year in question. The other benefit to the taxman is they know how much you should be sending them each month so, if you don’t pay, they know how much to chase you for!

The emphasis will again be put on the employer to ensure that the employee is entitled to work in the UK. For new employees, HMRC suggest seeing a copy of the passport to confirm name, date of birth and help towards a right to work in the UK. If a potential member of staff does not have a passport, HMRC suggest a birth certificate as an alternative. That is all very well unless the female in question has got married. How do you then match the name to the individual without marriage certificates etc? There are alternative documents that can be produced, but does someone turning up for a day’s work carry these papers about as well as their National Insurance number – they may need to in future.

Once the individual is set up within a payroll system, the operation should be straightforward. It’s a bit like sending HMRC a copy of the payslip each time you work out pay as well as giving one to the employee. If it is a casual worker who gets paid cash at the end of the day, it is up to you to work out the correct figure to pay. In a very few cases such as this one, you can send the copy of the payment details through to HMRC within 7 days of making the payment. Most other cases you need to tell them on or before the date the payment is made.

How many hours do you work ?

As part of the new regime that HMRC are bringing in for payroll know as RTI (Real Time Information) you will need to declare whether each employee does under 16 hours, 16 – 30 or over 30 per week or is an occasional worker. As a business owner, you may well do over 30, but how many do you get paid for?

 

At minimum wage (currently £6.19 per hour) you would need to be taking a salary of £9,657 to meet this hourly rate on 30 hours per week. If you are a director of a company, it may be that your company recognises your efforts by paying you a dividend depending on the profitability of the company. Even if it does not have the cash to pay you at the time, it may reserve the funds by adding it to the amount the company owes you. This is not uncommon. Dividends do not attract National Insurance whereas salary does.

 

So, is this a ploy by HMRC to ensure that company directors are getting a fair wage or will they start chasing those companies that primarily pay their directors by way of dividends on their shareholdings?

 

The good news is there is another box to tick which says the hours are unspecified. As a director you may choose how many or how few you work so this sounds like a more accurate answer.

 

If you employ your children during the school holidays to create PowerPoint slides, help with your web site, proof read the book or reports you have written, they would be counted as ‘occasional’ workers so must go on the payroll, but you don’t have to pay them every month. Remember this is an allowable expense of the business and will reduce the tax bill whether you are a sole trader or a limited company unless – of course – you pay them a huge salary. The minimum wage for under 18s is £3.68 per hour.

Are you paying your Staff enough ?

Are you paying your staff enough?

How much do you pay your staff? As from 1st October the national minimum wage changes for those aged 21 and over to £6.19 and the apprentice rate rises to £2.65. Rates for younger staff remains unchanged.

Did you know that agricultural workers will get a different minimum wage, depending on what they are being asked to do, and are entitled to a higher rate for overtime? If you are in this sector, you probably know all this but I have had clients who have been caught out and ignorance is no excuse.

When did you last pay your part time workers holiday pay? The common reason that staff are underpaid is when they work on a zero hours contract and therefore don’t book their holiday, they are just not available to be put on the rota. Where the hours vary from one week to another, the calculation for holiday is then based on 12.07% of time worked. When looking at the cost of employing staff, this should be taken into account – and the employer’s national insurance.

Lastly, the most important member of staff is you. Without you the business could not function. How many hours do you do, how much do you get paid per hour? When did you last take a holiday?

 

Do you need help with ensuring that you are the right side of the law ? Contact Penny for more advice