September 2012Issue 58Employers’DigestInside this issueA refresher course:home-working expensesAuto-enrolmentEmployers’ Digest pollCompany cars: advisoryfuel rates revisedA refresher course:home-working expensesModern technology allows increasingnumbers of employees to perform someor all of the duties of their employmentat home. We are frequently asked whatexpenses can be paid to home workersand what the tax consequences are.The tax rules are not straightforward.The same benefits or expensescan have different consequences,depending whether the employee isgenuinely home‐based, or office‐basedbut choosing to work at home or fromhome.Is home working necessary?Many employers assume that for anemployee to be home‐based, it is simplya matter of agreeing with the employeethat they should work from home.Unfortunately HM Revenue & Customs(HMRC) apply strict criteria beforeaccepting an employee as home‐based,HMRC insist that the following testsmust be satisfied:f fduties carried out at home by theemployee must be ‘substantive’ (i.e.forming the major part of the duties)f fit must be an ‘objective requirement’of the duties of the employment thatthe work is carried out at home andnowhere else (i.e. any employeeperforming those duties would find itnecessary to perform them at home).Click here to read the full article.Increase in NationalMinimum WageGetting to know the team
Crowe Clark Whitehill LLPAuto-enrolmentWe have trailered in previous bulletins the ‘forthcomingattraction’ that is auto-enrolment for pensions. Thegovernment has introduced this scheme to help boostthe pension pots of low and medium-sized earners andhas even introduced its own low cost workplace pensionscheme, the National Employment Savings Trust (NEST)specifically for this purpose. This article is designed to helpyou as the employer prepare for these changes.When will it happen?From October 2012, employers will need to beginautomatically enrolling their employees into a workplacepension scheme if the employee:ffis not already in a pension scheme at workffis aged 22 or overffis under state pension ageffearns more than £8,105 per yearffworks in the UK.Every employee who meets the above criteria must beenrolled in a scheme and contributions paid accordingly.The size of your workforce will determine when yourenrolment obligations begin. The start dates areNumber ofemployeessummarised below:Staging datebetween......and10,000 or more 1 October 2012 1 March 20131,250–9,999 1 April 2013 1 September 2013250–1,249 1 October 2013 1 March 201450–249 1 April 2014 1 April 2015Fewer than 50 1 June 2015 1 April 2017To find out exactly when you will need to start you canaccess the Pensions Regulator’s website.You will be asked to enter your PAYE reference number, thedate you will need to enrol your employees and start makingcontributions to your chosen pension scheme will then beprovided. It is possible to bring this date forward, which youmay want to do if you would prefer to tie it in to your payreview period or the tax year itself.What will it cost?Minimum contributions will be phased in over a period ofsix years:fffrom the employer’s staging date to 30 September2017, the minimum contribution will be 2%, of which theemployer must contribute at least 1%fffrom 1 October 2017 to 30 September 2018, theminimum contribution will be 5%, of which the employermust contribute at least 2%fffrom 1 October 2018 onwards the minimum contributionwill be 8%, of which the employer must contributeat least 3%.In addition to the contributions, there will be additionalcosts of training for HR and payroll, software,administration, pensions advice etc.Do employers have to contribute?Yes, contributions are compulsory. However, the employeecan opt-out of the workplace pension scheme, shouldthey wish, by completing an opt-out form. This means thatneither the employee nor the employer has to contribute.Employers should in no way encourage or induce staff toopt-out and indeed there are sizeable penalties for doingso.An employee who has opted-out can elect to opt-in againbut the employer only has to accept this once every 12months. The employer will automatically re-enrol theemployee at a later date, usually every three years.There are penalties for not complying with the newregulations and interest will be charged on late paymentof pension contributions.Which pension scheme should I use?Some employers will have an existing pension scheme inplace. Provided the contributions meet the requirementsunder the new guidelines this is acceptable and no changesneed to be made.Where the employer does not have a workplace scheme,they should take advice from an independent pensionsadviser and source a suitable pension provider.Alternatively they can use NEST as advised above.What about salary sacrifice for pension contributions?Historically employers have offered salary sacrificearrangements for payments into pension schemes. Thesehave been popular as it has meant that both employers andemployees pay less national insurance contributions. Underauto-enrolment these arrangements can still be used.The employer may agree to pay more than the minimumrequirement to cover some, if not all, of the contribution theemployee would be required to pay. This is on the basis thatthe employee agrees to sacrifice part of his earnings.As with any salary sacrifice scheme, the employer mustmake sure that the arrangement is an effective variation ofthe employee’s contractual terms and conditions and that,as a consequence, the employee receives a lower salary inexchange for payment of the pension contribution. Typicallythese arrangements should be in place for at least 12months, subject to any significant lifestyle changes.Under the new rules, employers can still use salary sacrificearrangements but it cannot be a condition of the schememembership and should not be structured in such a way soas to be seen as an inducement for employees to opt-out.
Employers’ DigestSeptember 2012Ordinarily, because of the need toretain salary sacrifice arrangementsfor a minimum period this wouldconflict with the employee’s statutoryright to opt-out.HMRC have therefore agreed thatemployees can revert back to theiroriginal salary should they opt-outwithout invalidating the salarysacrifice arrangement.For those employers with existingsalary sacrifice schemes for pensionarrangements, auto-enrolmentshould not affect these significantly.However, when an employeechooses not to renew the sacrificearrangement, the employer wouldthen need to provide a workplacepension and auto-enrol theemployee under the new regulations.Contributions would be based on thehigher salary.What should employers do now?It is likely that the starting date foryour organisation is some way off.However, you need to make sureyou are prepared well in advance.Amongst other things you should:fffind out when your auto-enrolmentdate isEmployers’ Digest pollReaders may recall that in the July edition of Employers’ Digest, we askedfor your views on the progress of Real Time Information (RTI) and the issuesconcerning your organisation. The results, which are reproduced below, show noreal surprises and are in line with the concerns expressed by our clients. Almostone third of all readers say that data cleansing and the capture of employeeinformation is the main concern. This perhaps reflects somewhat on the type ofsoftware currently being used and the amount of work that might be required toupdate HR and payroll systems. It is likely that integrated HR and payroll softwareis better suited to the RTI initiative. Indeed nearly one quarter (23%) of readershave concerns about the changes required to HR and payroll systems.As an employer, what is the biggest issue for you in preparing for theintroduction of RTI?5%23%18% 23%32%Obtaining management buy-inEmployee data cleansing and capturePayroll and HR system changesResource constraints in the payroll, HR,finance teamLack of information from HMRCObtaining management buy-in to the RTI project is a concern for nearly onequarter of readers. With another 1,300 organisations taking part in the RTI pilotscheme from September 2012, organisations need to act quickly to ensure thattheir systems are compliant and can cope with RTI from April 2013.We will provide further updates on RTI in future editions of Employers’ Digest.ffdecide whether this fits in withyour internal systems and if notdecide on an earlier dateffif you do not have an existingscheme, speak to a financialadviser about sourcing anappropriate pension scheme andcompare this to NESTffexplain the procedure andregulations to your employeesffcollate all necessary informationrequired to present to thepensions scheme and pensionregulator.Further information can be found onthe Pensions Regulators’ website.
Employers’ Digest September 2012Company cars: advisory fuelrates revisedHMRC have revised their advisory fuel rates for company carswith effect from 1 September 2012. The new rates, based onprices of 135.7p, 140.8p and 71.0p per litre for petrol, dieseland LPG respectively, are set out in the tables below. Petroland diesel rates are unchanged from 1 June 2012.Engine size Petrol LPG1400cc or less 15p 10p1401 to 2000cc 18p 12pOver 2000cc 26p 17pEngine size1600cc or lessDiesel12p1601 to 2000cc 15pOver 2000cc18pIncrease in NationalMinimum WageThe Department for Business, Innovation & Skills hasannounced the National Minimum Wage rates from 1October 2012:ffthe main adult rate (for workers 21 and over) will increaseby 11p to £6.19 an hourffthe rate for 18-20 year olds will remain at £4.98 an hourffthe rate for 16–17 year olds will remain at £3.68 an hourffthe rate for apprentices will increase by 5p to £2.65 an hour.Getting to know the teamAndrew LearmondTax SupervisorLondonWhat do you do at CroweClark Whitehill?As a member of theEmployers’ AdvisoryGroup, I advise clients onall aspects of employment tax related matters. This canrange from defending clients faced with HMRC compliancevisits to advising on the tax treatment of specific employeebenefits, hopefully identifying any tax exemptions that mayapply so that the benefits are provided in the most taxefficientway.My client base is quite varied. One day I could be advising amultinational not for profit organisation on aspects of staffliving accommodation, then the next day talking to a small tomedium-sized enterprise on entertaining expenses and thedifference between staff and third party entertaining.The contrast between the two sectors is motivating.Ultimately my aim is to ensure that I give practical advicethat meet the client’s needs while keeping within UK taxlegislation.What projects have you been working on recently?I recently assisted a client who was undergoing acompliance review by HMRC. These types of reviews cancause a lot of inconvenience and stress for clients. In thiscase, HMRC identified a number of irregularities andwere pursuing collection of the full liability. My job was tokeep the settlement as low as possible and minimise theclient’s exposure to interest and penalties. I discussedthe irregularities with the client and reviewed HMRC’scomputations. As a result,various exemptions were appliedand I succeeded in getting the original computationsreduced by approximately £7,000, and HMRC agreed tosuspend the penalties. Not a bad result!Clients find this level of service reassuring and I derivesatisfaction from the positive outcomes.What do you do in your spare time?I am currently studying to qualify as a Chartered Tax Adviser,which takes up a lot of my time. However, when time permitsI play the tenor saxophone, hoping to emulate my favouriteartist Joe Henderson.We hope you find this newsletter of interest. If you have any questions about any of the topicscovered, please call your usual Crowe Clark Whitehill contact or:LondonDavid Daly020Office7842locations7364david.email@example.comSusan Ball020 7842 firstname.lastname@example.orgBrian Robson020 7842 email@example.comCheltenhamKaren Goodwin01242 firstname.lastname@example.orgKentSimon Warne01622 email@example.comMidlandsPaul Edwards0121 543 firstname.lastname@example.orgManchesterSteve Livingston0161 214 email@example.comRebecca Durrant0161 214 firstname.lastname@example.orgThames ValleyStuart Weekes0118 959 email@example.comAssociate member ofCrowe Clark Whitehill UKIsle of Man01624 627335The office in the Isle of Man is CroweClark Whitehill LLC. It is a separate,independent firm and not part of CroweClark Whitehill LLP. Accordingly, neitherfirm can be held liable for the acts oromissions of the other.Crowe Clark Whitehill LLP is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independentlegal entity. Crowe Clark Whitehill LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath andspecifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member. © 2012 Crowe Clark Whitehill LLPThis information is published without the responsibility on our part for loss occasioned to any person acting or refraining from acting as a result of any information publishedherein.