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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

Blog

Employee Ownership Trusts - Through the Looking Glass

A lot has been written about the advantages of employee ownership trusts where the focus has been on the capital gains tax advantages to the vendor in not paying any capital gains tax at all.

To a lesser extent, mention has been made of employees of the company being able to receive tax free bonuses from the company each year of up to £3,600.

There are much wider issues here however, other than tax.

When ownership changes, it is almost inevitable that there will be a change in culture or a change in procedures which may not be for the better.  Employees may become unsettled and either move on or cause unrest among their colleagues. 

Where the ownership changes to that of a trust for the benefit of all employees then there should be a very much lower risk of this happening and a togetherness of purpose.  By all accounts, morale within the John Lewis Partnership, where employees are “partners” is high with the business having a good reputation and doing well compared to some other major national retailers.

Many businesses are sold to new owners who are geographically distant, whether in another part of the UK or abroad.  This can lead to a transfer of work abroad and, at the extreme, complete closure of the business which has been acquired, in its traditional location, with a loss of jobs.  Do you remember Terrys of York, the renowned chocolate manufacturer?  The company was bought by Kraft and the York factory closed about ten years ago.  Would a Terrys of York, owned by an Employee Ownership Trust still be manufacturing chocolate in York today?  Sadly, we will never know, but they did make lovely chocolates there.

If you are interested in finding out more about Employee Share Ownership please visit our web page here.

Changes to pensions auto-enrolment from April 2019

Our payroll services team would like to remind all French Duncan clients that changes to pensions auto-enrolment are due to come into place from April 2019. Regulatory auto-enrolment for pensions is offering most people in the UK workforce a valuable means of building a pension cash pot. However, company finance directors, finance teams and payroll administrators need to make provisions for a further increase in contributions taking place from 6 April 2019.

Increased pensions auto-enrolment contributions from April 2019
The existing 2018/19 pensions contributions and deductions you are required to make amount to a minimum of 3% of gross salary for qualifying employees and 2% for employers. From 6 April 2019 the requirements increase to 3% minimum employer contribution and 5% staff contribution.

All businesses operating PAYE payrolls are required by law to make the minimum contributions for all their qualifying employees at the very least. Where employers cover the current minimum contribution requirement of 5%, which rises to 8% from next April, staff are not required to make contributions.

The 2018/19 employee earnings levels affected by pension contributions legislation range from £6,032 to £46,350. The increases to pensions contributions requirements relate to all auto-enrolment pension schemes and all existing pension schemes apart from defined benefits schemes. You can find out more about auto-enrolment pension schemes on The Pensions Regulator website.

Implementing these increases
You will need to inform all your employees about these changes and a template letter is available on The Pensions Regulator website, if required. 

You'll also need to clarify which increases apply to your business. This information can be accessed from your pensions scheme documentation or direct from your pension scheme provider. 

These changes will apply to all qualifying employees except for individuals that requested you put them into a scheme which does not require employer contributions.

Your payroll processing software will need to be updated so these increases can be applied from 6 April 2019 onwards. So, if you do use the services of a payroll bureau you should confirm that these requirements will be in place. If you run a monthly payroll the April 2019 pay run needs calculating at the new rates from 6 April, so if your software does not support these types of pro-rated contributions you'll need to speak with your pension scheme provider and software supplier or payroll bureau to work out exactly how you will handle these changes.

French Duncan Payroll Services provide comprehensive payroll support to all clients. Get in touch if you would like information about our payroll services to business clients and the way our auto-enrolment software processes legislative changes of this nature.

Making Tax Digital - Latest Update

This blog was originally published on LinkedIn on 17 October 2018.

There were some interesting developments in yesterday’s update from HMRC regarding Making Tax Digital (MTD) for VAT.

1. HMRC has decided to defer the mandation date by 6 months for certain types of VAT registration entities.

This 6 month deferment applies to the following VAT registration categories: trusts; ‘not for profit’ organisations that are not incorporated; VAT divisions; VAT groups; public sector entities required to provide additional VAT return information (Government departments, NHS Trusts); local authorities; public corporations; traders based overseas; those on payments on account; and, annual accounting scheme users.

The revised mandation date for these organisations is 1 October 2019 and this effectively provides 1 year from now to be ready for MTD for VAT, however, it is still advised to start preparing for this sooner rather than later. HMRC expect that deferral will apply to around 3.5% of those VAT registrations mandated under MTD.

2. HMRC’s pilot service is now open to sole traders and companies whose VAT affairs are up to date and are ‘straightforward’.

However, the pilot service is not yet open to businesses that: are partnerships; trade with the EU; are based overseas; submit annual returns; make payments on account, use the VAT Flat Rate Scheme; and, those newly registered for VAT that have not yet submitted a VAT return. It is expected that businesses with a default surcharge within the last 24 months will be able to join the pilot by the end of this month.

There will be many businesses that don’t view themselves as having ‘straightforward’ VAT affairs that should in fact still be able to join HMRC’s pilot, in order to help them prepare for the MTD go live date. This could include limited companies that are required to carry out partial exemption calculations.

HMRC have updated their Overview of MTD webpage and this includes a revised timeline showing the mandation and pilot joining dates. This can be found at the following link: https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

Although deferment will likely be welcomed by those affected, it is looking ever more likely that MTD for VAT is not going away. And for the vast majority of VAT registered businesses that don’t fall within the October 2019 deferment, it is strongly recommended that they still get ready for their April 2019 mandation date.

French Duncan are assisting clients with their MTD preparation and offer a range of services around this, such as outsourced bookkeeping & VAT return preparation/submission, systems reviews/healthchecks and general advice around MTD and how it impacts on the business operation.

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