Lessons in CGT, Auto-enrolment, P11Ds and RTI

As a professional adviser you can't afford to stop learning, as the tax and regulatory landscape is constantly moving underneath your feet. Last week we shared a lesson to learn from CGT, and addressed the huge issue of auto-enrolment. We also had some tips for a painless P11D season.

Auto-enrolment
Auto-enrolment is not like VAT-MOSS, it can't be ignored on the assumption that no one will check whether such a small employer is complying with the rules (not that we would recommend that!). If the employer fails to implement a pension scheme for his employees he is messing with their future pensions, and the penalties are severe.  
 
There is a fixed penalty of £400 if the employer doesn't comply with statutory notices, which escalates up to £500 PER DAY for employers with up to 49 employees. Those same employers can also be subject to fixed penalties of up to £1,500 for not paying contributions or for encouraging employees to opt out of the pension scheme. Third parties such as payroll bureau can also be fined if the pension deductions aren't made correctly.     
 
The frightening part about auto-enrolment is that the Pensions Regulator, which is tasked with getting the 1 million small employers who are ignorant of their obligations to comply, believes that accountants and lawyers will bridge that knowledge gap. That means you.
 
You may protest that you don't “do” pensions so auto-enrolment is somebody else's problem. If you offer a payroll service you will have to process the pension deductions for your clients, who will expect you to get the calculations right. Clue: it is not a matter of deducting a straight percentage of net pay; there are options for the employer to choose which define pensionable pay in different ways.
 
The employees' employment contracts will be key to minimising the cost of the employer's contributions, but many employees in small businesses don't have detailed employment contracts. Someone (perhaps you) will have to help those businesses work with employment lawyers and human resource advisers to get suitable employment contracts in place.
 
Finally remember that auto-enrolment pension contributions will have to be made for employees who earn above £10,000 in 2015/16. The auto-enrolment threshold was not increased in line with the personal allowance, so employees will pay pension contributions before they become liable for income tax, unless the thresholds are aligned again in the future.

This is an extract from our tax tips newsletter dated 28 May 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>