Employing for the first time

There are a multitude of rules and regulations that you must be aware of when you start employing staff for the first time.

HMRC’s guidance sets out important issues to be aware of when becoming an employer.

  1. Decide how much to pay someone – you must pay your employee at least the National Minimum Wage.
  2. Check if someone has the legal right to work in the UK. You may have to do other employment checks as well.
  3. Check if you need to apply for a DBS check (formerly known as a CRB check) if you work in a field that requires one, e.g., with vulnerable people or security.
  4. Get employment insurance – you need employers’ liability insurance as soon as you become an employer.
  5. Send details of the job (including terms and conditions) in writing to your employee. You need to give your employee a written statement of employment if you’re employing someone for more than 1 month.
  6. Ensure that you register as an employer with HMRC. You can do this up to 4 weeks before you pay your new staff.  This process must also be completed by directors of a limited company who employ themselves to work in the company.
  7. Check if you need to automatically enrol your staff into a workplace pension scheme.

When it comes to paying staff, you generally have the choice between using a payroll provider or running your payroll yourself. If you decide to run your own payroll you must choose suitable payroll software. 

We can help.

Source: HM Revenue & Customs Tue, 01 Feb 2022 00:00:00 +0100

IHT – limitations on spouse or civil partner exemptions

Inheritance Tax (IHT) is a tax that is levied on a person’s estate when they die and can also be payable during a person’s lifetime on certain trusts and gifts. The rate of Inheritance Tax payable is 40% on death and 20% on lifetime gifts.  There is a nil-rate band, currently £325,000 below which no IHT is payable.

Transfers between married couples and civil partners are not usually subject to IHT, meaning that when the first partner of a couple dies leaving their estate to the other no IHT will be payable. The surviving partner also receives any unused nil-rate band allowance of the deceased.

The main limitations on spouse or civil partner exemption are that it does not apply to

  • postponed gifts – under certain circumstances, a transfer to a spouse or civil partner is not exempt if it ‘takes effect on the termination after the transfer of value of any interest or period’.
  • conditional gifts – a gift to a spouse or civil partner is not exempt if it depends on a condition which is not satisfied within twelve months after the transfer.

In addition, the spouse or civil partner exemption does not apply to certain dealings with settled property, including reversionary interests.

Source: HM Revenue & Customs Tue, 01 Feb 2022 00:00:00 +0100

Income Tax set-off of rental business losses

Where a property business makes a loss, the loss can usually be carried forward and set against future rental business profits. HMRC’s guidance is clear that any losses made in one rental business cannot be carried across to any other rental business the customer carries on at the same time in a different legal capacity.

Under limited circumstances property losses can be set against general income of the same year or the following year. However, where a property business claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income.

Income Tax rental business losses can only be set against general income to the extent that they are attributable to:

  • certain capital allowances,
  • certain agricultural expenses

A claim has to be made on or before the first anniversary of 31 January following the end of the year of assessment. For example, where relief is to be claimed for the 2021-22 tax year, the normal filing date would be 31 January 2023 and the claim for property loss relief must be made by 31 January 2024.

There are exceptions to the loss relief rules for properties that are let on uncommercial terms (for example, at a nominal rent to a relative).

Source: HM Government Tue, 01 Feb 2022 00:00:00 +0100

Tax codes for employees

The P9X form is used to notify employers of tax codes to use for employees. The latest version of the form has just been published and shows the tax codes to use from 6 April 2022. The forms states that the basic personal allowance for the tax year starting 6 April 2022 will, as expected, be £12,570 (£12,570 2021-22) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 2021-22) except for those defined as Scottish taxpayers who have a lower basic rate limit as well as an intermediate rate. The new form P9X is available online on GOV.UK to download or print.

The P9X (2022) form also includes information to help employers in the new tax year. The document reminds employers that have new employees starting work between 6 April and 24 May 2022, and who provide you with a P45, to follow the instructions at www.gov.uk/new-employee

Source: HM Revenue & Customs Tue, 01 Feb 2022 00:00:00 +0100

Charging charities at lower rates of VAT

There are special rules, under which a VAT-registered business can sell certain goods and services to charities at the zero or reduced rate of VAT. Before charging VAT at a lower rate, you must be able to show evidence that the charity is eligible. This is usually done by obtaining suitable evidence of the charity’s status and a written declaration or ‘certificate’ confirming they meet the conditions for a particular VAT relief.

Charities are legally required to provide an eligibility certificate when you supply qualifying building or construction services to them at zero VAT. A declaration is not required for other supplies but is recommended to prove the charity is eligible for the relief. Completed declarations should be held for at least 4 years.

The reduced VAT rate applies on the sale of fuel and power in certain circumstances to an eligible charity. The zero VAT rate applies on a wider range of supplies including the aforementioned construction supplies and items including certain medical and veterinary equipment, aids for disabled people, advertising and items for collecting donations, drugs and chemicals and equipment for making ‘talking’ books and newspapers.

Source: HM Revenue & Customs Tue, 01 Feb 2022 00:00:00 +0100