We are all too familiar with discussing the impact of the “downturn”, the effects of austerity measures, and the challenges of meeting increased demand at a time when funding and resources are under significant pressure.
As auditors and advisers, we need to fully understand the challenges our clients are facing – as well as the potential opportunities for doing things better. Certain areas have come into focus now more than ever before and have a bearing on the way charities conduct themselves.
Further clarification has now been issued re the claiming of the new Employment Allowance. From 6 April 2014 most employers can claim up to £2,000 per annum reduction off their employers Class 1 national insurance contributions. The claim is made as a reduction each and every month from April and is shown on the Employers Payment Summary (EPS). The employers national insurance can be reduced from April by £2,000; if the whole allowance cannot be used in April the reducing balance is carried forward month by month. The employer’s national insurance can be reduced by £2,000 each and every year. No unused balance can be carried forward to a new tax year.
The government is strengthening minimum wage enforcement. In future all employers who are found not to comply with national minimum wage rules will be publicly named.
This guidance, first published in October was updated on 10 December 2013. It provides practical advice and examples to explain:
- what counts and does not count as pay and working hours for minimum wage purposes
- eligibility for the minimum wage
- how to calculate the minimum wage
- how the minimum wage will be enforced
On 30 January, the FRC issued Practice Note 14 The audit of housing associations in the United Kingdom (PN 14). The updated guidance reflects changes to the landscape in which the social housing sector operates. These stem from reductions in grant funding and the availability of other sources of finance following the financial crisis and governmental reforms to the welfare system.
As a result, many housing associations have diversified their activities and include more commercial activities such as care home or student accommodation. They are also taking different approaches to funding which often involve a move away from traditional bank loans towards more complex debt instruments. These changes give rise to a new and different range of audit risks. PN 14 provides guidance to auditors of housing associations on how to identify, assess and respond to these risks of material misstatement in the financial statements of housing associations.
At the end of the tax year, if you’ve paid any employees, you would normally submit an Employer Annual Return to HM Revenue & Customs (HMRC). This includes each employee’s P14 and a P35 that summarises the total tax and NI due for the year.
Under RTI, as you’ve submitted your employees’ tax and NI information each period to HMRC, there’s no need to send a P14 or P35.
This year, there’s a much simpler year end process that consists of completing year end declarations, submitting them to HMRC and producing each employee’s P60. The Payroll Year End option in Sage 50 Payroll takes you through the steps required to complete your year end.
Although the year end process is simpler, it’s important to note the year end submission deadline has been brought forward to 19 April 2014.
If your company is medium or large and your financial statements are produced under UK accounting rules, then major changes are happening to your published financial statements. All the existing accounting rules have been re-written and re-issued as new standards with the detail being contained in FRS102. This means that the figures in your accounts must be recalculated, the earliest of which will be the balance sheet as at 1 January 2014 if you have a 31 December year end. If you have a 31 March year end then your balance sheet as at 1 April 2014 will need to be recalculated.
What does this mean for my business?
The changes are likely to affect your profits, how much tax you pay, how your business is valued, its credit rating, and also the outcome of contracts that you are currently negotiating, such as borrowing covenants, earn-outs and profit related bonuses.
As we approach the end of one tax year and the start of a new one, what is it that we currently know in relation to managing our own finances?
Well, we know that we all have to pay tax, we can save tax-efficiently and that we should plan for retirement.
What we don’t always know are the potential tax liabilities that lurk out there and we certainly don’t know how to avoid or limit the impact they may have upon us.
But help is at hand, you just need a ‘good teacher’; or in this case, a good Independent Financial Adviser (IFA). An IFA can help you overcome what you don’t know, point out and make you aware of any tax liabilities, advise on potential short-term tax savings and help you increase the value of funds at retirement.