Designed to benefit financial controllers and directors working in commerce, providing an ideal opportunity to update your knowledge on a wide range of subjects.
2. Reeves – in brief
• Reeves+Neylan for the past 60 years
• Kent’s leading accountants and business advisers
• One of the UK’s top 30 UK accounting firm
• Over 300 staff and partners
• National award winners… three times!
• International reach via Kreston
5. Issued by FRC in 2009
www.frc.org.uk/press/pub2141.html
FRC guidance issued to directors of all UK companies
Going concern
Going concern & liquidity risk: guidance for directors of
UK companies
6. Background
• Fundamental principle - accounts prepared using going
concern assumption
• Directors of all companies have to assess going concern
• The period to be assessed is 12 months from the
approval of the financial statements
Going concern
7. Three possible conclusions from directors’ assessment
Going concern
1. No material uncertainties that cast doubt over
going concern
2. There are material uncertainties relating to
events / conditions that may cast doubt on going
concern, but going concern assumption remains
appropriate
3. Going concern assumption is not appropriate
8. Going concern
Circumstances Impact on the disclosure in the
accounts
No material uncertainties regarding
going concern
The accounts should use the going
concern principle and make the
necessary disclosures, including those
about liquidity risk, necessary to give a
true and fair view
Material uncertainties but the use of
going concern is considered appropriate
The accounts continue to use the going
concern assumption.
The accounts to disclose the material
uncertainties. Disclosure should be made
within accounting policies so that it is
included in abbreviated accounts.
Going concern is not appropriate Detailed disclosure of the accounting
basis adopted
9. Going concern
FRC example of expected disclosure, no material
uncertainties:
“There has been a significant reduction in requests for
estimates for new work and the directors expect sales
to reduce significantly next year. However, costs are
expected to reduce accordingly and the company
should be able to operate within its overdraft. The
directors are not aware of any reason why the overdraft
facility might be withdrawn. As a result they have
adopted the going concern basis of accounting.”
10. Going concern
Summary
• FRC Guidance to all directors
Need to be aware in fulfilling responsibilities
• Different view on disclosure
Disclosing even when going concern is not an issue
interpreted?
11. Overdrawn directors’ current accounts
• Commercially sensitive
• Tax implications
oIndividual
oCompany
• Company law implications
• Disclosure required by S413 CA 2006
oApplication remains unclear
12. Overdrawn directors’ current accounts
S413 - What information is to be disclosed?
For all advances
• Amount
• Interest rate
• Conditions
• Repayments
13. Overdrawn directors’ current accounts
For advances, credit, guarantees
• Totals
• Applies to anyone who was a director at any time
during the year
For all guarantees
• Main terms
• Maximum liability to company
• Any amount paid by the company under the
guarantee
14. Overdrawn directors’ current accounts
S413 - What are the issues?
Every single loan transaction with a director has to be
disclosed
• Directors’ overdrawn current accounts = series of
transactions
• Shareholder loan approvals (>£10K)
o Not apply to advances for expenses (<£50K)
• Tax?
• Abbreviated accounts?
15. Overdrawn directors’ current accounts
S413 - Reeves’ - practical solution
• Analyse director’s current accounts chronologically to
ascertain if overdrawn
• Identify any shareholder approval issues
• Disclose advances / repayments separately during that
overdrawn period
16. Overdrawn directors’ current accounts
Use of dividends to clear overdrawn director’s loan
account
Factors to consider:
• Have to be paid from distributable profits
• A dividend becomes a liability of the company, when
o Final – approved by the members
o Interim – when paid, or approved by the
members
17. Overdrawn directors’ current accounts
What is payment?
• Cash
• Overdrawn current account – when credited
• Current account in credit – transfer does not count,
need cash
Beware timing issues
18. Overdrawn directors’ current accounts
Summary
• Consider need for shareholder approval
• What will the new disclosures look like?
• Clear by dividend?
• Adequate profits?
• Timing, have to create a liability
• Plan before the year end
19. Coming to you soon
• ISA Clarity
• iXBRL
• Bribery Act 2010
• IFRS
20. Coming soon – ISA Clarity
ISA Clarity
• What is it?
33 new auditing standards
• When is it?
December 2010 Year ends
• What will it mean?
10% additional audit time
Increased focus on accounting estimates used by directors
Increased focus on related parties
21. Coming soon – iXBRL
• What is it?
Standard computer accounts tagging adopted by HM
Revenue and Customs and Companies House
• When is it?
April 2011
• What will it mean?
All Corporation Tax Returns, computations and
accounts will need to be in iXBRL format and submitted
online to HMRC
22. Coming soon – Bribery Act 2010
• What is it?
New anti-bribery code
• When is it?
April 2011
• What will it mean?
Maximum jail term raised from 7 to 10 years
New corporate offence of failing to prevent bribery
- unlimited fine
Need anti corruption procedures
Guidance due from Secretary of State January 2011
23. Coming soon – IFRS
• What is it?
Complete new set of international accounting standards
• When is it?
July 2013
• What will it mean?
3 tier financial reporting for UK
Full IFRS for listed
IFRS for SMEs
FRSSE
25. Did you know that…
• 71% of business hit by late payments in the last 12
months?
• £63bn was not paid within terms last year
• UK business wait 41 days longer than payment terms
(BACS) – in June 2009 the figure was 32 days
• By 2018 businesses won’t be able to say “the cheque
is in the post”!
26. Warning tales…
• the Apple iPhone order
• the new £15,000 van on HP
• the wrong company name checked
• a “new scoring methodology”
• a “technical error within the report”
27. Do you as a matter of course…
• Check the credit score of new customers?
• Worry when you get a big new order?
• Take up credit references regularly?
• Ask for management accounts?
AND…
• Check your own credit reference?
28. The most important factors…
1) Demographics
• The age of the company
• Location
• Line of Business/SIC code
• Number of employees
29. The most important factors..
2) Directors and associations
• The number of them…
• Links to failed businesses
• Late filing of documents
30. The most important factors..
3) Payment habits
• D&B have 10,000 “payment partners”
• More than 500 sales invoices monthly
• Some suppliers are “non-critical”
40. Is the Landscape Changing?
• Banks and HMRC
• Politicians
• Business
• IPs and Turnaround Professionals
41. Avoiding Problems
• Terms of trade
• Look out for the warning signs in your customers
and suppliers
• Financial management
42. The warning signs
• Cash Flow
• Creditors/Suppliers
• Bank
• Landlord
• HMRC
43. Using The Warning Signs - External
• Difficulty getting money out of customers
• Real cash flow difficulties or an excuse
• Be a pedant
• Understanding the issues
44. Using the Warning Signs - Internal
• Historic accounting records up to date and accurate
• Are forecasts a fundamental part of financial
management
45. Continuing to trade
• Professional advice should be sought if the company is
thought to be insolvent
• Accept there is a problem
• Agree strategy
• Document it
• Implement it
46. The Key Messages
• Avoid Insolvency wherever possible
• Turnaround much more desirable
49. Tax Update
Session overview
• Some key dates
• Corporation tax changes
• Dividends vs bonus
• Capital expenditure
• Cars
• Employment tax issues
• Selling up
• Miscellany
50. Some key dates
days… Corporation tax, personal allowance and pension changes
days… VAT increase
days… Capital allowance changes
days… before higher rate tax thresholds increase again
2010 – the year of 3 finance Acts!
52. Company Accounts
Changes come April 2011
• Electronic filing mandatory from 1 April 2011
• Accounts and tax computations required in iXBRL
format
• Submitted electronically with CT 600
• All corporation tax to be paid electronically
PLUS…relaxation of R+D tax relief rules
53. Dividends vs salary / bonus
• Director shareholders remain able to
exploit opportunities available
• Salary…dividend…rent…pensions…
interest…cars
• New 50% tax rate changes little
56. Director Shareholder
comparison
Williams Ltd has £100,000 of pre-tax profits to
transfer to director shareholder Mr Williams
• Company pays tax at 21%
• Williams is 40% taxpayer
• Class 1 NIC ceiling reached
2010/11 2011/12
Dividend – effective tax rate 40.75% 40.0%
Bonus – effective tax rate 47.7% 48.15%
57. • Plant and machinery writing down allowances cut
Capital allowance changes
• (*) Special rate applies to integral features and cars with emissions
160g/km or more
Before April 2012 From April 2012
Main rate 20% 18%
Special rate (*) 10% 8%
Annual Investment Allowance
• To 31-03-2010 £50,000 p.a.
• To 31-03-2012 £100,000 p.a.
• From 01-04-2012 £25,000 p.a.
58. Capital Allowance Changes –
an example
An example:
Torrance Limited will soon need to incur £110,000 on
some new vans
Is there a timing issue?
59. Torrance Limited
Purchase on…
Assuming a 31 March accounting date
15 March 2012 30 April 2012
£100,000 AIA £25,000 AIA
+10,000 @ 20% + £85,000 @ 18%
£102,000 relief £40,300 relief
£20,400 tax saved £8,060 tax saved
60. Tax relief on cars
• Purchase Before April 2012 After April 2012
• ≤ 110g/km 100% 100%
• 111 – 160g/km 20% WDA 18% WDA
• Over 160g/km 10% WDA 8% WDA
• Leased Cars
• ≤ 160g/km no restriction
• > 160g/km 15% restriction
Tax relief based on CO2 emissions
61. Honda vs BMW
Honda BMW
List price £26,500 £26,500
CO2 emission (g/km) 173 109
mpg 43.5 68.9
Annual road tax £175 £35
62. New BMW 320d 109/km
Efficient Dynamics Saloon
… w/off £26,500 vs profits in Year 1
… annual tax charge for (40%) employee £1,378 pa
63. Honda CR-V Ex 173g/km
… w/off £2,650 only vs profits in Year 1
… annual tax charge for (40%) employee £2,756 pa
64. Expensive cars…leasing
More attractive since April 2009
• 3 year hire charge c £40,000
• Tax disallowance (15%) £6,000 only
… pre April 2009 disallowance was £18,000
£100,000
65. Employment Tax – PAYE penalties
• A new regime effective from 6 April 2010
• Have you noticed yet?
• …probably not as HMRC won’t levy penalties until after April 2011
• Worse if you part pay liability as 5% penalty for any PAYE /NIC paid
6 months or more late
Late payments in a year Penalty
1 None
2-4 1%
5-7 2%
8-10 3%
11 or more 4%
66. Employment Tax – PAYE penalties
- example
Scatty Ltd has a monthly PAYE/NIC liability of £50,000, and misses the
payment deadline by between one and four days on eight occasions
during 2010/11, for a variety of reasons. Penalties will be due as
follows:-
£
First late payment -
2nd
– 4th
late payments 1,500 (£50,000 x 1% x 3)
5th
– 7th
late payments 3,000 (£50,000 x 2% x 3)
8th
late payment 1,500 (£50,000 x 3%)
Penalty £6,000
67. Employment Tax – Mobiles, PDAs
• Employee’s mobile phone…tax free?
• Company contract vs personal contract
• One (or two) mobiles?
• PDA?
• PDA plus a mobile?
68. Cycle to work scheme
• Employers can loan cycles to
employees as a tax free
benefit under salary sacrifice
• Cycles should be used
primarily to get to work
• Biggest benefit for higher paid
employees
69. Cycle to work scheme
Example
Guy is provided with a bike worth £1,000
under this scheme…Guy earns £45,000 p.a.
Monthly cost to hire £41.84
Total cost (12 months) £502
Saving 50%
Ownership transfer cost may also be
incurred
70. Employment Tax
Now there’s an idea!
• Encouragement award of ≤ £25 for suggestions…whether
implemented or not
• Financial benefit award of ≤ £5,000 for suggestions
• Relating to improved efficiency
• Expected to bring financial benefit
• AND adopted
• Can pay ≤ 50% Yr 1 expected benefit
≤ 10% Yrs 1 - 5 expected benefits
• Scheme must be open to all employees or entire group and
outside employee’s normal duties
71. Selling up?
• Capital Gains Tax rate up from 18% to 28%
for many
• But Entrepreneurs’ relief gives qualifying
business gains of up to £5million per person
at 10% only (was £1m / £2m)
• Will your business qualify?
72. Entrepreneurs’ Relief
example
Tax bill on sale £1,900 £1,000
Tax rate on sale (overall) 19% 10%
Why the difference?
The Huggetts and the Barnes both run successful care home
businesses. Both sold their companies for £10 million in July 2010
Comparing notes following the sale revealed:
73. Entrepreneurs’ Relief
Planning
Huggett vs Barnes
• Minimum 5% shareholding?
• Employee or office holder?
• Shares held minimum 12 months?
• Associated property etc?
74. Miscellany
• Time to pay arrangements…4 more years
• IR35…on the way out
• Pensions…large contributions still possible
until April 2011
• BUDGET DAY 2011 is on 23 MARCH
76. VAT topics
• VAT rate change
• Penalties from HMRC
• Top 10 Tips for a VAT visit
• VAT News
77. VAT rate change – up we go
• 20% standard rate as of 4 January 2011
• Anti-forestalling measures same as before
• Reeves factsheets – Request on feedback form
• How does this compare in EU?
– standard-rate must be between 15% minimum and
25% maximum
– European mean average = 20.56%
78. Anti-forestalling legislation
• pre-invoicing or pre-payment for goods or services
• supplementary charge of 2.5% where a VAT invoice
is issued and/or prepayment received before 4
January 2011 (creating an actual tax point) but the
basic tax point when goods or services are to be
provided is on or after that date
• conditions apply
79. The 2.5% charge will only apply where the customer cannot
recover VAT in full on the supply and at least one of the following
conditions is met:
Anti-forestalling legislation (cont.)
• the supplier and the customer are connected with each other;
or
• the supplier or a person connected to the supplier finances a
prepayment by the customer; or
• the supplier raises a VAT invoice where payment is not due in
full within six months of the invoice date; or
• the consideration for the supply and any related supply of
goods or services amounts to more than £100,000 and does
not represent normal commercial practice
80. Suppliers may wish to seek assurance from a customer
that the VAT on the supply will be fully recoverable, to
ascertain whether the supplementary charge should
apply
A prepayment of less than £100,000 between
unconnected parties with full payment expected within
6 months of the date of the invoice would not attract the
supplementary 2.5%
Anti-forestalling legislation (cont.)
81. Reasons for error
Penalties
No Penalty
Reasonable
Care
No Penalty
No Penalty
Reasonable
Care
No Penalty
Max 30%
Careless
Unprompted
Min 0%
Max 30%
Careless
Unprompted
Min 0%
Max 30%
Careless
Prompted
Min 15%
Max 30%
Careless
Prompted
Min 15%
Max 70%
Deliberate
Prompted
Min 35%
Max 70%
Deliberate
Prompted
Min 35%
Max 70%
Deliberate
Unprompted
Min 20%
Max 70%
Deliberate
Unprompted
Min 20%
Max 100%
Deliberate
and
Concealed
Prompted
Min 50%
Max 100%
Deliberate
and
Concealed
Prompted
Min 50%
Max 100%
Deliberate
and
Concealed
Unprompted
Min 30%
Max 100%
Deliberate
and
Concealed
Unprompted
Min 30%
82. 1. Prior to the visit the VAT office should advise which
records are required for the inspection and who
will be attending – make a note of the officer’s
name and details and where and when they will be
visiting
2. Make sure that the right people are available at the
time of the visit
3. Prepare any questions or disclosures that you may
have beforehand, plus any useful information for
the officer
4. Offer normal hospitality and accommodation –
don’t go overboard but equally don’t neglect to
provide refreshments and the usual ‘comforts’
10 Ways to Handle a VAT Visit
83. 5. Make sure that you allow plenty of time for the visit
to take place – as well as yourself and any
relevant colleagues, ensure that books and
records and work space are available
6. Allow the officer to work unhampered by noise,
interruption or discomfort – additionally make sure
that all health and safety requirements are
observed
7. Check with the officer whether he or she has
finished with specific books and records before
removing them and if they no longer need to
speak to members of staff before they leave
How to Handle a VAT Visit
84. 8. Carefully record any directions or helpful
comments given by the officer – get their contact
details
9. On completion of the visit take time to discuss with
the officer any anomalies or points of contention
that may have come up
10. Above all, don’t panic! The visit may result in a
more efficient way of dealing with your VAT
How to Handle a VAT Visit
85. • Further ‘Place of Supply’ changes coming 01-01-11, including
cultural, artistic, sporting, scientific, educational, entertainment &
similar services – zero-rated where supplied to business customers
• Postal charges – standard-rated from 31-01-11 where ‘competitive’,
i.e. Royal Mail don’t get unfair advantage over other providers
• HMRC will be allocated £900 million over the four years to April
2015 to ‘raise additional revenues from those who undermine the
tax system and seek to avoid paying their fair share’
• EU VAT refund deadline extended to 31 March 2011 for claims
relating to 2009 (the portal mechanisms were not all up and
running)
• 5% VAT rate derogation
VAT News
87. Important changes to employment
legislation
• Equality Act 2010
• Default Retirement Age
www.uniquetokent.co.uk
88. “All animals are equal,
but some animals are more equal than others.”
Animal Farm, George Orwell - 1945
United States Declaration of Independence
written by Thomas Jefferson in 1776
www.uniquetokent.co.uk
Equality Act 2010
90. • Came into force on 1 October 2010
• Replaces:
• the Equal Pay Act 1970
• the Sex Discrimination Act 1975
• the Race Relations Act 1976
• the Disability Discrimination Act 1995
• much of the Equality Act 2006
• the Employment Equality (Religion or Belief) Regulations 2003
• the Employment Equality (Sexual Orientation) Regulations 2003
• the Employment Equality (Age) Regulations 2006
• the Equality Act (Sexual Orientation) Regulations 2007
• plus other ancillary pieces of legislation.
www.uniquetokent.co.uk
Equality Act 2010
91. Protected characteristics:
• Age
• Disability
• Gender re-assignment
• Marriage and civil partnership
• Pregnancy and maternity
• Race (now including colour, nationality, and ethnic or national
origins)
• Religion or belief (including lack of religion or belief)
• Sex
• Sexual orientation
Section 4, Equality Act 2010
www.uniquetokent.co.uk
Equality Act 2010
92. Types of discrimination and other unlawful conduct that
apply to most of the protected characteristics:
• Direct discrimination
• Combined discrimination: dual characteristics
• Indirect discrimination
• Harassment
• Victimisation
• Instructing, causing, inducing and aiding
discrimination
www.uniquetokent.co.uk
Equality Act 2010
94. • Direct Discrimination
Someone is treated lass favourably than another person because of
a Protected Characteristic.
• Discrimination by Association
Direct discrimination against someone because they associate with
another person who possesses a Protected Characteristic.
• Discrimination by Perception
Direct discrimination against someone because those discriminating
think that person possesses a Protected Characteristic.
• Indirect Discrimination
Where there is a rule or policy that applies to everyone but that has
the effect of disadvantaging a particular Protected Characteristic
www.uniquetokent.co.uk
Equality Act 2010
95. • Harassment
Unwanted conduct related to a Protected Characteristic, which has the
purpose or effect of violating an individual’s dignity or creating an
intimidating, hostile, degrading, humiliating or offensive environment for that
individual.
• Harassment by a Third Party
Employers will be potentially liable for harassment of employees by people
(third parties) who are not employees, such as customers or clients.
• Victimisation
Victimisation occurs when an employee is treated badly because he or she
has made or supported a complaint, or raised a grievance under the
Equality Act, or because they are suspected of doing so.
www.uniquetokent.co.uk
Equality Act 2010
96. Pre-employment health questions
• Prohibited.
Unless necessary …
• to establish if there is a duty to make reasonable
adjustments.
• to check whether an applicant can carry out a function
that is intrinsic to the job.
www.uniquetokent.co.uk
Equality Act 2010
97. “Retirement at sixty-five is ridiculous.
When I was sixty-five I still had pimples.”
- George Burns
www.uniquetokent.co.uk
Default retirement age
98. The Employment Equality (Age)
Regulations 2006
Prohibits discrimination in employment on the grounds of
age.
Introduced national Default Retirement Age (DRA) of 65.
Prohibited compulsory retirement below 65 unless
objectively justified.
www.uniquetokent.co.uk
Default retirement age
99. Proposed changes:
6 April 2011: Transitional arrangements to phase out
the default retirement age and all associated statutory
retirement procedures (including the "duty to consider"
and "right to request" procedures) will begin.
No new notifications of retirement under the default
retirement age may be issued by employers after 31
March 2011.
1 October 2011: The default retirement age and the
statutory retirement procedures will be abolished.
www.uniquetokent.co.uk
Default retirement age
100. Transitional arrangements from 6 April 2011 to 1 October 2011.
• Intended date of retirement before 1 October 2011. The DRA
will continue to apply so long as the employer continues to follow
the statutory retirement procedures.
• Intended date of retirement after 1 October 2011. The DRA will
no longer apply. The employer will need to be able to objectively
justify any retirement taking effect after 1 October 2011.
• If an employer gives notice of retirement after 31 March 2011,
they will no longer be able to rely on the DRA because the
minimum 6 months' notice would expire after 1 October 2011. The
short notice provisions allowing less than 6 months notice will
have been repealed.
www.uniquetokent.co.uk
Default retirement age
101. Objective justification
From April 2011, employers wishing to have a
compulsory retirement age will only be able to do so if
they can objectively justify it.
Must be a proportionate means of achieving a
legitimate aim.
An objective justification allows employers to
discriminate both directly and indirectly on the basis of
age.
www.uniquetokent.co.uk
Default retirement age
102. “Proportionate”:
• what the employer is doing is actually achieving its aim
• discriminatory effect should be significantly outweighed by the
importance and benefits of the legitimate aim
• no reasonable alternative to the action.
“Legitimate”:
• economic factors such as the needs of and the efficiency of running
a business
• health, welfare and safety of the individual (including protection of
young people or older workers)
• the particular training requirements of the job.
www.uniquetokent.co.uk
Default retirement age
103. Legitimate aims which might justify age
discrimination, depending on the circumstances:
• Health, welfare and safety.
• Facilitation of employment planning.
• Particular training requirements.
• Encouraging and rewarding loyalty.
• The need for a reasonable period of employment
before retirement.
• Recruiting or retaining older people.
www.uniquetokent.co.uk
Default retirement age
104. Aims that tribunals have found to be legitimate:
• Reforming a retirement benefits scheme to make
a firm's profit-share fairer.
• Achieving a supportive culture by avoiding the
need to confront older under-performing partners,
and encouraging staff to remain with the firm with
a view to advancement.
• Ensuring a "reasonable flow" of new judicial
appointments.
• Ensuring a spread of skills and experience in
workers of all ages.
• Ensuring the availability of career progression
opportunities.
www.uniquetokent.co.uk
Default retirement age
105. • It is not easy to prove objective justification
• Employers will have to provide valid evidence if they
are challenged.
www.uniquetokent.co.uk
Default retirement age
108. Summary
• High Level Pension Planning for Directors
• Employer Pension Proposals - Pensions Act 2008
• Deposit Accounts
109. High Level Pension Planning
• Three tax regimes in three years
• Significant opportunity to make large funding
before greater restrictions are introduced
110. High Level Pension Planning
April 2006 “A Day”
• Everyone can pay up to 100% of earnings
• Maximum £255,000 (2010/11)
• Created flexibility over amount and timing of
contributions
111. High Level Pension Planning
Budget April 2009
• Complex anti-forestalling provisions announced
• Those earning more than £130,000 pa face
restrictions
• Limited to ‘protected’ contributions or for most,
between £20k - £30k pa
112. High Level Pension Planning
Opportunity
• Those with relevant income of less than £130,000 in
current or previous two tax years can contribute up to
£255,000 attracting Corporation Tax relief and no NI or
P11D charge
• Attractive where effective rate of tax on dividend and
salary between 41% and 48%, higher for top rate
taxpayers
• Permissible to contribute commercial property
instead of cash
113. High Level Pension Planning
Post 6 April 2011
• Annual allowance will be reduced to £50,000 pa
for everyone, regardless of earnings
• More restrictive for some although much better
than proposals due to be introduced for 50% tax
payers
114. High Level Pension Planning
Opportunity
• Those with relevant income greater than £130,000
who have been restricted by anti-forestalling
measurers have an opportunity in April 2011 to
contribute up to £200,000 and gain tax relief at
highest marginal rate!
• Planning with your adviser is essential.
• If you are not sure of your options, speak to us!
116. Biggest change to employer based
pension schemes
• What is NEST ?
• What does it mean for your company ?
• What are your options ?
117. What is NEST ?
• Introduced in Pensions Act 2008 with the aim to
provide work based pensions to a further 7 million
people
• Enrolment will begin from April 2012
• Employer and employee contributions are compulsory
• The Pensions Regulator will contact all employers a
year before the start date
118. What does it mean for your Company?
• Qualifying workers must be enrolled into a qualifying
work based pension
• Qualifying workers:
– Are aged at least 22 but less than State Pension
age
– Work in the UK
– Earn more than £5,715 pa
119. What does it mean for your Company?
• A qualifying work based pension scheme must be
designated
• Minimum level of contributions based on qualifying
earnings above £5,715
• No reference to charges or scheme design
120. What does it mean for your Company?
TOTAL Employer
10/2012 – 09/2016 2% 1%
10/2016 – 09/2017 5% 2%
10/2017 - onwards 8% 3%
Minimum contribution requirements:
121. What are your options?
• Designed for low / moderate earners
• Maximum £3,600 pa contribution
• No transfer in / out
• Very restrictive and cautious fund choice
1) NEST
122. What are your options?
• Choose provider (existing scheme?)
• No restriction on contributions / transfers
• Much wider fund choice
• Better employee perception
• Provision of ongoing advice to members
2) Employer Sponsored Group Pension
123. Example
ABC Ltd currently offers no scheme, employs 30 eligible
workers with average salary of £35,000 pa
Under the proposals, the cost of the scheme will be:
• 3% Employer Contribution £31,500 pa
• 4% net Employee Contribution £42,000 pa
124. Example
As an alternative, ABC Ltd could establish a qualifying
work based pension scheme using salary sacrifice, for
example:
• 8% employer contribution (3% Employer + 5%
Salary Sacrificed)
• Scheme contributions + member take home pay unchanged
• Which means £7,245 Employer NI Saving on Salary Sacrificed.
125. Example
£7,245 saving could be:
• Used to provide alternative employee benefits (e.g.
fund the cost of a Death in Service Scheme)
• Recycled to increase Pension Contributions
• Used partially or in full to offset the cost of running
the scheme to the employer
126. Example
• Cost neutral with (1) above but a more attractive
overall benefit package can be created
Result
127. Deposit Accounts for Companies
Interest rates are very low for companies :-
6 months 12 months 3 year
Lloyds £100k 0.54% 0.83% 2.0%
£500k 0.57% 0.98% 2.0%
Barclays £100k 0.35% 0.73% -
£500k 0.54% 0.97% -
RBS £100k 0.32% 0.70% -
£500k 0.50% 0.94% -
Open Market: £100k 1.85% 2.75% 3.5%