Well according to a recent Employment Appeals Tribunal (EAT), yes, they should.

In this latest case, a taxi driver in Watford was employed by a firm, which dictated that as part of his conditions of employment he was required to provide a vehicle and uniform, both of which were rented from a company associated with his employer.

Rental costs

In the case of Augustine v Data Cars Ltd, Mr Augustine was employed as a taxi driver by Data Cars.

But at the end of his employment, he brought a variety of claims to the employment tribunal, including that he had not been paid the NMW.

When making remuneration calculations, there are certain allowances and expenses which are deductible.

Mr Augustine argued the cost of the car rental and the purchase of the uniform should be deducted from his total remuneration.

Successful appeal

The initial employment tribunal disagreed, concluding the payments did not need to be considered for the purposes of calculating NMW, on the basis that both payments were optional and not a condition of employment.

Mr Augustine successfully appealed, with both payments found to be deductions for the purposes of calculating his NMW.

The EAT allowed the claimant’s appeal and pointed out that the correct test was whether the expenditure was incurred “in connection with” the employment and that both the rental payments and uniform costs satisfied that test.

This case highlights the complexities involved with calculating pay for NMW purposes and the potential pitfalls of getting your calculations wrong.

Careful calculations

Employers risk a penalty and being ‘named and shamed’ publicly by HMRC if they fall foul of the NMW regulations, even if the mistakes may have been made quite innocently.

Many employers are caught out because of their uniform policies. NMW regulation 12 and 13 provide that any deductions made by an employer for the cost of uniform provided or for the cost of uniform to be purchased (whether from the employer directly, a third party generally or by the worker directly) does not reduce worker pay below the minimum wage in the relevant pay period.

The same principle also applies to tools which workers are required to provide or that they are provided with for the purposes of their work.

It does not matter that the uniform or tool can also be used for the worker’s benefit. What matters is that wearing the item or having the tool is a requirement of their employment. Any additional uniforms or tools bought by the worker are not counted for NMW purposes.

A common issue, as in this case, is that many employers do not appreciate that unbranded items of clothing, which were required to be worn at work such as white t-shirt, black trousers or flat black shoes, are also considered to be ‘uniform’ by HMRC when assessing whether NMW had been complied with.

This kind of area can be a minefield for employers, but basically, when calculating hourly pay you must divide total pay by the number of hours worked.

Remember, the National Living Wage increases to £9.50 from £8.91, while the National Minimum Wage for 21- and 22-year-olds rises to £9.18 from £8.36 from next April.

Link: Mr W Augustine v Data Cars Ltd: EA-2020-000383-AT(previously UKEAT/0254/20/AT)

Self-Assessment taxpayers have been warned to be on their guard against fraudsters trying to steal their information.

Over the last year, HM Revenue & Customs (HMRC) received nearly 900,000 reports from the public about suspicious HMRC contact, which included phone calls, texts or emails.

More than 100,000 of these were phone scams, while over 620,000 reports from the public were about bogus tax rebates.

HMRC is issuing reminder emails and SMS texts to Self-Assessment taxpayers about the 31 January deadline and is warning people to not be taken in by malicious emails, phone calls or texts, thinking that these are genuine HMRC communications referring to their tax return.

Some of the most common techniques fraudsters use include phoning taxpayers offering a fake tax refund.

They are also pretending to be HMRC by texting or emailing a link that will take customers to a false web page, with a similar appearance to the HMRC official page, where their bank details and money will be stolen.

Fraudsters are also known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

What to look out for

It could be a scam if calls, emails and text messages, are:

• Unexpected
• Offering a refund, tax rebate or grant
• Asking for personal information like bank details
• Threatening in their nature
• Telling you to transfer money.

More than four million genuine emails and SMS are being issued to Self-Assessment taxpayers pointing them to guidance and support.

The communication will prompt them to think about how they intend to pay their tax bill and to seek support if they are unable to pay in full by the deadline at the end of January. Taxpayers should consult their accountant for advice on this.

Always be on your guard

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Never let yourself be rushed. If someone contacts you saying they’re from HMRC, wanting you to urgently transfer money or give personal information, be on your guard.

“HMRC will also never ring up threatening arrest. Only criminals do that.

“Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the ‘HMRC scams’ advice on GOV.UK and find out how to report them to us.”

People can report suspicious phone calls using a form on GOV.UK; customers can also forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599.

HMRC has a dedicated team working on cyber and phone crimes using state of the art technology to counter misleading and malicious communication.

Anyone who is in doubt about whether a website is genuine should visit GOV.UK for more information about Self-Assessment and use the free signposted tax return forms.

Link: HMRC warns customers about Self-Assessment tricksters

For busy small businesses, a PAYE Settlement Agreement (PSA) offers a simpler alternative to pay your employees.

It allows you to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for your workforce.

According to HM Revenue & Customs (HMRC), if you get a PSA for these items, you will not need to:

• Put them through your payroll to work out tax and National Insurance
• Include them in your end-of-year P11D forms
• Pay Class 1A National Insurance on them at the end of the tax year (you pay Class 1B National Insurance as part of your PSA instead).

Why go for a PSA?

The scheme may allow you to cut back on paperwork and administration if you are forever totting up minor taxable expenses, such as employee entertainment, birthday presents, or incentive awards.

You will no longer have to put these expenses through your employee’s payroll, pay Class 1A NICs on them (you’ll pay Class 1B NICs through your PSA), or include these expenses in forms P9D and P11D.

The expenses categories of the settlement agreement include:

Minor expenses

These could be birthday presents, health club memberships, expenses deemed to be personal yet incidental, or even a present, flowers, or a voucher should an employee fall ill.

Irregular expenses

These could include:

• Relocation expenses over £8,000 (these are tax-free below £8,000)
• The cost of attending overseas conferences
• Use of a company holiday flat.

Impracticable expenses or benefits

These are expenses are things that are difficult to place a value on, or divide up between individual employees, but could include:

• Staff entertainment that is not exempt from tax or National Insurance Contributions
• Shared cars
• Personal care expenses, for example, hairdressing.

How to apply

You will need to contact HMRC, with a description of expenses you believe are covered.

Once they’ve agreed on what can be included, they’ll send you two draft copies of form P626. Sign and return both copies. HMRC will authorise your request and send back a form – this is your PSA.

You’ll need to report anything that cannot be included separately using form P11D. You do not need to send a P11D if you’re paying employees’ expenses and benefits through your payroll.

Use form PSA1 to help you calculate the overall amount you’ll need to pay, otherwise, HMRC will calculate the amount and you will be charged more if this happens.

Send to HMRC as soon as possible after the end of the tax year. They’ll get in touch with you before 19 October following the tax year that the PSA covers to confirm the total tax and National Insurance you need to pay.

You’ll need to give an agent a signed letter of authority to make a PSA on your behalf if they do not have the authorisation to do so.

Campaigners are angry over the fact that more and more people will be drawn into paying Inheritance Tax (IHT), after a big rise in receipts.

They are angry that Chancellor Rishi Sunak has frozen the IHT nil rate band and residence nil rate band at £325,000 and £175,000, respectively, until 2026, while the value of homes has rocketed – potentially drawing more people into paying this tax.

Estates that exceed these allowances face paying 40 per cent IHT on anything above these amounts.

Given this freeze and rising house prices, it should come as no surprise that the latest IHT receipts totalled £3.6 billion between April and October this year, up from £3 billion in the same period last year.

What is IHT?

IHT is a tax on the estate (the property, money and assets) of someone who’s died. There’s normally no IHT to pay if:

• The value of your estate is below the £325,000 tax-free nil rate band allowance.
• You give away your main home to your children (including adopted, foster or stepchildren) or grandchildren, as the additional residence nil rate band increases your overall allowance to £500,000.

Any unused allowance can be passed to your partner after your death, if you are married or in a civil partnership. This could mean that a couple could pass on as much as £1 million tax-free if they make full use of the allowances on offer.

What are the rates for IHT?

The standard IHT rate is 40 per cent and it’s only charged on the part of your estate that’s above the threshold.

So, if your estate is worth £500,000 and your tax-free threshold is £325,000. The IHT charged will be 40 per cent of £175,000 (£500,000 minus £325,000).

The estate can pay IHT at a reduced rate of 36 per cent on some assets if you leave 10 per cent or more of the ‘net value’ to charity in your will.

Are there any ways to save on IHT?

You can give up to £3,000 per year per person to a beneficiary without it being subject to tax after death.

If you haven’t previously given a gift in the preceding tax year then you can backdate it and make a gift of £6,000 in a single tax year.

Any gifts over this amount you give to beneficiaries while you’re alive may be taxed after your death, depending on when the gift was made.

Under the seven years rule, a ‘taper relief’ is applied that might mean the IHT charged on the gift is less than 40 per cent on a sliding scale.

Other reliefs, such as Business Relief, allow some assets to be passed on free of IHT or with a reduced bill, while trusts can help to pass on wealth tax-free.

Link: Inheritance tax climbs again – fury as more bereaved families dragged into ‘horrid tax’

Every year many of us decide to set a New Year’s resolution. Perhaps it is losing weight, going vegetarian or putting extra money away in your savings.

Of course, inevitably, life can get in the way and it is easy to lose track of the promises you set yourself.

However, if there is one goal, we would all like to achieve, it is for our businesses to flourish and thrive.

That is why we believe it is important to set some New Year’s resolutions for your organisation that builds resilience and helps you grow.

Here are our eight New Year’s resolutions for businesses to follow:

Look for new funding

It has, admittedly, got more challenging for businesses to find the finance they need to grow, but if you are planning to invest or you need some additional funding to tide you over next year you must consider your options.

Although many of the Government-backed schemes are now closed, the Recovery Loan Scheme has been extended into next year, offering much-needed support to SMEs.

The British Business Bank is also helping to manage many regional schemes for small businesses so it is worth taking a look at its website here.

If you can’t secure funding from traditional lenders, such as banks, have you considered alternative finance, such as peer-to-peer lending or crowdfunding?

Improve cash flow

Cash flow is the lifeblood of your business. Without good cash flow, many companies fail. If you are continually worrying about cash flow then you need to take action to improve it.

This could include strengthening or automating your credit control systems or finding ways to boost sales or reduce costs so that more money is flowing into your company or less is leaving respectively.

Review costs

The nation is experiencing a cost crisis driven by many factors, including price inflation on many goods and materials, energy costs and skills shortages.

These are beyond the power of our national leaders, let alone you as a business owner, but that doesn’t mean you should do nothing.

Despite how challenging it may seem, there is often a way to reduce costs. This could include switching suppliers, finding savings by reducing or cutting unprofitable activities or recovering some of your costs through tax reliefs.

Get a better picture of financial health

It is very difficult to plan for the year ahead or react to changes in the market without having a clear picture of your organisation’s financial health.

Without the right data and information, how can you expect to make effective decisions?

Thankfully, there has perhaps never been a greater opportunity to learn more about your business through regular management accounts, supported by the latest cloud accounting technology – which can feed you information in real-time.

Retain and reward

Although we have spoken about cutting costs, the one area of your organisation where investment may be key, at least temporarily, is your workforce.

The UK, and much of the world, is experiencing labour shortages in certain sectors following the impact of the pandemic.

This crisis has led many people to reassess their life, including where they work and their goals.

With a million job vacancies in the UK, those who are dissatisfied with their current career are making a switch, so you need to think about how you can boost pay, provide benefits and change your work environment to secure the top talent.

Revitalise your business plan

When was the last time you properly reviewed your business plan? If you haven’t done it in a while, or you made temporary changes to it during COVID-19, you need to revisit it to make sure your goals and current strategies are aligned.

It is worth taking some time to review your operation as a whole and ask yourself what is profitable, what supports cash flow and where are your weaknesses.

This should help you formulate a new business plan for the next 12 months – but make sure you continue to review this and act upon your findings.

Cut your tax bill

Do you or your business pay too much tax? Many taxpayers often pay more than they need to because they do not make full use of the reliefs, allowances and tax saving opportunities available to them.

Every year we surprise our clients by helping them find ways to reduce their liabilities, often saving them and their business thousands of pounds.

This need not be a complex process if you seek the support of your accountant or tax adviser, who can review your activities, taxable income and investments to create a plan that reduces the tax paid.

Ask for more help

Perhaps the most essential advice we can offer is to ask for help. You aren’t alone and there are always people who can assist and support you.

A small investment at the start of 2022 in professional advice, could open up new opportunities to save time and money while reducing the stress and strain of running a business.

The final stage of Making Tax Digital (MTD) for VAT is just a few short months away.

From 1 April 2022, even the smallest VAT registered business will need to comply with the quarterly digital recording and reporting of VAT – including those below the £85,000 VAT threshold who are voluntarily registered.

Millions of UK VAT registered businesses above the VAT threshold of £85,000 have already begun complying with MTD since it was introduced several years ago.

They have invested time and money to bring their systems and processes up to date with the tax regime’s requirements.

Now many more small businesses are likely to be caught out by this change, which will require them to use the latest MTD compliant cloud accounting software.

Given the scale of the change and the steps needed to comply with the regulations, businesses that are affected by this change must act now to ensure they are compliant.

To achieve this, they may need to invest in:

• HMRC compliant software
• Additional training
• Help from their accountant.

MTD compliant software

You must use the correct software to meet HM Revenue & Customs’ (HMRC) MTD requirements.

HMRC requires software that can:

• Keep records in a digital form
• Preserve digital records in a digital form
• Create a VAT or tax return from the digital records held in functional compatible software and provide HMRC with this information digitally
• Provide HMRC with VAT and tax data voluntarily
• Receive information from HMRC via the API platform that the business has complied.

Many of the existing cloud accounting platforms out there have been created or revised to ensure that they meet the requirements of MTD for VAT.

Not only that, but they offer many other advantages to businesses of all sizes. Often helping owners to save time and money while providing critical real-time insights into a business’s financial health, which can be invaluable for decision-making.

We can help you find online cloud accounting software that is suited to you and your business’s needs, thanks to our experience supporting many other organisations with this transition.

Failure to comply

Given the scale of the change, there are concerns that some businesses may not be ready in time.

Unlike the initial launch of MTD, there will be no soft-landing period for this latest stage and businesses can expect to be fined or even investigated by HMRC for non-compliance.

It is, therefore, essential that you seek advice to help you with your preparations for this change if you are not yet compliant.

We have already helped many businesses migrate to the latest cloud accounting technology in preparation for MTD, delivering many benefits beyond compliance.

Given the impending implementation of these new rules and the risks associated with not meeting them by April next year, we are ready and able to support businesses, like yours, as they prepare for MTD.

For years businesses on the British high street have been calling for reforms to the business rates system.

The Chancellor has finally announced new measures in the Autumn Budget that he claims will reduce the burden of business rates in England by over £7 billion over the next five years.

The reforms are intended to make the business rates system “fairer, more responsive and more supportive of investment.”

Based on the conclusions of the Government’s review of business rates, which was published alongside the Budget, the reforms include six measures that seek to minimise the costs of business rates.

Here are the key points:

Temporary retail, hospitality and leisure discount – A new temporary business rates relief will be made available to eligible retail, hospitality and leisure properties for 2022/23. Eligible properties will receive 50 per cent relief, up to a £110,000 per business cap. Critics have pointed out that the cap may limit the effectiveness of this relief for businesses with multiple sites.

The business rates multiplier – This will remain frozen for a second year, from 1 April 2022 until 31 March 2023. This means that the small business multiplier will be 49.9p (for businesses with a rateable value below £51,000) and the standard multiplier 51.2p (for businesses with a rateable value of £51,000 or more). Multiply your rateable value by your multiplier to show how much you will have to pay in business rates (before any relief is deducted).

Improvement relief – This will offer 12 months of relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The Government has said it will launch a consultation on this relief with it coming into effect in 2023.

Targeted business rate exemptions – Introduced from 1 April 2023 until 31 March 2035, these will support eligible plant and machinery used in onsite renewable energy generation and storage and offer a 100 per cent relief for eligible ‘heat networks’, as part of plans to decarbonise non-domestic buildings.

Revaluations – One of the key criticisms of the business rates system is the infrequency of revaluations. From 2023, the Government will increase the frequency of business rates revaluations so that they take place every three years instead of every five. This should ensure rateable values are more accurate and reflect the market better. The Government will provide additional funding to the Valuation Office Agency to support the delivery of the new revaluation cycle.

Transitional relief for small and medium-sized businesses and small business scheme extension – These schemes will be extended for another year and will restrict bill increases to 15 per cent for small properties (up to a rateable value of £20,000 or £28,000 in Greater London) and 25 per cent for medium properties (up to a rateable value of £100,000), subject to subsidy control limits.

What about the online sales tax (OST)?

Part of the earlier review looked at ways of implementing an OST to make the retail business space more competitive. At the moment the likes of Amazon benefit from selling the same goods as high street retailers but with lower business rates due to where their warehouses are located.

The OST proposals would look to address this imbalance by taxing goods sold online. In its report alongside the Autumn Budget, the Government said it will continue to explore the arguments for and against a UK-wide OST and will publish a consultation shortly.

If such a measure were introduced, the revenue generated from it would be used to reduce business rates for physical retailers in England.

If you are unsure how these reforms will affect your business costs you should speak with your accountant, as it may be possible to plan investments around the reliefs and exemptions that are introduced.

Link: Autumn Budget 2021

The Help to Grow campaign was first announced in the Spring Budget earlier this year but received yet another mention in the Autumn Budget as the Government ramps up support for smaller businesses.

It has been designed to help more than 100,000 SMEs access management training and advice on innovations that are focused on boosting productivity.

Within the latest Budget, the Chancellor committed an extra £196 million in 2024/25 for the Help to Grow Schemes.

What is Help to Grow: Management?

This part of the initiative has already been launched in more than 20 business schools across the UK. It is offering thousands of businesses the opportunity to access an industry-led curriculum, one-to-one mentoring, and alumni network backed by Government funding. Its goal is to provide better training to business owners and their management teams.

What is Help to Grow: Digital?

This will provide SMEs with impartial, high-quality advice on how to use productivity-enhancing software that can benefit their business.

From December, SMEs will be able to access support through the online platform and vouchers to help them with the costs of adopting new software, including cloud accounting systems and support.

What other support is being offered alongside these programmes?

The Help to Grow Scheme is part of a larger campaign that included the launch of the British Business Bank (BBB).

The BBB has already had £484 million invested into it by the Government and the Autumn Budget confirmed a further £1.4 billion of investment in future.

The BBB’s primary goal is to help “businesses thrive and address regional finance gaps”, it wants to make sure that small and medium-sized enterprises (SMEs) can access the finance they need to thrive.

Funding initiatives from the BBB include the Start-Up Loans Scheme, the Regional Angels Programme and the expanding Regional Funds.

How can businesses access the support on offer?

If businesses are interested in using either the BBB’s loans or the Help to Grow Schemes, they should speak with their advisers first to make sure that the funding and support meet their goals.

They can also visit the following sites for more information.

• Help to Grow
• British Business Bank

Link: Autumn Budget 2021