Good newsGood newsPayroll Giving
In 2004, around 530,000 employees gave £85 million to charity through Payroll Giving, with one in five employees having access to a Payroll Giving scheme. The Home Office has launched an incentive scheme to encourage more employees to give to charity. The scheme applies to employers with fewer than 500 staff, who set up a Payroll Giving scheme between April 2004 and December 2006 and consists of two elements:
Payroll Giving allows employees to give to charity from their gross salary and get immediate tax relief at up to 40%.
Further information including detail on how to sign up for the scheme is available at www.payrollgivinggrants.org.uk
Working Tax Credit
In Budget 2004 the government announced its intention to phase out the payment of WTC via employers (PVE). No date was set for this change and the whole matter then went very quiet.
It has now been confirmed that PVE will be phased out between November 2005 and April 2006 and replaced with direct payment by the Inland Revenue. This move will undoubtedly be welcomed by many small businesses.
National minimum wage (NMW)
The NMW rate will rise from £4.85 to £5.05 in October 2005 and to £5.35 in October 2006. The rise is in line with the recommendation of the Low Pay Commission and will take the minimum wage in 2006 to almost 50% above its 1999 introduction rate. The youth rate which applies to 18-21 year olds will rise to £4.25 in October 2005 and to £4.45 in October 2006. The operation of the new rate for 16 and 17 year olds currently at £3.00 will be kept under review.
The announcement of the increases has not found favour in all quarters. The Federation of Small Businesses has declared that ‘year-on-year above inflation increases in the NMW are dangerous for the economy and send the wrong message to employers’. The Institute of Directors warned that increases have a knock-on effect as the wages of better paid employees in an organisation also need to increase to maintain a large enough gap between them.
There are calls in other quarters for the whole NMW regime to be simplified. Certainly we would agree that the rules do seem unnecessarily complex. Please talk to us if you have any questions or concerns relating to any aspect of the NMW.
Electronic filing
This is not so much bad news, more the Inland Revenue’s response to a very small minority of cases where financial incentives were being exploited artificially.
Large employers (those with 250 employees or more) are obliged to file their 2004/05 end of year returns (forms P35 etc) electronically. Medium-sized employers (those with between 50 and 250 employees) will be required to do likewise with effect from 2005/06.
Smaller employers will not be obliged to file electronically until 2009/10. However to encourage an earlier switch to online filing small employers are being offered financial incentives amounting to a total of £825 if they begin to file electronically from 2004/05. The government is concerned that, in a tiny minority of cases, there has been exploitation of the incentives. As a consequence, provisions have been introduced with effect from 18 March 2005 to counter artificial arrangements and refuse the tax-free incentive payments in certain circumstances.
The good news is this will not affect the availability of the incentives in the majority of cases.