Auto enrolment is changing

Auto Enrolment is changing – Are you aware?

From 6 April 2018, minimum contributions are increasing for Auto Enrolment. By law, the employer must pay a minimum contribution of 2% and the employee has to top this up to the required total contribution of 5%, meaning employee contributions rise from 1% to 3%.

If the employer pays the minimum total contribution (5%) then the employee will not need to make any contribution, unless the scheme rules requires them to do so.

These increases are a legal requirement and changes will need to be made in April in order for the scheme to remain a qualifying scheme. If the contributions are below this level the scheme may not be used for automatic enrolment.

Both the employer and employee may choose to pay more than the minimum contributions if they wish. If your pension scheme already has contributions of more than the total minimum contributions no changes will be needed in April.

There are no additional duties requiring employers to advise employees of the changes, but it would be a good idea to do so to minimise queries.

Operating through a company – managing the IR35 risk

What Is IR35?

There is a lot of information about IR35 and urban myths of which many aren’t true. IR35 came into effect in April 2000 and was designed to stop contractors working as disguised permanent employees i.e. benefiting from the tax advantages of being a contactor without accepting the increased responsibilities of company ownership. This means working with the same level of responsibility, control and liability expected of directors of other limited companies. For example an IT worker may resign from their permanent role on a Friday, but return on Monday doing the same job, at the same company, same desk with the same manager. The only difference is they are now doing the job as an IT Contractor working through their own limited company.

Due to the increased work, risks and responsibility there are certain tax advantages, for example dividend payments (profits taken from your company) though a limited company do not attract National Insurance contributions, which is fair enough as you wouldn’t be able to benefit from all the standard employee benefits such as holiday pay, sick pay, pension etc.

What is inside and outside IR35?

Essentially if you have the same benefits, responsibilities and control as a permanent employee, then you would more than likely be classed as inside IR35 (caught by IR35). Some of the key factors that determine if you’re inside or outside IR35 are control, financial risk, substitution, provision of equipment (sometimes, especially in secure sites you may have to use a client side equipment), right of dismissal and employee benefits.
Many of the above will be detailed in your contract. However, it is best to remember that although HM Revenue and Customs will more than likely want to see your contract, your working practices must reflect what is in your contract.

IR35 can be a complex issue, but it can be managed.

The underlying message emerging from the HMRC is that there is considerable IR35 under-compliance. HMRC want to tackle the issue with legislative changes and also alterations in approach. It is now more important than ever to understand whether your arrangement is IR35 compliant – there is a lot of money at stake! We can perform comprehensive IR35 Contract Review and look at both your contractual terms and working practices to offer you a clear opinion on your IR35 status.

So, don’t wait until HMRC start taking an interest. Simply call us on 0117 304 8455 to discuss your requirements.