ICAEW reminds employers to make use of tax break as seasonal celebrations commence

The Institute of Chartered Accountants in England and Wales (ICAEW) is reminding employers holding a seasonal party to make use of a tax break which permits businesses to spend a specific tax-free amount per employee each year.

For a party to be exempt from tax, it must be an annual occurrence, cost the business no more than £150 per attendee and be open to all employees.

Meanwhile, the introduction of a new trivial benefits exemption from 6 April 2016 allows employers to gift employees items up to the value of £50. Gifts to employees are usually taxable, but may be deemed trivial if they cost less than this amount.

However, the exemption doesn’t cover gifts that consist of cash or cash vouchers, or where the employee is entitled to the benefit as part of a contractual obligation (including under salary sacrifice arrangements).

Additionally, the trivial benefits exemption does not apply if the benefit is supplied in recognition of services performed by the employee as part of their employment duties.

Anita Monteith, Tax Faculty Technical Manager at the ICAEW, commented: ‘The tax exemption for a staff Christmas party is a great way to reward hard work and boost staff morale.

‘Don’t forget if you spend as little as one penny over the [£150] limit, the full amount spent on the party becomes liable to income tax and national insurance.’

New flood insurance scheme launched to help small businesses

The British Insurance Brokers’ Association (BIBA) has announced the launch of an insurance scheme to provide flood cover for businesses, after the government backed a similar scheme for homeowners earlier this year.

The scheme, available only to BIBA members and backed by Lloyd’s underwriting, will provide insurance for commercial sites and rental properties in areas at risk of flooding. Until recently, many small businesses in high risk areas have been unable to access affordable flood insurance.

Flood damage in Britain from winter storms last year resulted in claims from more than 15,000 homes and businesses, and could lead to pay-outs of £1.3 billion, according to the Association of British Insurers (ABI).

Commenting on the introduction of the new scheme, Steve White, Chief Executive of the BIBA, said: ‘We have been working closely with government ministers and their teams in relation to flood cover for some time. They were as keen as our members for us to find a solution for businesses struggling to access flood insurance.

‘We are delighted that this scheme will now be able to provide protection for many of the businesses that have not been able to buy cover against flood damage.’

UK private sector growth remains steady, CBI reveals

Growth in the UK’s private sector remained steady in the three months to November, according to the latest Growth Indicator from the Confederation of British Industry (CBI).

The survey of 715 respondents across the distribution, manufacturing and services sectors showed the pace of growth rose to a balance of +9%, compared with +8% in the three months to October.

In addition, businesses across most sectors expect to see a slightly higher rate of growth over the next quarter (+11%).

Rain Newton-Smith, Chief Economist at the CBI, said: ‘The High Street has had a good month, even before we see the impact of Black Friday and Christmas shopping, whilst our manufacturers and services sector are seeing subdued growth.

‘Businesses will be pleased by the welcome measures in the Autumn Statement to unlock research and development spending, spur innovation and upgrade crucial infrastructure. By further prioritising spending, the government can seize the opportunities to deliver growth and prosperity across the UK’s regions and nations.’

Meanwhile, the IHS Markit/CIPS Purchasing Managers’ Index – an important indicator for the services sector – rose to 55.2, up from 54.5 the previous month. This represented the highest figure since January.

However, Chris Williamson, Chief Business Economist at IHS Markit, sounded a note of caution: ‘Rising prices – often linked to the weaker pound – are a big concern and suggest that inflation is set to lift higher. The past two months have seen the steepest rise in businesses’ costs for over five-and-a-half years. These higher costs will inevitably feed through to consumers in the form of higher prices.

Government unveils new payment reporting rules for large companies

The government has outlined new measures that will require large companies to publish details on how quickly they pay their suppliers.

The proposals, which come into force in April 2017, will require large firms and limited liability partnerships (LLPs) to publicly report twice a year on both their payment practices and their performance, including the average time taken to pay supplier invoices.

A recently-published report by the Federation of Small Businesses (FSB) found that, on average, 30% of payments are late.

The government hopes the new measures will increase transparency and help small businesses to make ‘informed decisions’ in regards to who they do business with.

Small Business Minister, Margot James, commented: ‘By shining a light on how large businesses pay their smaller suppliers, we want to empower small businesses and drive a real change in payment culture.’

The measures form part of a package to tackle late payments, which also includes the appointment of a Small Business Commissioner. The Commissioner will support small businesses in resolving any payment disputes.

Guidance on how to comply with the requirement to report will be published by the government early next year.

Agency workforce set to reach one million as think-tank calls for review of employment rights

The number of agency workers has risen by 30% in the last five years and could reach one million by 2020, a think-tank has claimed.

A new report from the Resolution Foundation suggests there are now 865,000 agency workers in the UK – up by 200,000 since 2011.

Although the organisation acknowledged there are advantages to using agency workers, it has described the agency workforce as the ‘forgotten face’ in the recent debate around insecure work.

The Resolution Foundation estimates that a full-time agency worker receives £430 less a year when compared to a permanent employee in the same role.

It also points out that while action has been taken to address the issue of zero-hours contracts, agency workers remain vulnerable to exploitation because they are not entitled to employment rights such as sick pay or parental leave pay, and have no notice period.

‘While zero-hours contracts are often in the news, agency workers are the ‘forgotten face’ of the modern workforce, despite being just as prevalent across the labour market,’ commented Lindsay Judge, senior policy analyst.

‘This fast-growing group is not just made up of young people looking for temporary employment as some have suggested, but instead includes many older full-time, permanent workers.

Although agency work is usually viewed as short-term, the report suggests that this is not always the case, with half of agency workers saying they work on a permanent basis and three-quarters claiming to work full-time.

The think-tank is now carrying out an 18-month investigation into the issue and is calling on the government to review the situation.

MPs issue warning over plans to move HMRC services online

The Public Accounts Committee (PAC) has warned that plans to move HM Revenue & Customs (HMRC) services online could lead to a ‘disastrous decline’ in customer service.

HMRC is reducing the number of customer service staff it employs by nearly a third, in anticipation that more people will use its digital services.

It intends to make most of its processes automated, leaving staff to focus on tackling tax avoidance and evasion.

However, in its annual review of HMRC’s performance, the PAC urged HMRC not to repeat the ‘mistakes it made two years ago’ when it reduced its number of personal tax service staff, which resulted in a significant decline in customer service.

The Committee stated that it is ‘not convinced HMRC has a credible plan to make savings without damaging customer service’, and is calling for ‘urgent action’ to address this.

Meg Hillier MP, Chair of the PAC, commented: ‘The public and Parliament rightly have high expectations of HMRC which plays a vital role in national life.

‘It is therefore disconcerting that again we must raise concerns about the authority’s customer service and transparency in the tax system.

‘The lack of a convincing fall-back plan to safeguard service as HMRC undergoes significant change remains a looming threat to its ability to collect tax from individuals simply trying to pay their fair share.’

FSB welcomes proposal to put small business champions on boards

The Federation of Small Businesses (FSB) has welcomed the government’s new Green Paper on corporate governance, which includes a proposal for large companies to appoint a Non-Executive Director to champion small suppliers at board level.

The Green Paper – entitled Corporate Governance Reform – was instigated following negative stories about high levels of executive pay and scandals at large corporations.

It contains a raft of proposals for consideration, including publishing pay ratios – which would show the gap in earnings between the chief executive and an average employee – and measures to give shareholders more powers to vote against executive pay packages. Of particular interest to small businesses is the measure to give suppliers a voice on the boards of major corporations.

Mike Cherry, National Chairman of the FSB, welcomed the government’s other Green Paper plans to combat ‘supply chain bullying’ and improve prompt payment.

He said: ‘FSB has been pushing hard for this reform, and we will now work to flesh out how this could work in practice. Small businesses right across the country will want to see this proposal adopted, so that whole Boards own a company’s payment practice and are held accountable for it. In our view, this issue lies at the very core of good corporate governance, and is required alongside reforms to transparency and the proposed Small Business Commissioner.’

The Green Paper can be found here.