UK businesses ‘hit by rising employment costs’, BCC finds

A survey carried out by the British Chambers of Commerce (BCC) has revealed that four in five businesses in the UK have been affected by rising costs generated as a result of changes to employment legislation.

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In its Annual Workforce Survey, which garnered the opinions of more than 1,400 UK businesses, the BCC found that the Apprenticeship Levy, the National Living Wage (NLW) and pensions auto-enrolment have led to an ‘increase in the cost base of businesses’.

50% of respondents surveyed revealed that the NLW has helped to increase their employment costs, whilst 75% of firms reported a rise in costs as a result of compliance with pensions auto-enrolment.

Meanwhile, 20% of businesses have experienced rising costs as a direct result of the introduction of the Apprenticeship Levy.

Rising costs could lead to reduced investment and wage growth opportunities, the BCC warned.

Commenting on the findings, Jane Gratton, Head of Business Environment and Skills at the BCC, said: ‘Businesses are under increasing pressure from the burden of employment costs, and this will influence the choices they make and outcomes for employees.

‘Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people.

‘At a time when employers across the country are facing acute skills shortages, it is vital that they have the resources and flexibility to invest in their workforce and the future needs of the business.’

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Significant number of individuals facing ‘retirement income shortfall’

More than half of the 25.5 million individuals in employment in the UK are at risk of not having a satisfactory income in old age, the Pensions and Lifetime Savings Association (PLSA) has suggested.

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A report by the pension industry body defined an ‘adequate retirement income’ as one that reaches the ‘target replacement rate’ – 67% of the amount earned before retirement.

Some 13.6 million workers are at risk of not achieving this rate, according to the PLSA.

The report also revealed that 1.6 million people are at ‘high risk’ of not meeting the minimum income standard of £9,500 set by the Joseph Rowntree Foundation.

However, the analysis suggests that auto-enrolment will leave individuals an estimated £2,500 per year better off in retirement.

Graham Vidler, Director of External Affairs at the PLSA, commented: ‘Automatic enrolment is set to deliver a tangible improvement in the retirement incomes of millions of people, but there is still work to do.

‘It is clear from our analysis that minimum contributions under automatic enrolment need to increase to at least 12%.’

Meanwhile, Frances O’Grady, General Secretary of the Trades Union Congress, stated: ‘Employers must step up and show they’re prepared to put more into workplace pensions alongside their employees. And the government must improve auto-enrolment so it delivers a decent pension for everyone.’

306% increase in pension auto-enrolment enforcements

Enforcement action against small businesses who fail to comply with pension auto-enrolment requirements has risen by 306%, data from The Pensions Regulator (TPR) has revealed.

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The Regulator used its enforcement powers on a total of 8,812 occasions between April 2015 and March 2016, the data revealed.

6,241 compliance notices were issued, whilst 2,002 fixed penalty notices were handed out to small businesses.

Employers are required to automatically enrol eligible workers into a pension scheme, and must make a minimum level of contributions or provide a minimum level of benefits in the case of defined benefit schemes.

Auto-enrolment deadlines have been coming into force gradually: deadlines for large companies (those who employ 250 employees or more) began in 2012, while deadlines for medium-sized companies (employing 50 to 249 employees) began in 2014.

Deadlines for small (five to 49 employees) and micro-enterprises (employing one to four employees) began in 2015 and will continue until 2018.

Charles Counsell, executive director for auto-enrolment at TPR, stated: ‘Our key challenge in the past year has been to engage hundreds of thousands of small and micro-employers and to help them prepare for automatic enrolment.

‘We needed to target these employers in new and innovative ways. The hard work and commitment of the many organisations who support employers – from trade bodies to employer representative bodies – has made a huge difference.’

The new tax year brings updated Key Guides

As a result of the Chancellor’s Budget in March, there have been a number of important changes across the finance and tax planning sector. Our series of Key Guides has undergone a quarterly review and each one contains the most up-to-date and accurate information reflecting the new 2016/17 tax year (www.nhllp.com). These specialist publications provide you with expert content on topics ranging from starting and selling a business to strategies for a high tax environment.

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  • The taxation of investments: The new personal savings allowance has come in as well as changes to tax allowances, bands and rates. Alterations to the way your interest and dividend income will be calculated are also important.

 

 

 

  • Starting and selling a business  We have added information about the British Business Bank which can help smaller businesses and updated to include changes to capital gains tax.

 

  • Making the most of fringe benefits: Since 6 April 2016, all employees (with certain exceptions) are treated the same when it comes to the taxation of fringe benefits. There have also been some changes to reporting requirements.

For further information on any of the topics above and to view our full set of updated Key Guides, please visit our website / click on the links. Or contact us to discuss any issues that may affect you.

FSB reveals its 2016 Budget wish list

Ahead of the 2016 Budget on 16 March, the Federation of Small Businesses (FSB) has called on the Government to implement far-reaching business rates reform, simplify the tax system and back enterprise.

Within its submission to Chancellor George Osborne, the federation urges the Government to clearly and consistently back enterprise in order to boost small business confidence.

It also states that FSB members will be ‘tested’ by upcoming policy changes, such as the introduction of the new National Living Wage (NLW), pensions auto-enrolment and the changes to the taxation of dividends, alongside the introduction of quarterly digital tax reporting.

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These changes are predicted to significantly raise costs for small businesses.

The FSB revealed that its members require ‘tangible and fundamental changes to business rates as a whole’, suggesting that the current business rates system is ‘outdated’.

This appeal echoes previous requests from the Confederation of British Industry (CBI) for the Government to put reform of the business rates regime at the forefront of its Budget Business Tax Roadmap document.

The CBI stated that the system ‘undermines’ both retailers and manufacturers.

Furthermore, the FSB proposes the creation of a simplified small business tax regime that would be centred on a single tax payment, in place of the complex tax system that is currently in use, which requires businesses to apply multiple taxes.

Mike Cherry, Policy Director for the FSB, said: ‘In this climate, it’s crucial that the Chancellor uses the Budget to reassure small firms and boost their confidence so that they invest, create jobs and drive economic growth. This means no new major challenges that drive up costs and burdens.

‘In addition, Mr Osborne must deliver on his promises to overhaul the business rates regime and simplify the tax system.’

Many have speculated over the contents of the Chancellor’s forthcoming Budget speech, with some predicting that Mr Osborne will reveal significant changes to pensions tax relief.

The Chancellor will present the 2016 Budget on Wednesday 16 March. Coverage of the key announcements will be available on our website, so please visit regularly.

Taxes and charges make savings decisions difficult, suggests IFS

The Institute for Fiscal Studies (IFS) has suggested that individuals face a complex and ever-changing range of tax treatments, which can make it difficult to select the most appropriate savings vehicle.

Additionally, the IFS claims that pensions are set to remain the most tax-efficient savings option, despite forthcoming changes to personal taxation.

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This may be partly due to the fact that, under the pensions auto-enrolment scheme, employers must match any employee contributions. This has resulted in a potential boost of up to 60% to workers’ pension pots, the IFS reported.

The Institute compared saving via a pension to purchasing a house, paying into an ISA, and investing in buy-to-let property.

The report also considered the changes to dividend taxation and the introduction of the new Personal Savings Allowance (PSA), alongside any potential changes to pension taxation.

Furthermore, the IFS found that minor differences in charges can outweigh the effects of certain tax treatments.

Stuart Adam, co-author of the report, stated: ‘The last few years have seen radical changes announced to the taxation of savings. These will take millions of people’s savings out of the tax net altogether. Ideally, people might make savings decisions based on the underlying risks and returns of different assets. But taxes and charges can significantly change the relative attractiveness of different savings options. If people are unsure about how taxes and charges might change, their decisions become even harder’.

Auto-enrolment is putting firms ‘under pressure’, claims FSB

In a new survey by the Federation of Small Businesses (FSB), three in four business owners who responded claimed that pensions auto-enrolment has ‘put too much pressure’ on them.

The study also found that some 45% of respondents were unclear about their responsibilities regarding enrolling their employees into pension schemes.

Over the next two years, more than a million small and micro businesses will be required to set up a workplace pension for their employees under the auto-enrolment rules.

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From January, many more employers will reach their designated staging date, with tens of thousands ‘staging’ each month in 2016 and 2017.

In response to the survey, Lesley Titcomb, chief executive of the Pensions Regulator, claimed that auto-enrolment had so far been successful, with over 70,000 employers signing up to it.

She stated: ‘We’re not complacent. In the next three months, 100,000 employers have got to enrol their employees. The message to them is that they need to start early, and make a plan.’

John Allan, FSB national chairman, said: ‘Our message for small employers is auto-enrolment is coming and will affect your business – and the sooner you get to grips with what you need to do, the better off you will be.

‘Most of the businesses which have already set up a work place pension told us they found the process fairly straightforward, but we know many remain concerned about their ability to cope. These businesses should feel reassured that there is plenty of information and support available to help them through this process, both through the FSB and from the Pensions Regulator.’