Payslips and Deductions

Image result for payslips and deductionsPayslips

You must give your employees and ‘workers’ a payslip on or before their payday.

What to include

Payslips must show:

  • pay before any deductions (‘gross’ wages)
  • deductions like tax and National Insurance
  • pay after deductions (‘net’ wages)
  • the number of hours worked, if the pay varies depending on time worked

Payslips can also include information like your employee’s National Insurance number and tax code, their rate of pay, and the total amount of pay and deductions so far in the tax year.

Employers must also explain any deductions fixed in amount, for example repayment of a season ticket loan. This can be shown either on a payslip, or in a separate written statement.

Deductions from your employee’s pay

An employer is not allowed to make deductions unless:

  • it’s required or allowed by law, for example National Insurance, income tax or student loan repayments
  • the employee has agreed in writing
  • their contract says you can
  • there’s a statutory payment due to a public authority
  • they have not worked due to taking part in a strike or industrial action
  • there’s been an earlier overpayment of wages or expenses
  • it’s a result of a court order

A deduction cannot normally reduce their pay below the National Minimum Wage even if they agree to it, except if the deduction is for:

  • tax or National Insurance
  • something they’ve done and their contract says they’re liable for it, for example a shortfall in the till if they work in your shop
  • repayment of a loan or advance of wages
  • repayment of an accidental overpayment of wages
  • buying shares or share options in the business
  • accommodation provided by you as their employer
  • their own use, for example union subscriptions or pension contributions

Setting Up A Social Enterprise

Related imageYou must choose a business structure if you’re starting a business that helps people or communities (a ‘social enterprise’).

If you want to set up a business that has social, charitable or community-based objectives, you can set up as a:

  • limited company
  • charity, or from 2013, a charitable incorporated organisation (CIO)
  • co-operative
  • community interest company (CIC)
  • sole trader or business partnership

If you’re setting up a small organisation like a sports club or a voluntary group and do not plan to make a profit, you can form an ‘unincorporated association’ instead of starting a business

Social enterprises are distinct from traditional charities or voluntary organisations in that they generate the majority, if not all, of their income through the trading of goods or services rather than through donations.

Charity Types

You need to choose the right structure for your charity, depending on whether you need it to have a corporate structure and whether you want to have a wider membership

There are four main types of charity structure:

  • charitable incorporated organisation (CIO)
  • charitable company (limited by guarantee)
  • unincorporated association
  • trust

Your charity structure is defined by its ‘governing document’ (the legal document that creates the charity and says how it should be run

More detailed information can be found here

Student Loan and Postgraduate Loan Repayment

Related imagePlan and loan types and thresholds

With effect from April 2019, the thresholds for making Student Loan deductions are:

  • Plan 1 – £18,935 annually (£1577.91 a month or £364.13 a week)
  • Plan 2 – £25,725 annually (£2143.75 a month or £494.71 a week)

Repayments for Plan 1 and Plan 2 are calculated at 9% of the income above the threshold.

Postgraduate Loans (PGL) – £21,000 (£1750 a month or £403.84 a week)

Repayments for PGL are calculated at 6% of the income above the threshold.

Starting Student loan and PGL deductions, checking plan and loan type

You should work out the correct figure of employee earnings on which Student Loan and PGL deductions are due. The figure to use is the same gross pay amount that you would use to calculate your employer’s secondary Class 1 National Insurance contributions.

From 6 April 2019 your employee may be liable to repay a PGL at the same time as a Plan 1 or Plan 2 loan. If so, they’ll be due to repay 15% of the amount they earn over the threshold.

Start making Student Loan and PGL deductions from the next available payday using the correct plan and loan type, which you will select on your HMRC submission, if any of the following apply:

  • your new employee’s P45 shows deductions should continue – ask your employee to confirm their plan and loan type
  • your new employee tells you they’re repaying a Student Loan – ask your employee to confirm their plan and loan type
  • your new employee fills in a starter checklist showing they have a Student Loan – the checklist should tell you which plan type and loan type to use, if your employee has both plan type 1 and 2, ask them to check with the Student Loan Company for the correct plan type to take deductions under otherwise, default to plan type 1 until you receive a student loan start notice SL1 that HMRC sends you
  • HMRC sends you form SL1 ‘Start Notice’ – this will tell you which plan type to use
  • HMRC sends you form PGL1 ‘Start Notice’ – this will tell you they have a PGL
  • you receive a Generic Notification Service Student Loan reminder – ask your employee to confirm their plan and loan type

If your employee does not know which plan or loan type they’re on, ask them to check with the Student Loan Company (SLC). If they’re still unable to confirm their plan or loan type, start making deductions using Plan type 1 until you receive further instructions from HMRC – defaulting to Plan 1 is only available for Plan 1 or Plan 2 loans.

More detailed information can be found here

Claiming Employment Allowance for earlier tax years

Related imageYou can make a claim for the Employment Allowance up to 4 years after the end of the tax year in which the allowance applies. For example, if you want to make a claim for the allowance for the tax year 2015 to 2016 (that tax year ends on the 5 April 2016), you must make your claim by no later than the 5 April 2020.

You will need a separate Employment Payment Summary (EPS) for each year’s claim when claiming for any tax years that have now ended. You don’t need to send previously reported EPS figures, such as statutory payments.

If you send your claim one year after the tax year has ended, your claim will continue into the current tax year, unless you already have a claim for the Employment Allowance in place that year. If you have paid your PAYE up to date, HMRC will set any Employment Allowance award against your future or existing PAYE liabilities, unless you ask them to refund the amount.

Further information and details can be found here

Employers’ Liability Insurance

Image result for employers' liability insuranceCharities which employ staff are required to take out employers’ liability insurance (EL)
Under the law, all employers are required to have a minimum insurance cover of £5 million for injury or disease suffered or contracted by employees while carrying out their duties
A charity must buy employers’ liability insurance from an insurer that is an individual or company working under the terms of the Financial Services and Markets Act 2000. The Financial Services Authority maintains a register of authorised insurers
You may not need EL insurance if you only employ a family member or someone who is based abroad

You can be fined £2,500 every day you are not properly insured.

The charity (as an employer) must prominently display a certificate showing that a valid policy is in force and the minimum level of cover purchased.

You can also be fined £1,000 if you do not display your EL certificate or refuse to make it available to inspectors when they ask.

Check to see if your insurer is authorised by looking at the Financial Conduct Authority register or contact the Financial Conduct Authority

Responsibilities of Trustees

Image result for duties of charity trustees ukYou and your co-trustees must make sure that everything your charity does helps (or is intended to help) to achieve the purposes for which it is set up, and no other purpose. This means you should:

  • ensure you understand the charity’s purposes as set out in its governing document
  • plan what your charity will do, and what you want it to achieve
  • be able to explain how all of the charity’s activities are intended to further or support its purposes
  • understand how the charity benefits the public by carrying out its purposes

Spending charity funds on the wrong purposes is a very serious matter; in some cases trustees may have to reimburse the charity personally.

More details can be found here

Spring Newsletter 2019

A Newsletter Spring 2019

Our Spring Newsletter should have arrived with you by post – if it hasn’t please let us know by emailing us here, or download it by clicking here:

Spring 2019 Newsletter

In this edition we cover changes to Income Tax, National Insurance and Statutory Payment rates; Setting Objectives the SMART way; Restricted, Unrestrictes and Designated Funds for Charities; Automatic Enrolment and Opting Out of Workplace Pensions; Honorary Presidents of Derby Community Accountancy Service

Qualifying for Statutory Maternity Pay

Image result for statutory maternity pay do i qualifyIf you need to check whether or not an employee qualifies for Statutory Maternity Pay, SMP, they need to have been earning on average at least £118 a week, before any deductions, in the qualifying weeks depending on when the baby is due.

You can use the government website calculator here

For example, if the baby is due on 30th September 2019

When does the employee want to start their leave?  14 July 2019

Did the employee have a contract with you covering 29 December 2018 to 16 June 2019?  Yes

What was the last normal payday on or before Saturday, 22 June 2019?  21 June 2019

What was the last normal payday before Saturday, 27 April 2019?  26 April 2019

How often do you pay the employee?  Weekly

What were the employee’s total earnings between Saturday, 27 April 2019 and Friday, 21 June 2019?  £944

How many weeks’ pay did the employee get between Saturday, 27 April 2019 and Friday, 21 June 2019?  8 payments or fewer

How do you want the Statutory Maternity Pay calculated?  weekly starting 14 July 2019

Based on these dates and pay figures, the entitlement would be £106.20 per week, beginning on Friday 20th July and ending on Friday 11th April 2020

If you need any further help, please contact us here

Paying Trustees for Services

Trustee ExpensesMost trustees are unpaid, but all trustees can claim reasonable out-of-pocket expenses. 

A charity can pay a trustee for the supply of any services over and above normal trustee duties.

The decision to do this must be made by those trustees who will not benefit. They must decide that the service is required by the charity and agree it is in the charity’s best interests to make the payment and must comply with certain other conditions

Examples of services that may be provided by a trustee in return for payment under the power in the Charities Act include:

  • the delivery of a lecture
  • a piece of research work
  • the use of a trustee’s firm for a building job
  • the occasional use of a trustee’s premises or facilities
  • entering into a maintenance contract with a trustee’s firm Trustee expenses and payments (CC11) 12
  • providing curtains or decorating materials for hall premises
  • providing timber for a building
  • providing specialist services such as estate agents, land agents, management and design consultants, computer consultancy, builders, electricians, translators, and graphic designers

The power cannot be used to allow payment for auditing services as a trustee cannot legally act as an auditor for his or her charity

Recording the proposed arrangement in the charity’s minutes will not be enough to meet the conditions for an agreement. There must be a separate written agreement which must cover certain issues, but there is no set format. This will depend on the nature of the service being provided, and the level of detail needed to cover it.

More detailed guidance can be found here in document CC11

Selling or Leasing Charity Property

Image result for selling charity propertyThere may be various reasons for disposing of your charity land. You may, for example, want to relocate the charity to more appropriate premises or release some cash that you can apply to other projects.

Before you start, you and the other trustees must be sure that:

  • you have permission to sell or lease the property – either in your governing document or in the law
  • there is nothing in your governing document that prevents you selling or leasing the property
  • your charity actually owns the title to the property
  • the sale or lease is in the charity’s best interests
  • if the property is designated for a particular purpose, such as a recreation ground, that the sale or lease doesn’t go against this

It’s usually straightforward to sell or lease charity land and property – most charities don’t need Charity Commission approval.  You must try to get the best deal for your charity and follow any rules in the law and your governing document.

More detailed information can be found here

For free property advice, guidance and workshops visit the Ethical Property Foundation