Paul Tew highlights some of the main employment law changes affecting small businesses that are due in 2014.

Introduction

The Federation of Small Businesses (FSB) claims that “the burden of regulation often falls heaviest on the smallest of firms”. As a result, it has welcomed the news that the current exemption from new domestic regulation that affected all new regulations from 1 April 2011, and that currently applies to businesses with fewer than 10 employees and genuine start-up companies, is not only to continue, but is also to be extended from 2014.

The new regulations will come into force after 31 March 2014 and extend to businesses with fewer than 50 employees. In future, when new proposals are made, if unnecessary burdens on these businesses are identified, the changes will not be introduced until an exemption is given for small businesses or the burdens are mitigated.

Pensions

Small employers who had between 59 and 499 payees in their PAYE scheme on 1 April 2012 will have a pension auto-enrolment staging date during 2014. Relevant employers should by now have agreed a scheme with a chosen pension provider and selected their software.

From 1 April 2014, the period in which employers must auto-enrol all eligible jobholders into a qualifying pension scheme is to be extended from one month to six weeks. Employers must complete the online registration process with The Pensions Regulator within five calendar months (four months prior to 1 April 2014) of their staging date. Registration is mandatory for all employers, even if no workers are being auto-enrolled.

For 2014/15 onwards the annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000. Pension schemes can pay any annual allowance tax charge in return for a reduction in benefits.

National Insurance

In March 2014 NIC Holiday Scheme End of Year Return Forms E89 and E92 will be issued to relevant employers (new employers since 22 June 2010) who claimed NIC holiday during 2013/14. The scheme ended on 5 September 2013 and no employer NIC must be withheld on earnings that were due to be paid after that date.

From April 2014 outstanding Class 2 NIC payable by the genuinely self-employed may be collected by adjusting tax codes for those in PAYE employment or receiving a UK based private pension. Those self-employed individuals who do not pay or contact HMRC after receiving a Class 2 NIC payment request may be issued with a PAYE coding notice between January and March 2014 showing the Class 2 NIC debt to be collected during 2014/15.

From 6 April 2014, those individuals engaged as an actor, singer, or musician, or in any similar performing capacity will pay Class 2 and Class 4 NIC as self-employed earners.

For 2014/15, the introduction of an Employment Allowance means all businesses will be able to reduce their employer Class 1 NIC liability by up to £2,000 per year. The Employment Allowance is claimable on the Employer Payment Summary report, as part of Real Time Information (RTI) reporting for PAYE.

Real Time Reporting

HMRC have agreed a temporary concession for RTI reporting, allowing employers with fewer than 50 employees to send information to HMRC by the end of the tax month (always 5th of a calendar month) in which the payments are made, rather than adhering to the strict “on or before” the date of payment rule. From 6 April 2014, this relaxation is revised so that only existing employers with nine or fewer employees are covered by the concession until April 2016. From April 2014, all new employers starting to operate PAYE, and existing employers with 10 or more employees, must report PAYE information “on or before” each time employees are paid. By April 2016, all employers will be required to report PAYE each time they pay their employees, unless an exception applies.

In 2014 HMRC will start cancelling newly-opened PAYE schemes, likely to be set up by small or single person companies, where there has been no activity in the 120 days following successful registration, for example if no payments have been made to HMRC or no submissions have been made in real time. Employers will then not be able to submit any PAYE submissions in real time.

From 6 April 2014, the Simplified Tax Deduction Scheme currently only available for care and support employers (individuals who employ providers of domestic or personal services to a disabled, elderly or infirm person in their home) will be closed. These employers will need to begin submitting PAYE information in real time to HMRC either online, or on paper, on a regular basis throughout the tax year.

Personal taxation

For tax returns due for 2013/14 and beyond, a new “cash basis” (money in all forms that is actually received), rather than accounts being prepared on an accruals basis and simplified expenses method (allowing the use of a fixed flat rate to calculate some types of business expenses rather than the actual amounts based on business usage) can be used in calculating taxable profits for small unincorporated businesses (self-employed individuals and partnerships) with receipts up to the VAT registration threshold.

All unincorporated businesses can choose, on a simplified flat rate basis, to deduct motoring expenses for relevant vehicles, business use of home and private use of business premises. A relevant vehicle means a car, motor cycle or goods vehicle that is used for the purposes of the trade. The “simplified expenses” rules are entirely optional for those using the “cash basis” and for those outside the “cash basis”.

Sickness management

The Percentage Threshold Scheme (PTS), which allows employers — primarily small employers with high levels of sickness absence — to recover all or part of the Statutory Sick Pay (SSP) paid to employees, is to be discontinued from the start of 2014/15.

The savings from the PTS will be used to fund a new Health and Work service, designed to support employees to return to work after a period of sickness absence. Under this new service employers will receive advice and a State-funded assessment for cases of employee sickness absence lasting more than four weeks. It is envisaged that this will address some of the barriers that hinder an employee’s timely return to the workplace, especially for small and medium-sized enterprises.

At the same time the statutory requirement on employers to maintain SSP records is to be removed, enabling employers to keep records to show their SSP obligations are being met, in a manner which best suits the size of their organisation.

Flexible working

From spring 2014, all employees will have a right to request flexible working (not just those with parental responsibility for a child, or caring responsibilities for an adult as at present). Small employers may find such requests difficult to accede too, and may be able to reject an employee request for flexible working providing that there is a justified business reason for doing so, for example, due to the burden of additional costs.

Employers will be required to notify employees of their decision, including any appeals, normally within three months from the date the application for flexible working is made.

Reservists

In April 2014, the Government plans to introduce legislation allowing the Secretary of State for Defence to make a payment to armed forces reservists of £500 per reservist, per month, when mobilised (call-up notice issued) to small and medium-sized enterprises.

Last reviewed 6 January 2014