When you’re running a business, it can be hard to keep up to date with legislation changes. You’ll want to be focusing on delivering your products and services to your customers, while aiming to stay on top of your cash flow.
However, legislation plays an important role in how your business is run and it pays to stay on top of changes and amends to laws.
Our clear expert advice will help you manage VAT, RTI and auto-enrolment with confidence. And don’t forget, there is also the small matter of the General Data Protection Regulation (GDPR) that your business has to be aware of too.
Dealing with value added tax (VAT) can be a challenge for many businesses – but that doesn’t have to be the case.
What is VAT?
Not sure what VAT is? It’s a tax that is charged on most products and services that VAT-registered businesses provide in the UK. The tax is collected by registered businesses on behalf of HMRC.
If your business is VAT registered, you have to charge the required rate of VAT on any products or services that you provide.
There are three tiers of VAT rates to be aware of:
- Standard rate: 20%. Applies to most products and services
- Reduced rate: 5%. Applies to some products and services, such as car seats for children
- Zero rate: Applies to most food, children’s clothes and other zero-rated products and services
The HMRC website has more details on goods and services and their relevant VAT rates.
How to register for VAT
However, even if your VAT taxable turnover is less than £85,000, you might still opt for your business to be VAT registered. Sid Moore, a Sage Business Expert and owner of Moore Accountancy, reveals why being voluntary VAT registration might be a worthwhile option for you.
If you need (or want) to register for VAT, you can do so with HMRC online. Once you are set up, you will be able to submit your VAT returns. Another option is to use an accountant or agent to do this for you.
Submitting your VAT
VAT registered? If so, you’ll have to submit a VAT return at regular intervals. For most businesses, this will be every three months. It’s worth knowing that this period of time is called your “accounting period”.
You have to send your VAT returns to online – you’ll need a VAT number and VAT online account to do this.
To submit your VAT return, you can use HMRC’s free online service or accounting software. Again, like the option for registering for VAT, you can authorise an accountant or an agent to send your VAT returns.
How to stay compliant with VAT
To make sure you stay compliant when dealing with VAT, there are a number of things to ensure your business does.
You’ll need to keep your VAT records for at least six years – you can the records electronically, on paper or by using software. Make sure it’s possible to read them – and they need to be both accurate and complete.
If you lose a VAT invoice, it’s damaged, or you are unable to read it, then you need to ask the relevant supplier for a duplicate version (make sure it’s marked “duplicate”).
Remember, if you need help with staying compliant with VAT, it might be worth getting the services of an accountant to help you.
If your business has employees, then you’ll be dealing with payroll. As part of that, you need to understand where Real Time Information (RTI) fits into the Pay As You Earn (PAYE) process.
What is RTI?
RTI is an HMRC initiative that was launched to improve the accuracy of PAYE. The aim is to reduce the possibility of fraud and the need to send overpayment or underpayment corrections.
You need to submit information to HMRC electronically on or before you pay your employees rather than just once a year, at payroll year end.
How to submit RTI information to HMRC
Your business needs to send RTI information using a Full Payment Submission (FPS). Using payroll software? It will create the necessary reports and will send your information online to HMRC.
If you don’t send an FPS as required or your payments are late, then HMRC will penalise your business.
If you’re an employer, your business will have to deal with auto enrolment and workplace pensions.
What is auto enrolment?
Under the Pensions Act 2008, employers are legally required to offer their employees a workplace pension so they can save for their retirement. Your eligible employees are automatically enrolled into the pension and both employer and employee contribute to it (see below for more on this).
This process is known as automatic enrolment – or auto enrolment – and if your business employees at least one member of staff, then this applies to you. So remember, as an employer, no matter whether your business has one employee or thousands, you will be affected by auto enrolment.
If your employees work in the UK, are aged between 22 and up to state pension age, and their earnings before tax are more than £10,000 per year (or £833 per month or £192 per week), then they are eligible to receive a workplace pension.
Choosing a pension scheme and dealing with contributions
When choosing a pension scheme for your employees to be part of, there are numerous schemes that are available from the main pension providers. Take the time to assess the market and get independent financial advice so you can find the best provider for your business.
Both employers and employees contribute to the pension scheme under auto enrolment. From 6 April 2018, the minimum pension contribution rate was 2% from employers and 3% from employees, totalling a rate of 5%.
The statutory contribution levels will continue to increase gradually over time – these figures are set to rise again in 2019 to a total rate of 8% (minimum employer contributions will be 3% and 5% for employee contributions).
Knowing your staging date
Staging is the staggered introduction of auto enrolment. It’s important that you know when you need to launch the pension scheme in your business. For help on finding out your staging date, The Pensions Regulator has a useful online tool.
Using payroll software
It’s worth choosing a scheme that integrates with your payroll software, which is legislatively compliant, as this will help to reduce ongoing process times and admin costs.
Make sure your software is compliant with RTI and allows you to keep the data that’s required for auto enrolment. It needs to be able to calculate how much your business and your employees need to pay in pension contributions.
It’s also worth checking that your auto enrolment payroll software is right for your needs and allows you to manage payroll for your employees if they are on a range of different contracts.
What is re-enrolment?
Not sure what re-enrolment means for your business and your employees? Every three years, you will need to automatically enrol your eligible employees who have previously opted out of receiving a workplace pension. It is then up to the employee to opt out again if they wish.
There are four stages to consider when it comes to re-enrolment:
- Determining when your business needs to engage in the re-enrolment process
- Working out which employees need to enrol
- Completing the re-enrolment process
- Declaring compliance with The Pensions Regulator
Re-enrolment also provides a great opportunity for your business to look at the pension scheme that you have in place and decide whether it is still the best choice for your employees.
The GDPR has been called the biggest shake up in the way that personal data is handled. When it comes into force on 25 May 2018, your business may have to change some of its business processes to be compliant.
What is the GDPR?
Put simply, the GDPR is the European Union’s new data protection legislation. It replaces the EU Data Protection Directive and its purpose is to bring data protection legislation in line with how people and businesses use data today, such as via the internet and social media.
What GDPR means for your business
There will be numerous changes that your business will need to be aware of when it comes to handling and processing employee data. For example, only the personal data required for each specific purpose should be collected by your business and processes.
If your business recruits staff, then the likes of forwarding a candidate’s CV to one of your colleagues for a second option will have to be reconsidered. That’s right, the way that you deal with CVs in the workplace may have to change.
And when it comes to collecting customer data via registration forms on your firm’s website, pre-ticked boxes, silence and inactivity will no longer be regarded as consent.
If you have employees, you’ll be dealing with payroll. As that involves processing lots of personal data, it’s pretty likely your processes will have to be revised in order to be compliant with GDPR. One area to think about is how you can make sure your employees receive their payslips securely.
Your employees also need to know what personal data that belongs to them is held by your payroll team and business.
But the GDPR doesn’t have to be seen as a chore – in fact, it represents an opportunity to improve how your business deals with your customers, enhance your business processes and even help your company to win or regain trust.
When it comes to the GDPR, there are 12 important things your business should be aware of, including details on audits and if you’ll need to appoint a data protection officer.
Final thoughts on business legislation
Keeping up with legislation while building your business can be tricky, so it might be worth getting experts on board to help you. From accountants to business advisers, there are lots of people with the necessary expertise to keep your business in check.
VAT can be complex, as can RTI, auto enrolment and GDPR – in fact for the latter, one of our Sage Business Experts who runs an accountancy firm turned to external consultants to prepare for the GDPR.
Make sure you have the right team on board to keep you and your company on top of business legislation and you will have one less thing to worry about as you navigate the choppy waters and exciting times of growing and running your business.