Universal Credit

Universal Credit

Last year saw the introduction of Universal Credit, which is the largest overhaul to the benefits system since the 1940s and which could affect up to 8 million people.  The concept behind the new system is to “make work pay” so that people are not trapped on benefits because they would lose money if they got a job.  The system will combine six working-age benefits into the one new Universal Credit, so it is expected to be easier to run as well as reducing the incidence of fraud and error.  As with most new systems that involve HMRC, we’ll wait to see if what is expected actually happens!

Universal credit will be paid monthly, and claimants will be expected to manage and budge their own payments, for example to landlords if they are in receipt of rent benefit.  This is supposed to make the payment received feel more like wages, thus preparing the claimant for the way things would work if they were employed.

In order to claim Universal Credit you have to apply online, and all data thereafter is also kept online.  This is where your part in the process may kick in, as it interacts with RTI (Real Time Information) and your obligations if you’re an employer.  You must ensure your RTI returns are complete, accurate and submitted on time because the data will be used in Universal Credit claims.  You may not be claiming yourself but you may have staff, and for them it’s vitally important that HMRC have the correct information.

Universal Credit is being slowly introduced between 2013 and 2017, so there’s plenty of time to see how the system will work in practice, and to see what interesting things go awry along the way!

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

How will RTI (Real Time Information) affect me?

RTI (Real time information)

Will this affect me as a one man Limited Company, should I expect my accountant just to deal with it within the fee. What do I need to do to comply and protect myself?

Although you may not have any employees, one man Limited Companies will be affected by RTI. The reason is that as a one man Limited Company you are a director of your company. For the purposes of PAYE this means you are therefore an employee of the company, in the role of company director, which is within the scope of RTI.

RTI is replacing the year end PAYE P35 Employers Annual Return which details employees tax, NI and statutory payments made during the tax year. With RTI this data must instead be submitted to HMRC on a monthly or quarterly basis throughout the year.

A key point is that this affects PAYE submissions only. It has no impact on dividends or other payment arrangements.

The main benefit of RTI is that it will eventually make the PAYE system easier for employers and HMRC to manage and will be far more accurate. All this should mean that HMRC have better information to help them review employee’s income information and ensure they are paying the right amount of tax and NI in any tax year. The other key point is this will also mean that any benefits payable to employees are reported to HMRC as you go, and any tax codes can be amended accordingly. The majority of employers and pension providers will start using this system from April 2013 and all employers must be using it by October 2013.

The biggest issue with RTI is the sheer volume and frequency of administration.

For a one man Limited Company the easiest way to administer this is to plan all 12 of your salary payments in advance. This makes it much easier for you to then simply submit your pre-calculated PAYE figures on time and therefore avoid any late penalties. As the current late penalty proposals are for a minimum of £100 per week for small companies these are clearly best avoided.

If you have an accountant, agree with them what your monthly salary amounts across the year will be – and stick to them. Varying your salary without telling your accountant, making ad hoc cash withdrawals and so on are what may potentially cause problems. Ideally your accountant should be able to deal with your RTI administration for you as part of their regular service.

In practice, with good planning, the majority of one man Limited Companies who have an accountant will not experience much change when RTI rolls out.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.