Council of Ethnic Minority Voluntary Sector Organisations

• What is Employment?
• Forming a Company
• Links with HM Revenue and Customs
• Registering for Value Added Tax (VAT)
• Corporation Tax and Tax returns
• Employer responsibilities
• Helplines

What is Employment

Employment

Employment is a contract between two people or an organisation and a person, one being the employer and the other being the employee. An employee may be defined as: "A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed."
Black’s Law Dictionary page 471 (5th ed. 1979).

Definition of an Employer and Employee

In a commercial setting, the employer conceives of a productive activity, generally with the intention of creating profits and the employee contributes labour to the enterprise, usually in return for payment of wages.

Employment also exists in the public, not for profit, voluntary and domestic sectors.

Forming a Company

Forming a company

As an employer or self employed person it may be necessary to form a company. This is beyond our scope and it will probably be advantageous to consult a professional advisor.

You also have to register your business with HMRC

Links with HM Revenue and Customs

Links with HM Revenue and Customs

• HMRC are responsible for:
  • Assessing various Tax (Income Tax, Capital Gains Tax, Value Added Tax, Capital Gains Tax and Corporation Tax, Vehicle Excise Duty etc) and National Insurance Liabilities
  • Collecting the taxes assessed
  • Administering the tax (revenue) system
• To do this, HMRC work closely with employers and produce a number of helpful documents, websites and Help Lines
• HMRC is also responsible for monitoring and enforcing the National Minimum Wage

Registering for Value Added Tax (VAT)

Value Added Tax

• It may be that, if your business is new, you may not have to register for VAT immediately
• You must register when your sales of goods and services which are liable for VAT at any rate (even zero rated) exceed certain limits – at present £61,000 pa
• You may register voluntarily if your turnover is less than this
• Information is available from the VAT section of the HMRC website at www.hmrc.gov.uk or from their help line at 0845 010 9000

What is VAT?

Value Added Tax (VAT) is a tax charged on most business transactions made in the UK or the Isle of Man.
It is also charged on goods, and some services, imported from places outside the European Union and on goods and some services coming into the UK from the other EU countries.

All goods and services that are VAT rated are called ‘taxable supplies’. You must charge VAT on your taxable supplies from the date you first need to be registered. The value of these supplies is called your ‘taxable turnover’.

Some examples of taxable supplies:

• selling new and used goods, including hire purchase
• renting and hiring out goods
• providing a service, for example hairdressing or decorating and
• charging admission to enter into buildings.

Corporation Tax and Tax returns

Registering for Corporation Tax

• If a company has any taxable income, you must tell HMRC that the company exists. This must be done within 12 months of the end of your accounting period.
• Companies House informs HMRC when a new company is registered with them
• The booklet – A General Guide to Corporation Tax Self-Assessment – available at: http://www.hmrc.gov.uk/pdfs/ctsabk4.pdf or from the order line gives useful guidance
• There are penalties for not informing HMRC or not filing a return.

Corporation Tax – self assessment and payment

• The key to getting this right is good record keeping – you may be penalised if your company does not keep good records of its affairs for six years (longer if the return was late)
• Self assessment and payment may be made electronically
• Information is available by following the link http://www.hmrc.gov.uk/ctsa/index.htm or from the help line if you are a new employer

Employer responsibilities

Employer responsibilities

As an employer, apart from your responsibilities re: tax and national insurance for your employees, there are also other responsibilities. These include:

• Ensuring that your premises comply with health and safety at work legislation
• Ensuring that you employers and public liability insurance is in place
• Checking potential employee’s documentation – age, residency status, right to work etc

This is beyond the scope of this course but the HMRC, Directgov and Business link websites have useful help and advice.

Running a payroll

As an employer, one of the most important jobs that you have to do is running your payroll. New employers get Help and advice from HMRC in the new employers pack and the annual employers CD-ROM.

There is also a helpline. Advice is available on software, making returns, payment and using a bureau or Agency to run your payroll.

The following link lists the phone numbers and web links that will be helpful http://www.hmrc.gov.uk/employers/nesi8.pdf

Meeting your liabilities

As an employer, you are expected to be responsible for making payments to cover your employees PAYE and NIC liabilities as well as covering the other taxes that may be levied on companies. These include VAT, capital gains tax and corporation tax.

If you face difficulties in meeting any of these liabilities, it is essential that you discuss it with your tax office.

Arrangements may be able to be made. However, if you do not meet your liabilities, HMRC will use enforcement to collect what is owed.

Making payments

http://www.hmrc.gov.uk/howtopay/employers.htm
The above website includes large amounts of information on making PAYE , VAT and other tax liability payments.

If a company has difficulties in making payments a good source of help is:
http://www.hmrc.gov.uk/howtopay/prob-indiv-comp.htm

This covers the help that is available from HMRC. Help is available from other organisations listed at:
http://www.hmrc.gov.uk/howtopay/others_help_individuals.htm

Helplines

• Home Office Helpline 08450106677
• HM Revenue & Customs (Employers) 08456000678
• Job Centre Plus 08456000643
• HM Revenue & Customs (VAT) 08450109000
• Registration for Self Employment 08459154515