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Blog Post

Accounting and Payroll Round-Up 2019-2020

2019 was a busy year for changes to accounting and payroll legislation with the introduction of Making Tax Digital, as well as the announcement of new IR35 rules and the CID Domestic Reverse Charge. We’ve recapped the biggest changes to affect accounting and payroll professionals in 2019, as well as looking ahead at what we can expect from 2020.

2019 Accounting and Payroll Legislation Changes

Making Tax Digital

The first major change to accounting legislation happened in August, when HMRC launched its digital tax initiative, Making Tax Digital, to make VAT returns easier, more efficient and more accurate. This change affects every business with a taxable turnover above the £85,000 threshold and requires them to file VAT returns electronically using compliant accounting software, as well as keeping digital records of all transactions. For more information about the MTD changes take a look at our earlier blog post here.

Minimum Wage Increases

2019 also saw important changes to legislation surrounding minimum wage – an area that affects businesses of all sizes. From 1st April 2019, minimum wage amounts were increased as follows;

  • Workers 25 and over – £8.21 per hour.
  • Workers aged 21-24 – £7.70 per hour.
  • Workers aged 18-20 – £6.15
  • Young workers 16-17 – £4.35
  • Apprentice (under 19 or in the first year of apprenticeship) £3.90

On top of this, changes to the Employment Rights Act 1996 regarding employee payslips and the information required were made. The first of the changes states that employers must include the total number of hours worked where a worker’s pay varies according to the hours worked; for example, where variable hours are worked or with zero-hour contracts. The second change states that payslips must be issued to all workers and not just direct employees of the company.

Legislative Changes Due in 2020

Further changes will be added next year which will affect the way you perform your payroll and accounting duties. Read on to see what to expect from the year ahead.

IR35- Off-Payroll Tax Changes

From April 2020, HMRC is extending the IR35 rules to include the private sector. This change will allow HMRC to treat fees paid to a limited company as if they were a salary paid to an employee; meaning that contractor’s fees will be taxed at source by their clients.

Those affected by the IR35 changes include;

  • Individuals supplying services through an intermediary such as a Personal Service Company (PSC) who would otherwise be employed if engaged directly.
  • Medium and large-sized organisations who contact work to individuals through PSC’s.
  • Recruitment agencies and other intermediaries who supply staff through PSC’s.

To find out more about the IR35 rules and whether they will apply to you, read our blog post here for more information.

New Tax Bands for Company Cars

On 6th April 2020 new tax bands for company cars will be introduced reflecting zero-emission trends. Eleven new tax bands will be created for zero-emissions cars, with new fields added to P46 (car) and to the FPS for cars that are payrolled. These changes will apply to cars with emissions in the 0-75g Co2/km range.

CIS Domestic Reverse Charge

In October 2019, the CIS Domestic Reverse Charge was due to take effect, however following pressure from the construction sector it was delayed until October 2020 to give businesses more time to prepare. The Domestic Reverse Charge will change the way HMRC collects VAT from businesses working under the Construction Industry Scheme (CIS) and will affect an estimated 150,000 businesses in the construction and building sector.

Under the new DRC rules the VAT liability will switch from the supplier of the services to the end recipient, meaning that VAT must be clearly shown on invoices from the supplier, but the actual VAT payment will be made by the recipient. The Domestic Reverse Charge is being introduced to help combat VAT fraud within the construction and building industry. To see a full overview of the Domestic Reverse Charge changes coming into force in April 2020 see our blog post here.

Student Loan Thresholds

If you have employees who are paying back student loans, the thresholds for those repayments will change once again from April 2020. The following thresholds will be implemented;

  • Plan 1: £19,390
  • Plan 2: £26,575
  • Postgraduate Loan: £21,000

Deductions will remain at 9% of pay over the threshold for plans 1 &2, and 6% for postgraduate loans.

Holiday Pay Changes

The way employers calculate holiday pay will also change in 2020, with workers entitled to adjustments that take into account the average hours worked and pay received in the previous 52 weeks, rather than the current 12 weeks.

How to prepare for future legislation changes

In order to future-proof your business and prepare yourself for further legislative changes the best thing you can do is to invest in compliant software and technology. The right software will take away the need to manually keep up to date with changes as regular updates will ensure you are always compliant with the latest changes.

Take a look at our Sage Accounts and Sage Payroll products – helping to keep your business up-to-date.

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