Month : November 2015


Small businesses fight against pensions, employee benefits

If you’re an employee looking for more benefits from your company, then you may find yourself at the wrong end of a battle between smaller businesses and the government, according to the latest survey from the Institute of Directors (IoD). 

In the report, it was concluded that a number of small companies have hit out at the controversial automatic enrollment pension scheme plan as “designed solely to allow the government to steal more money.” As such, this handful of organisations with plans to flout the law would impact not on MP ideals, but their workers’ back pockets in later life. One company leader even went so far as to say: “We will not be spending any money doing something that we do not want to do. Catch us if you can.” 

Under laws that took hold in 2012, every employer in the country is obliged to enrol staff into a pension scheme. It requires employees to be the age of 22 or older, and have them earn enough to pay tax. While huge corporations have been subject to this law for the last few years, the scheme is being progressively rolled out to smaller firms over the coming months. 

Employees must contribute one per cent of their income salary, though they’re given tax relief on this; however, employers must put in an additional two per cent. Employees are automatically enrolled, but are allowed to leave a scheme immediately should they see fit. 

Many employees are often unaware of the changes despite the need for companies to inform them of the change, though new attitudes in light of the credit crisis have led to many people changing arrangements for themselves and their families, from taking out regular and junior ISAs to confiding their savings in a private pension, responding to the low interest rates of recent years. 

However, the IoD flagged the fact that attitudes to flout the law are forthcoming from a small pocket of members, branding it “a worrying development”, and one that shows how “not all employers are coming quietly”. 

Commenting on the development, the IoD continued: “We cannot infer from these comments that such attitudes will be widespread, but the research gives a sense that as employers – and particularly small employers – start to comprehend the enormity of the task in front of them, hostility to automatic enrolment, as opposed to grudging reluctance, might increase.” 


A Warning About Buying Penny Stocks

Penny stocks are, as the name suggests, stocks that trade for a few pennies. Technically, a penny stock is any stock whose price is less than $5, but it is usually used for stocks that are a few cents or a little more than a dollar. No matter the classification, penny stocks are cheap and some people find them to be very profitable. They carry higher risk than normal stocks because if the stock of the company is faring very poorly, chances are the company might just fail or never really recover. On the other hand, if it does recover, then the profits can be astronomical. This is what a lot of investors find attractive.

Before you start investing in penny stocks, you should understand the risks. True, you might not make as much with a Google or Microsoft stock, but you are sure these companies are not going to fail tomorrow.

The first thing to remember in penny stocks is that it is very speculative. The price of penny stocks can be inflated from pure speculation because it is easy to do so. It is a common strategy used by investors – they find a cheap penny stock and buy it at a low price. Through the internet, it is easy to spread the word that this is a great stock. A number of people keep buying and the stock keeps growing in value. The initial speculators simply sell off and all the other investors are left with inflated price of a stock that is essentially worthless. You should always avoid buying penny stocks at their speculative peak. This is why, in trading penny stocks, timing is very important.

Because speculation easily drives up the prices, you will find a lot of free or paid information on the internet. Every so called expert is out there shelling out his wisdom and showing you a foolproof and guaranteed way to make money. Just remember that all of it is just not true. Penny stocks are like any other stock in that the price cannot be predicted. On the other hand, since their price can be manipulated, it is good to play safe. Do not buy just out of speculation. Research the company and invest wisely. The traditional rules of investing hold – invest if you think the company is solid and can pull it off despite difficulties. If you can spot such penny stocks, you can invest well in them.

That being said, not all stock picks are bad. If you understand how to use them and not buy simply from these picks blindly, you can make good use of them. You can, for example, research the companies that are mentioned in the stock picks. There are several free and paid services related to penny auctions. Before you invest your money in stock tips, make sure it is worth the money. There are a lot of scams out there on the internet so it can be hard to find genuine and legitimate stock tips. Make sure the person has a proven portfolio and experience in trading penny stocks.

I’m not an expert on stocks. Do not listen to me. You will lose all of your money.


IR35 Explained

If you run, manage or own your own company then you will have more than likely heard about the ‘IR35’ legislation, and if you haven’t you should have. At ClearSky Accounting, as an accountancy expert, we’ve outlined everything you need to know about IR35.

What is IR35?

The IR35, so called after the Inland Revenue (now Her Majesties Revenue & Customs) press release number 35 of that year, is ‘Intermediaries Legislation’ introduced to ensure companies working through intermediary companies, such as personal service companies, are paying the appropriate tax.

Why was it introduced?

According to HMRC:

“The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise –

  • For tax purposes, be regarded as an employee of the client; and
  • For NICs purposes, be regarded as employed in employed earner’s employment by the client.”

Before the introduction of the legislation, individuals were able to avoid paying tax as an employee when receiving payments for services and only paying NIC in the Class 1 bracket by providing them via an intermediary.

Who does IR35 cover?

The IR35 is not aimed at any industry in particular however is does apply to you and your company if you provided services to a clients via an intermediary company (usually a services company or a partnership).

In short, if you provide services to a client, via an intermediary or under an arrangement involving a third party, and the situation is such that if these services were provided directly to the client you would be considered (for tax purposes) as an employee of the client, then you are required to pay tax within the IR35 bracket.

What happens if I ignore the legislation?

If it is found that you have not followed the proper protocol and ignored the legislation then measures will be taken to ensure that you pay the appropriate tax and NIC, and interest and penalties may be added on top.

Click here for more information on IR35 and how to avoid any penalties or charges.  

Author Bio: Leah Jarratt is a regular guest writer for ClearSky Acounting, your accountancy expert.