Pension deadlines loom for small businesses

Nationwide more than 690,000 employers have already met their workplace pension duties, since the previous Government introduced its automatic enrolment legislation in 2012.

This made it a duty for business owners to automatically sign up  employees to a pension scheme and into which they must legally contribute, unless an employee decides to opt out.

Not complying with the legislation can result in hefty fines and even imprisonment for business owners and directors.

By the final deadline of 1st February 2018, a further 700,000 existing small and micro businesses are expected to have reached their staging date for workplace pension schemes. To help employers know when their staging date is due, The Pensions Regulator (TPR) has provided this Duties Checker.

If a business employs someone between 2nd April 2017 and 30th September 2017, the date of their auto-enrolment duties will vary. However, anyone setting up a new business and employing staff from 1st October will have auto-enrolment duties immediately.

Therefore, time is running out and avoid hefty penalties if they haven’t set up an auto-enrolment scheme – even if they only have just one employee.

As part of a nationwide enforcement campaign launched in April, the TPR inspection teams have been carrying out spot checks to ensure employers are meeting their automatic enrolment duties and employees are gaining access to the workplace pensions they are entitled to. So far, the TPR has visited small companies in London, Greater Manchester, Sheffield, Edinburgh, Birmingham, and most recently Glasgow.

While the majority of small businesses have been successfully meeting their duties, the TPR’s quarterly bulletin revealed that the number of penalties being issued is rising; as the size of the employers staging gets smaller and the volume of employers increases.

This may be because unlike larger businesses, smaller firms often do not have the financial resources or staff dedicated to look after their payroll and pension affairs.

In its most recent Compliance and Enforcement Bulletin, the TPR reported it issued 9,265 compliance notices, 4,794 fixed penalty notices and 1,384 escalating penalty notices from 1st April to 30th June 2017.

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To help you understand the different penalty notices, we have provided the below guide:

Statutory notices

These include compliance notices, third party compliance notices, and unpaid contributions notices. Other statutory notices include improvement notices, third party warning notices, and third-party notices to individuals or companies. These are written notifications requesting action be taken to avoid the next level of penalty.

Fixed Penalty notice (FPN)

Failing to comply with a statutory notice leads to an FPN, which can also be issued immediately if there is sufficient evidence of a breach of some duties. The FPN is £400.

Escalating Penalty notice (EPN)

An EPN is issued when an FPN has not been acted upon and states the future date from which an additional daily fine starts accruing. The daily rate is determined by the number of people in a company’s PAYE scheme, with the TPR using the most recent data it possesses when it issues an EPN.                          

Number of employees	Daily rate
1 - 4	£50
5 - 49	£500
50-249	£2,500
250-499	£5,000
500 or more	£10,000

Other penalties

Just as incorrectly processing or neglecting to process income tax and National Insurance (NI) contributions leads to an employer being penalised, failing to apply Automatic Enrolment and general pension processes correctly will also be targeted.

Some other areas in which non-compliance may trigger penalties are:
•    Failure by the employer to make their contributions to the pension scheme – fine up to £50,000
•    Failure to pay over workers’ contributions to the pension scheme – fine up to £50,000
•    Prohibited recruitment conduct such as encouraging staff to opt out, can be subject to a minimum fine of £1,000 increasing to £5,000.

Legal proceedings

Repeated failure to comply with the legislation will most likely result in civil and/or criminal proceedings, which will undoubtedly cost a business much more than just money.

Act now to avoid penalties

You’ll be pleased to hear that planning ahead and setting up a workplace pension for your staff couldn’t be easier as TaxAssist Accountants can help. Once you have decided on the scheme for your business then we can begin set this up and place your staff and payroll details in this. 

In addition, we work with independent financial advisors who can recommend a pension scheme to you.  Additional fees will apply, but will be disclosed to you prior to undertaking any work.

For further details about this please call us today on 01923 850 300 and our accountants will be able to provide you with more details.

Date published 24 Aug 2017

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.