The 2023-24 tax year may seem a long way off, but it is important that companies are prepared for changes to the system a little more than year down the line.

The main rate of Corporation Tax (CT) will rise to 25 per cent for the financial year commencing on 1 April 2023, but it is slightly more complicated than the headline figure and the rate will vary depending on company profits.

How will companies be affected?

For companies recording profits of £50,000 or less, the ‘lower profits limit’, the current CT rate of 19 per cent will still apply, but those firms with profits between £50,000 and £250,000, the so-called ‘upper profits limit’, will pay the main CT rate of 25 per cent.

However, they will receive what is known as marginal relief to cut their tax bill which increases the rate incrementally, as profits rise, until the upper limit of 25 per cent is reached for firms with profits of £250,000 or more.

The lower and upper profit limits are reduced proportionately where the accounting period is less than 12 months. They are also reduced where a company has one or more associated firms.

Broadly, a company is associated with another company at a particular time if, at that time or at any other time within the preceding 12 months:

• One company has control of the other
• Both companies are under the control of the same person or group of persons.

Effectively, the full amount of CT at the rate of 25 per cent is calculated before marginal relief is deducted. The marginal relief calculations are based on offsetting ‘augmented profits’ against the total taxable profits.

According to HMRC, ‘augmented profits’ are the company’s total taxable profits plus exempt distributions from non-group companies.

These include dividends, distribution of assets or amounts treated as a distribution on the transfer of assets or liabilities or the repayment of share capital.

The calculations are quite complex so your accountant will be able to help you with assessing just how much CT you will have to pay to HMRC.

Link: Corporation Tax Charge

Small and medium-sized enterprises (SMEs) are the lifeblood of the country, accounting for 99.9 per cent of all businesses across the UK.

At the start of 2021, there were estimated to be 5.6 million UK private sector businesses.

But they acknowledge, according to a survey, that their operations would struggle to function efficiently without the assistance of accountants, particularly as COVID-19 has swept across the country.

Strategic guidance vital to SMEs

The survey has confirmed the importance of accountants to SMEs, rating the profession as the go-to business service as firms struggle with problems over the pandemic, Brexit and other areas like moving across to Making Tax Digital (MTD).

This is where the expertise of accountancy firms in the latest cloud accounting technology eases the burden on their clients.

The survey, commissioned by accountancy software supplier Sage, shows 91 per cent of SME owners rating accountants as an important part of their business operation, while 49 per cent are happy to approach them for strategic business guidance.

When asked what services they would go to when first starting a business, more than a third (34 per cent) said accountants would be the first port of call.

The survey also found:

• Over a quarter (28 per cent) said Covid-19 had driven them to seek out the help of an accountant
• A fifth (18 per cent) named Brexit as the driving factor. In fact, during the pandemic, over half increased their reliance on accountants
• Sage also found that two-fifths (39 per cent) of SMEs name Making Tax Digital as the number one reason they sought accountancy services.

Named by small and mid-sized businesses as ‘critical’, the new study discovered a huge 91 per cent of SMEs use the services of an accountant, with half (49 per cent) using their services at least weekly.

Paul Struthers, MD, UK and Ireland, Sage, said: “Accountants play a critical role in accelerating this success and our research shows they are vital to the UK’s economic recovery.

“Our research shows accountants have an open door to become a de-facto strategic partner for their clients – this is an opportunity they must embrace.”

Link: SMEs name accountants as ‘number one’ service, report finds

Under new rules set by the Government, the system of penalties for VAT and Income Tax Self-Assessment (ITSA) are changing.

The new system of fines is aimed at tackling non-compliance by taxpayers who repeatedly fail to meet their obligations to provide returns and other information requested by HMRC. Those who make occasional and infrequent mistakes will be less likely to be penalised.

It will see the current system of automatic financial penalties removed and a new points-based system implemented, which will require taxpayers to incur a certain number of points for missed obligations before a financial penalty is issued.

The changes were initially meant to apply to VAT customers for accounting periods beginning on or after 1 April 2022, before being introduced later to ITSA customers with business or property income over £10,000 per year, who are mandated for Making Tax Digital (MTD) for ITSA, from the tax year beginning 6 April 2024, and for all other ITSA customers from the tax year beginning 6 April 2025. However, now the new rules for VAT will be delayed until 1 January 2023.

What will be considered a late submission?

The new rules are part of the ongoing implementation of MTD, which requires taxpayers to submit tax information digitally each quarter using compliant software.

Late submission under the new rules will be a failure to provide either a quarterly MTD update or an annual return on time.

However, it will not apply to other occasional submissions to HMRC, which will continue to be covered by the current penalty regime for the relevant submission.

How do the new late submission penalties work?

Every time you miss a submission deadline you will receive a point, which HMRC will notify you of on each occasion.

After you receive a certain number of points an initial financial penalty of £200 will be charged. The threshold that must be reached for a penalty to be issued is determined by how often a taxpayer is required to make their submission.

However, not only will a penalty be charged for that failure but every subsequent failure to make a submission on time. This means that those who continually fail to meet their obligations could face big fines.

The penalty thresholds are as follows:

The points are only applied to each type of submission you need to make, as you will only have points totals for each obligation.

That means if you miss two deadlines for separate submissions in the same month, you will be penalised separately for each submission type.

It is only where you regularly miss consecutive deadlines for a single type of submission that you will begin to accrue points that lead to a fine.

In general, if a taxpayer makes two or more failures relating to the same submission obligation in the same month, they will only incur a single point for that month.

This is to prevent a taxpayer reaching the points threshold too rapidly to be able to improve their compliance. However, there are exceptions to this rule, which can be found here.

Are late submission penalty points retained over time?

The points that are issued only have a lifetime of two years, after which they expire to prevent historic failures combining with occasional recent failures resulting in a fine. This period begins the month after the month in which the failure occurred.

Points will not expire when a taxpayer is at the penalty threshold. This ensures they must achieve a period of compliance to reset their points.

After a taxpayer has reached the penalty threshold, all the points accrued within that points total will be reset to zero when the taxpayer has met both of the following conditions:

• A period of compliance; and
• The taxpayer has provided all submissions due within the preceding 24 months (It does not matter whether these submissions were initially late).

Both requirements must be met before points can be reset. The periods of compliance are:

If a taxpayer is at the penalty threshold and has achieved the period of compliance, but has not submitted outstanding submissions, they will remain at the penalty threshold and continue to be charged penalties for any further failures to make submissions on time.

There will be time limits after which a point cannot be levied. The time limits for levying a point depend on the taxpayer’s submission frequency and start from the day on which the failure occurred, as follows:

The time limit for HMRC to assess a financial penalty will be two years after the failure which gave rise to the penalty.

Can I appeal the issuing of a penalty point?

You can challenge a point or penalty issued by HMRC through its internal review process or via an appeal to the First Tier Tax Tribunal.

To appeal the issuing of points or a penalty you will need to be able to prove you had a reasonable excuse for missing a filing deadline, this could include bereavement or illness.

The appeal process will be the same as the appeal process against an assessment of tax for the relevant tax on which the penalty is based.

Here to help

Although this guidance covers the basics of these upcoming changes there are additional rules that may affect how penalty points are issued against you or your business.

If you are concerned about these changes or would like advice on remaining compliant with MTD for VAT and ITSA, please speak to our team today.

Link: Penalties for late submission

All unincorporated businesses, including sole traders, the self-employed and trading partnerships, will be taxed on profits generated in the 12 months to 5 April (or 31 March) each year from 2024-25.

Here is what you need to know:

• The Government has proposed changes that will move the tax basis period for all unincorporated businesses
• This will affect sole traders, partnerships and LLP’s who do not have an accounting year-end at that date
• It may cause additional tax to be payable
• Extra tax due can be spread over up to five years or by using Time to Pay arrangements
• Overlap relief that has been accrued can also be used to offset a larger tax bill
• It will affect accounting periods from 6 April 2023, as there will be a transition period during 2023-2024 when all businesses will have their basis period moved to the end of the tax year.

These changes were meant to be brought in a year earlier but were delayed by the Government in September 2021 to give those businesses affected more time to prepare.

The current system

Currently, unincorporated businesses are taxed on profits arising in the accounting period ending in a given tax year.

By law, unincorporated businesses do not have to produce accounts. They are, therefore, free to choose any accounting date they like.

This means that a business’s profit or loss for a tax year is usually the profit or loss for the year up to the accounting date – this is known as the basis period.

Specific rules determine the basis period during the early years of trading. Where the accounting end date is not 5 April or 31 March, which is the equivalent of 5 April for the first three years of trade, the rules can create overlapping basis periods, which charge tax on profits twice and generate ‘overlap relief’, given when the business ceases.

As other forms of income such as dividends and income from property are taxed based on the tax year, the different rules for trading profits can confuse some taxpayers.

What is changing?

The proposed reforms will change the basis period for all unincorporated businesses to the end of the tax year, currently 5 April.

This will create the need for interim arrangements for businesses that do not currently have year-ends falling between 31 March and 5 April each year.

These businesses will potentially face a single, higher tax bill from their profits arising in the year-end falling in the 2023-24 tax year to 5 April 2024.

According to HMRC, businesses with a different accounting period end date to the end of the tax year:

• Will need to apportion profits/losses.
• May need to use provisional figures in their tax returns if the accounts and tax computations for later accounting periods in the tax year are not prepared before the tax return filing deadline (later amending their returns once figures are finalised).
• The statutory rule that deems 31 March to be the 5 April in the first three years of a trade would be extended to apply to all years including the transition period and potentially also to property businesses.

Reliefs, allowances and tax band thresholds will remain unchanged and will not be pro-rated. This could also move some taxpayers into higher tax bands, while also reducing their ability to benefit from various annual reliefs and allowances.

In addition to the direct impact of the transitional arrangements, businesses with year ends that have not aligned with the tax year will have a much shorter time between when they generate profits and when the tax falls due, which could have cash flow implications.

What help is available?

Recognising the impact that this may have on taxpayers, HM Revenue & Customs (HMRC) is considering an election to allow businesses with higher profits, due to the change, to spread those additional profits equally over five years.

HMRC will also offer regular Time to Pay arrangements for those that need to spread the costs further.

Businesses will also be able to use all overlap relief accrued when they began trading during the transition year (2023-24). This would mean that businesses in this position will only have tax to pay on 12 months’ profits.

In the future, once these new rules are in place, new businesses will not generate overlap relief and there will be no special rules required for starting or ceasing trading or for a change in the accounting period end date.

For the many unincorporated businesses that already have year-ends aligning with the tax year (which includes those falling between 31 March and 5 April), nothing will change.

However, for those with year-ends that are not synchronised with the tax year, there are several considerations and careful tax planning may be necessary.

How we can help

These changes, when implemented, are likely to have a significant impact on unincorporated businesses, leading to substantial tax bills and costs without careful planning.

Worried you may be affected by these reforms? Find out how we can assist you.

Link: Basis period reform

The final stage of Making Tax Digital (MTD) for VAT is just a few short months away.

From 1 April 2022, even the smallest VAT registered business will need to comply with the quarterly digital recording and reporting of VAT – including those below the £85,000 VAT threshold who are voluntarily registered.

Millions of UK VAT registered businesses above the VAT threshold of £85,000 have already begun complying with MTD since it was introduced several years ago.

They have invested time and money to bring their systems and processes up to date with the tax regime’s requirements.

Now many more small businesses are likely to be caught out by this change, which will require them to use the latest MTD compliant cloud accounting software.

Given the scale of the change and the steps needed to comply with the regulations, businesses that are affected by this change must act now to ensure they are compliant.

To achieve this, they may need to invest in:

• HMRC compliant software
• Additional training
• Help from their accountant.

MTD compliant software

You must use the correct software to meet HM Revenue & Customs’ (HMRC) MTD requirements.

HMRC requires software that can:

• Keep records in a digital form
• Preserve digital records in a digital form
• Create a VAT or tax return from the digital records held in functional compatible software and provide HMRC with this information digitally
• Provide HMRC with VAT and tax data voluntarily
• Receive information from HMRC via the API platform that the business has complied.

Many of the existing cloud accounting platforms out there have been created or revised to ensure that they meet the requirements of MTD for VAT.

Not only that, but they offer many other advantages to businesses of all sizes. Often helping owners to save time and money while providing critical real-time insights into a business’s financial health, which can be invaluable for decision-making.

We can help you find online cloud accounting software that is suited to you and your business’s needs, thanks to our experience supporting many other organisations with this transition.

Failure to comply

Given the scale of the change, there are concerns that some businesses may not be ready in time.

Unlike the initial launch of MTD, there will be no soft-landing period for this latest stage and businesses can expect to be fined or even investigated by HMRC for non-compliance.

It is, therefore, essential that you seek advice to help you with your preparations for this change if you are not yet compliant.

We have already helped many businesses migrate to the latest cloud accounting technology in preparation for MTD, delivering many benefits beyond compliance.

Given the impending implementation of these new rules and the risks associated with not meeting them by April next year, we are ready and able to support businesses, like yours, as they prepare for MTD.

Every year many of us decide to set a New Year’s resolution. Perhaps it is losing weight, going vegetarian or putting extra money away in your savings.

Of course, inevitably, life can get in the way and it is easy to lose track of the promises you set yourself.

However, if there is one goal, we would all like to achieve, it is for our businesses to flourish and thrive.

That is why we believe it is important to set some New Year’s resolutions for your organisation that builds resilience and helps you grow.

Here are our eight New Year’s resolutions for businesses to follow:

Look for new funding

It has, admittedly, got more challenging for businesses to find the finance they need to grow, but if you are planning to invest or you need some additional funding to tide you over next year you must consider your options.

Although many of the Government-backed schemes are now closed, the Recovery Loan Scheme has been extended into next year, offering much-needed support to SMEs.

The British Business Bank is also helping to manage many regional schemes for small businesses so it is worth taking a look at its website here.

If you can’t secure funding from traditional lenders, such as banks, have you considered alternative finance, such as peer-to-peer lending or crowdfunding?

Improve cash flow

Cash flow is the lifeblood of your business. Without good cash flow, many companies fail. If you are continually worrying about cash flow then you need to take action to improve it.

This could include strengthening or automating your credit control systems or finding ways to boost sales or reduce costs so that more money is flowing into your company or less is leaving respectively.

Review costs

The nation is experiencing a cost crisis driven by many factors, including price inflation on many goods and materials, energy costs and skills shortages.

These are beyond the power of our national leaders, let alone you as a business owner, but that doesn’t mean you should do nothing.

Despite how challenging it may seem, there is often a way to reduce costs. This could include switching suppliers, finding savings by reducing or cutting unprofitable activities or recovering some of your costs through tax reliefs.

Get a better picture of financial health

It is very difficult to plan for the year ahead or react to changes in the market without having a clear picture of your organisation’s financial health.

Without the right data and information, how can you expect to make effective decisions?

Thankfully, there has perhaps never been a greater opportunity to learn more about your business through regular management accounts, supported by the latest cloud accounting technology – which can feed you information in real-time.

Retain and reward

Although we have spoken about cutting costs, the one area of your organisation where investment may be key, at least temporarily, is your workforce.

The UK, and much of the world, is experiencing labour shortages in certain sectors following the impact of the pandemic.

This crisis has led many people to reassess their life, including where they work and their goals.

With a million job vacancies in the UK, those who are dissatisfied with their current career are making a switch, so you need to think about how you can boost pay, provide benefits and change your work environment to secure the top talent.

Revitalise your business plan

When was the last time you properly reviewed your business plan? If you haven’t done it in a while, or you made temporary changes to it during COVID-19, you need to revisit it to make sure your goals and current strategies are aligned.

It is worth taking some time to review your operation as a whole and ask yourself what is profitable, what supports cash flow and where are your weaknesses.

This should help you formulate a new business plan for the next 12 months – but make sure you continue to review this and act upon your findings.

Cut your tax bill

Do you or your business pay too much tax? Many taxpayers often pay more than they need to because they do not make full use of the reliefs, allowances and tax saving opportunities available to them.

Every year we surprise our clients by helping them find ways to reduce their liabilities, often saving them and their business thousands of pounds.

This need not be a complex process if you seek the support of your accountant or tax adviser, who can review your activities, taxable income and investments to create a plan that reduces the tax paid.

Ask for more help

Perhaps the most essential advice we can offer is to ask for help. You aren’t alone and there are always people who can assist and support you.

A small investment at the start of 2022 in professional advice, could open up new opportunities to save time and money while reducing the stress and strain of running a business.

Campaigners are angry over the fact that more and more people will be drawn into paying Inheritance Tax (IHT), after a big rise in receipts.

They are angry that Chancellor Rishi Sunak has frozen the IHT nil rate band and residence nil rate band at £325,000 and £175,000, respectively, until 2026, while the value of homes has rocketed – potentially drawing more people into paying this tax.

Estates that exceed these allowances face paying 40 per cent IHT on anything above these amounts.

Given this freeze and rising house prices, it should come as no surprise that the latest IHT receipts totalled £3.6 billion between April and October this year, up from £3 billion in the same period last year.

What is IHT?

IHT is a tax on the estate (the property, money and assets) of someone who’s died. There’s normally no IHT to pay if:

• The value of your estate is below the £325,000 tax-free nil rate band allowance.
• You give away your main home to your children (including adopted, foster or stepchildren) or grandchildren, as the additional residence nil rate band increases your overall allowance to £500,000.

Any unused allowance can be passed to your partner after your death, if you are married or in a civil partnership. This could mean that a couple could pass on as much as £1 million tax-free if they make full use of the allowances on offer.

What are the rates for IHT?

The standard IHT rate is 40 per cent and it’s only charged on the part of your estate that’s above the threshold.

So, if your estate is worth £500,000 and your tax-free threshold is £325,000. The IHT charged will be 40 per cent of £175,000 (£500,000 minus £325,000).

The estate can pay IHT at a reduced rate of 36 per cent on some assets if you leave 10 per cent or more of the ‘net value’ to charity in your will.

Are there any ways to save on IHT?

You can give up to £3,000 per year per person to a beneficiary without it being subject to tax after death.

If you haven’t previously given a gift in the preceding tax year then you can backdate it and make a gift of £6,000 in a single tax year.

Any gifts over this amount you give to beneficiaries while you’re alive may be taxed after your death, depending on when the gift was made.

Under the seven years rule, a ‘taper relief’ is applied that might mean the IHT charged on the gift is less than 40 per cent on a sliding scale.

Other reliefs, such as Business Relief, allow some assets to be passed on free of IHT or with a reduced bill, while trusts can help to pass on wealth tax-free.

Link: Inheritance tax climbs again – fury as more bereaved families dragged into ‘horrid tax’

For busy small businesses, a PAYE Settlement Agreement (PSA) offers a simpler alternative to pay your employees.

It allows you to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for your workforce.

According to HM Revenue & Customs (HMRC), if you get a PSA for these items, you will not need to:

• Put them through your payroll to work out tax and National Insurance
• Include them in your end-of-year P11D forms
• Pay Class 1A National Insurance on them at the end of the tax year (you pay Class 1B National Insurance as part of your PSA instead).

Why go for a PSA?

The scheme may allow you to cut back on paperwork and administration if you are forever totting up minor taxable expenses, such as employee entertainment, birthday presents, or incentive awards.

You will no longer have to put these expenses through your employee’s payroll, pay Class 1A NICs on them (you’ll pay Class 1B NICs through your PSA), or include these expenses in forms P9D and P11D.

The expenses categories of the settlement agreement include:

Minor expenses

These could be birthday presents, health club memberships, expenses deemed to be personal yet incidental, or even a present, flowers, or a voucher should an employee fall ill.

Irregular expenses

These could include:

• Relocation expenses over £8,000 (these are tax-free below £8,000)
• The cost of attending overseas conferences
• Use of a company holiday flat.

Impracticable expenses or benefits

These are expenses are things that are difficult to place a value on, or divide up between individual employees, but could include:

• Staff entertainment that is not exempt from tax or National Insurance Contributions
• Shared cars
• Personal care expenses, for example, hairdressing.

How to apply

You will need to contact HMRC, with a description of expenses you believe are covered.

Once they’ve agreed on what can be included, they’ll send you two draft copies of form P626. Sign and return both copies. HMRC will authorise your request and send back a form – this is your PSA.

You’ll need to report anything that cannot be included separately using form P11D. You do not need to send a P11D if you’re paying employees’ expenses and benefits through your payroll.

Use form PSA1 to help you calculate the overall amount you’ll need to pay, otherwise, HMRC will calculate the amount and you will be charged more if this happens.

Send to HMRC as soon as possible after the end of the tax year. They’ll get in touch with you before 19 October following the tax year that the PSA covers to confirm the total tax and National Insurance you need to pay.

You’ll need to give an agent a signed letter of authority to make a PSA on your behalf if they do not have the authorisation to do so.

Self-Assessment taxpayers have been warned to be on their guard against fraudsters trying to steal their information.

Over the last year, HM Revenue & Customs (HMRC) received nearly 900,000 reports from the public about suspicious HMRC contact, which included phone calls, texts or emails.

More than 100,000 of these were phone scams, while over 620,000 reports from the public were about bogus tax rebates.

HMRC is issuing reminder emails and SMS texts to Self-Assessment taxpayers about the 31 January deadline and is warning people to not be taken in by malicious emails, phone calls or texts, thinking that these are genuine HMRC communications referring to their tax return.

Some of the most common techniques fraudsters use include phoning taxpayers offering a fake tax refund.

They are also pretending to be HMRC by texting or emailing a link that will take customers to a false web page, with a similar appearance to the HMRC official page, where their bank details and money will be stolen.

Fraudsters are also known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

What to look out for

It could be a scam if calls, emails and text messages, are:

• Unexpected
• Offering a refund, tax rebate or grant
• Asking for personal information like bank details
• Threatening in their nature
• Telling you to transfer money.

More than four million genuine emails and SMS are being issued to Self-Assessment taxpayers pointing them to guidance and support.

The communication will prompt them to think about how they intend to pay their tax bill and to seek support if they are unable to pay in full by the deadline at the end of January. Taxpayers should consult their accountant for advice on this.

Always be on your guard

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Never let yourself be rushed. If someone contacts you saying they’re from HMRC, wanting you to urgently transfer money or give personal information, be on your guard.

“HMRC will also never ring up threatening arrest. Only criminals do that.

“Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the ‘HMRC scams’ advice on GOV.UK and find out how to report them to us.”

People can report suspicious phone calls using a form on GOV.UK; customers can also forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk and texts to 60599.

HMRC has a dedicated team working on cyber and phone crimes using state of the art technology to counter misleading and malicious communication.

Anyone who is in doubt about whether a website is genuine should visit GOV.UK for more information about Self-Assessment and use the free signposted tax return forms.

Link: HMRC warns customers about Self-Assessment tricksters

Well according to a recent Employment Appeals Tribunal (EAT), yes, they should.

In this latest case, a taxi driver in Watford was employed by a firm, which dictated that as part of his conditions of employment he was required to provide a vehicle and uniform, both of which were rented from a company associated with his employer.

Rental costs

In the case of Augustine v Data Cars Ltd, Mr Augustine was employed as a taxi driver by Data Cars.

But at the end of his employment, he brought a variety of claims to the employment tribunal, including that he had not been paid the NMW.

When making remuneration calculations, there are certain allowances and expenses which are deductible.

Mr Augustine argued the cost of the car rental and the purchase of the uniform should be deducted from his total remuneration.

Successful appeal

The initial employment tribunal disagreed, concluding the payments did not need to be considered for the purposes of calculating NMW, on the basis that both payments were optional and not a condition of employment.

Mr Augustine successfully appealed, with both payments found to be deductions for the purposes of calculating his NMW.

The EAT allowed the claimant’s appeal and pointed out that the correct test was whether the expenditure was incurred “in connection with” the employment and that both the rental payments and uniform costs satisfied that test.

This case highlights the complexities involved with calculating pay for NMW purposes and the potential pitfalls of getting your calculations wrong.

Careful calculations

Employers risk a penalty and being ‘named and shamed’ publicly by HMRC if they fall foul of the NMW regulations, even if the mistakes may have been made quite innocently.

Many employers are caught out because of their uniform policies. NMW regulation 12 and 13 provide that any deductions made by an employer for the cost of uniform provided or for the cost of uniform to be purchased (whether from the employer directly, a third party generally or by the worker directly) does not reduce worker pay below the minimum wage in the relevant pay period.

The same principle also applies to tools which workers are required to provide or that they are provided with for the purposes of their work.

It does not matter that the uniform or tool can also be used for the worker’s benefit. What matters is that wearing the item or having the tool is a requirement of their employment. Any additional uniforms or tools bought by the worker are not counted for NMW purposes.

A common issue, as in this case, is that many employers do not appreciate that unbranded items of clothing, which were required to be worn at work such as white t-shirt, black trousers or flat black shoes, are also considered to be ‘uniform’ by HMRC when assessing whether NMW had been complied with.

This kind of area can be a minefield for employers, but basically, when calculating hourly pay you must divide total pay by the number of hours worked.

Remember, the National Living Wage increases to £9.50 from £8.91, while the National Minimum Wage for 21- and 22-year-olds rises to £9.18 from £8.36 from next April.

Link: Mr W Augustine v Data Cars Ltd: EA-2020-000383-AT(previously UKEAT/0254/20/AT)