How to Deal with Bank Holidays and Part Time Workers

Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000, it is illegal to treat any workers differently from their colleagues, and this applies as much to how leave is allowed and paid as to anything else. All employees must have at least the minimum annual leave entitlement. For those working a five day week or more, this is 28 days a year. Those working fewer days or hours must be given the appropriate proportion of this amount.

What About Bank Holidays?

You can choose to include these within this annual leave entitlement or give them additionally. If you do the former, everything is straightforward. The employee is paid for a normal week or month. It makes no difference whether or not they normally work on the day of the week on which the bank holiday falls. But suppose you are like the majority of employers who give additional leave for bank holidays; how do you calculate the payment they are due?

Calculating How Much you Should Pay

The way to do it is to work out the number of hours you need to pay them for, much as you calculate the amount annual leave they should have. If your working week is 35 hours, the hours of a normal years’ eight Bank Holidays is eight times the hours of a working day, which equals 56. For a part timer working 3 full days (21 hours), the hours they should be paid for bank holidays are calculated in this way:

21 divided by 35 x 56 = 33.6

Divide this total by eight and you get 4.2. If the rate of pay is £10 an hour the payment for a bank holiday day is £42 gross instead of £70 for a full time worker on the same hourly rate. To ensure full parity with full time workers, you would be wise to pay this amount whether or not the worker would otherwise have been at work on the bank holiday.

Keeping Within the Law

While human resources personnel should have no problem with these calculations, entrepreneurs who have a myriad of details to cope with may find it confusing. Getting help from your local bookkeepers could ensure you stay within the law and keep your staff happy and loyal.

New Tax Rules Affecting Company Distributions

In previous years it has been financially advantageous for business owners and directors to take a small salary during the year, and take a lump sum dividend at its end. This is because the rates of dividend tax have been much less than the rates of income tax. From 6 April 2016, however, this changed and dividend tax has been raised.

The first £5,000 is tax free, at zero rate. After that the basic rate amount is taxed at 7.5%, but the higher rate tax amount is 32.5% and for the additional rate it is 38.1%. So there is now much less advantage in taking high dividends instead of salary.

Government Concerns About Taking Capital on Winding up

Capital gains tax is also much less than income tax and now is less than both income and dividend tax. The maximum is 28% but it can be as little as 10% if an individual is eligible for entrepreneurs’ relief.

It is therefore tempting to take as much as possible as capital, which you might be able to do on winding up a company. But the government is wise to this and has set up new rules designed to discourage it. In certain circumstances they will tax such a distribution as income tax.

What Are Those Circumstances?

Firstly, the rule will apply if you are classed as a closed company, ie. one which only has up to five shareholders, or where the directors have full control of the company. Secondly, it will apply if a shareholder is paid capital from surplus reserves following a winding up, but they are involved with a new company set up for the same purpose within two years. When this is discovered the individual will be billed for extra tax, probably plus penalties.

The government takes a dim view of companies dissolved with new ones set up just to avoid higher rates of tax. They will always charge income tax on capital extracted in such circumstances.

What About Deliberately Retained Profits?

The practice of retaining profits instead of issuing dividends, so that they can be taken later as capital on winding up, has also been nipped in the bud. In future it will be penalised so you need to have a good reason for retaining profits.

Beware any tax adviser who recommends these dodgy tax avoidance schemes. Your local bookkeepers can assist you to stay within the law. They will also help you to document any legitimate reasons for retaining profits and to keep adequate records in case there are queries from HMRC. 

What you Need to Know About the New Confirmation Statement

If you own or are with a company that normally submits an annual return to Companies House, since 30 June 2016, you can no longer do this. Instead you must file a Confirmation Statement no later than 14 days after the anniversary of your last review date. This grace period is reduced from the 28 days previously allowed for the annual return. If you set up a new company, the first Confirmation Statement filing will be due one year after the date of incorporation, together with your first People with Significant Control (PSC) Register.

Failure to comply could mean prosecution for yourself and any other directors or officers of the business as well as the company itself. Late filing can carry severe financial penalties.

How to Submit

The Confirmation Statement is filed on form CS01 which consists of 62 pages, but it will only be necessary to complete it all the first time. The pages cover the company details; the date the confirmation is due, the business activities; the statement of capital held; the trading status of its shares and shareholder information; and details about PSCs. Confirming all this information assists Companies House to keep the public register up to date.

The Confirmation Statement is to be filed each year, following the due date, with a payment that is currently £13 for online filing or £40 if you send it by post. You can send in changes as they occur during the year without any additional payment. When the confirmation date comes round again, you need to check whether any further changes need to be made.

What to Check

These changes might be to:

• Company directors – any new appointments or terminations or changes in personal details
• The Company Secretary or registered office
• Shareholder information
• The SIC code or changes to the business activities
• Information in the PSC register
• Previously reported statement of capital
• Where the statutory books are kept 

This second and future statements will be made on a 2 page document that confirms or amends these details. It’s not a good idea to file early, because this will adjust the next due date to 12 months from this filing.

After the first Confirmation Statement, this should be a simple chore, but it must not be forgotten. Your local bookkeepers will be happy to remind you to get your filing done at the right time and to assist with all the submissions.