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PAYROLL ON POINT | APRIL 2020
CLASS 1A NATIONAL INSURANCE ONTERMINATION AWARDS At present, termination payments including those exceeding the £30,000 tax exemption are payable without generating a National Insurance liability for both the employee and employer. However, from April 2020 HMRC are introducing a Class 1A Employer
Unlike Class 1A National Insurance due in relation to P11Ds which is payable by 19th July each year, Class 1A in relation to Termination payments will be recorded, reported and paid in line with Real Time Information i.e. at time of termination payment. BDO will assess the termination payment at time of process and apply the Class 1A NIC where applicable. Any additional payment will be included in the HMRC liability shown on the client payroll reports.
National Insurance liability on termination payments which exceed the £30,000 exemption. The rate at which Class 1A NI will be due is 13.8% in alignment with the secondary Class 1 National Insurance. There will continue to be no Employee liability on such payments.
HIGHQUALITY CASHFLOW FORECASTS AND MANAGEMENT INFORMATION PACKS DO MATTER.
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Here are five ways they could make a real difference to your business.
Increasing business understanding
Supporting a managed business closure
Internal changes in the business can also affect future performance. Management information packs that identify key performance indicators (KPIs) and highlight when performance falls below critical thresholds enable proactive action to address any weaknesses. For example, a subscription-based business might track whether customer renewals fall below the normal level, or a product manufacturer might focus on an increased level of product returns. KPIs also give you reasons to celebrate when things are on target, such as achieving a stretch goal for recurring revenues in a new market. Generating evidence of sound management processes Generating timely, effective cashflow forecasts doesn’t only help management teams run the business, but also builds up a track record of sound processes being applied. This may be beneficial in 12 or 18 months if the decision is taken to seek new funding or to sell the business. Banks, investors and potential acquirers will all take comfort from the fact that the business has been run using sound information for a period of time.
Not every business will be in growth mode. Some management teams may be looking to close down all or part of a business in response to market changes. If they want to close the business gracefully, on their own terms, then it’s important to think through details such as what assets might be liquidated when and the cost of any redundancies. If temporary funding is required to manage the winding down process, this can be identified and action taken in good time. Cashflow forecasting is a vital component of business planning – and plays a key role in providing management teams with insight into future issues that might arise. Taking advice and having an objective view from experts who can review your forecasts through an investor or funder lens can add real value and contribute to your commercial objectives. To find out more about our cashflow forecasting solutions, please contact Jeremy Hayllar.
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Strengthening internal management alignment
In some businesses, the planning process can be relatively ad hoc with individual managers having differing priorities and making their own assumptions. Establishing a consistent approach to forecasting and making it a ‘business as usual’ process strengthens internal cohesion and clarity, keeping managers focused on the right areas when investing in products and services. Building business resilience We live in uncertain times politically, economically and environmentally. Although it is never possible to foretell the future, management teams can consider possible scenarios and how these might affect the business. For example, what happens if the business starts trading internationally under WTO rules? What happens if corporation tax rises? Forecasts can be adjusted for new assumptions to identify potential cashflow pressure points – a form of risk management that helps to make the business more resilient.
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