Act Now on Company Pensions

Here, Sussex Business Times got into contact with Mark Jury, owner of small business tax specialists, TaxAssist Accountants in Crowborough, who urges urges businesses to be proactive in contributing to their staff pension schemes to avoid the possible consequences.

More than 750,000 employers face new responsibilities this year to contribute to their staff pension schemes, so it’s vital that small business owners across Sussex who have yet to act, do so now to avoid large fines and potential prosecution.

A record number of businesses reach their so-called ‘staging date’ this year for the new workplace pension scheme. The Pensions Regulator (TPR) predicts at least 156,000 small businesses will have reached their staging date between January and March 2017.

Business owners who fail to provide a qualifying pension scheme could face a £400 fixed penalty from the TPR, escalating to daily fines set at a minimum of £50 per day, with the possibility of civil penalties and court action.

It is a major new responsibility and a further challenge for the small business community who are already facing a number of other challenges, including digital tax reporting, changes to dividend taxation and the National Living Wage.

Local business owners will have received their date from the TPR and must automatically enrol eligible employees and contribute to their pension pot. Business owners whose staging date was in 2014, will also need to automatically re-enrol certain staff and complete a re-declaration of compliance this year.

We’ve been advising Sussex small businesses since the pension changes were first introduced five years ago and many business owners have planned well in advance. Business owners need time to shop around for the right pension scheme for their business and to get their employees and processes ready for the change, so we have recommended starting those plans at least 12 months ahead of the staging date.

But for local business owners who haven’t yet put a scheme in place for their eligible staff, we’re urging them to do so soon to beat the inevitable rush and avoid hefty penalties. Pension providers are likely to be overwhelmed with enquiries and many will not cater for the small business market.

Auto-enrolment far exceeded expectations when it was first introduced in 2012, with more than 5.47 million individuals enrolled into workplace pension schemes across over 60,000 employers in the first three years. Employee opt out rates were also much lower than originally forecasted at between 8% and 14%.

And with this year representing a peak in the number of companies expected to comply with auto-enrolment legislation since it was first introduced, it is going to be an even busier time in the pensions market.

We work with a firm of independent financial advisers who can advise on the right scheme for your business and we can also help with the day-to-day running of the scheme. Business owners need to be confident that their firm is compliant with the legislation, so they can concentrate on running and growing their business.

The TPR has recently been flexing its muscles as increasing numbers of small businesses have been leaving it until the last minute to prepare for their staging date and then failing to meet their obligations.

Unlike larger organisations, smaller businesses often do not have the financial resources or staff dedicated to look after their payroll and pensions commitments, so it can often be overlooked.

In its most recent Compliance and Enforcement Bulletin, the TPR reported it issued 15,073 compliance notices, 3,728 fixed penalty notices and 576 escalating penalty notices from 1st July to 30th September 2016.

A number of employers have unsuccessfully contested their fixed penalty notices at a tribunal, citing their non-compliance was unintentional and that they had a ‘reasonable excuse’.

Among the circumstances given in their defence were illness, being short-staffed and confusion between the employer and payroll administrator.

HM Revenue & Customs (HMRC) also uses the idea of a reasonable excuse for appeals against tax penalties, but the tribunal has made it clear that HMRC and the TPR are two distinct regulators.

The same basic principle may apply, in that a reasonable excuse is a factor that was unexpected or not within the control of an employer and prevented them from meeting their statutory duties. However, as automatic enrolment and tax duties are different, what may be deemed a reasonable excuse for HMRC, may not be enough to avoid an automatic enrolment penalty.

For example, the TPR is far stricter than HMRC and will not accept IT issues as a reasonable excuse, because it offers an alternative telephone service and issues a series of reminders to employers ahead of their staging dates.

Local business owners will want to avoid fixed penalties, daily fines and the possibility of civil penalties and court action at all costs, so the best solution is to avoid any issues of non-compliance in the first place.

To help them achieve this, we’ve been urging Sussex business owners to protect their hard-earned income by planning ahead for their auto enrolment staging date and understanding the effect it will have on their business.