The Blog

National Minimum Wage increase: Are you paying the correct amount?

Every year, the Government increases the National Living Wage, which is also widely referred to as the National Minimum Wage.

At present, the rates, which determine the minimum pay per hour most employees are legally entitled to, look like this:

But come April 1, the current rates will increase to:

What does this mean for employers?

While the increase may be a standard UK-wide increase, there’s nothing standard about how it’s calculated, as there are several different variables, such as age and apprenticeship rules, involved.

As a result, some employers aren’t interpreting minimum wages accurately, with non-compliance resulting in them being penalised by the Government. Take major retailer, John Lewis, for instance, who reported in their 2017 Annual Report and Accounts that for some months, some of their workers had been paid less than the stipulated hourly rate:

‘We have identified that some of our pay practices, though designed to help Partners, have technically not complied with the National Minimum Wage (NMW) Regulations.

‘This has come about in the main because our pay averaging arrangements do not meet the strict timing requirements of the NMW Regulations; although Partners will, over the course of a year, usually have received the correct pay, in some months where greater than average hours are worked they will have been paid less than the hourly rate stipulated in the NMW Regulations.

‘The £36.0m exceptional charge principally relates to payments that are required to be made to recipient Partners and former Partners for the previous six years. We are now required to make good those amounts…’ 

While John Lewis may be at the larger end of the scale in terms of their size, this doesn’t mean that National Minimum Wage errors are only detected within bigger organisations. All companies of all sizes struggle to get these calculations correct each year and, as a result, they’re all at risk of being punished for failing to maintain compliance.

What should employers do?

It’s important businesses fully understand their National Minimum Wage obligations and what the correct associated payments are, as non-compliance can come at a real hefty price.

In February this year, the Department for Business, Energy and Industrial Strategy took the unprecedented move of naming and shaming more than 350 companies who had underpaid their workers. What’s more, as well as enforcing that all underpayments were made, HMRC also issued penalties in the region of £800,000.

With the Government really stamping down on National Minimum Wage offenders, it has never been so crucial for employers to make sure their payroll administration is accurate.

That’s where our PAYE health checks can help. They’re specifically designed to identify and rectify any potential PAYE (and VAT) problems before they’re picked up by HMRC. You’ll find out more about them in our blog, ‘Have your PAYE and VAT affairs been given a clean bill of health?’

While it may be tempting to assume your National Minimum Wage calculations are correct, it really does pay to get them checked by a professional – it’ll a) give you peace of mind that you don’t have anything to worry about and b) you won’t be appearing on the Government’s next named and shamed list.

To find out more about maintaining National Minimum Wage compliance or our health checks, contact us on 01905 777600 or

A best practice glimpse at business structures

When you become a business owner, you have to be prepared to make lots of key decisions, it’s all part and parcel of running your own venture.

And if you’re just starting out, then one of the key decisions you’ll inevitably have to make is deciding which type of business structure to opt for.

Unfortunately, there’s no hard and fast rule as to which structure you should choose. For instance, if you’re a beauty therapist then you don’t automatically have to become a sole trader and if you’re an architect, then you don’t necessarily have to set yourself up as a company.

There are several different avenues you can choose to go down, here Ormerod Rutter Partner, Tony Archer, talks us through the main business structure options:

  1. Sole trader

Of all of the business structures to go for, sole tradership is the most straightforward route to choose. If you operate as a sole trader, then you’ll find there are very few formalities that you need to follow however, you must still make sure you inform HMRC that you’ve set up as a sole trader.

Sole traders are the exclusive owners of their businesses, which means they’re entitled to keep all of the profits after tax has been deducted, but they are liable for all losses. Furthermore, their businesses aren’t classed as being separate to their personal affairs, so if there are any debts, they’re legally liable to pay for them, which may impact them personally.

  1. Limited company

Unlike sole traderships, limited companies are run as a separate legal entity that doesn’t have any bearing on owners’ personal affairs.

Business owners own their limited company by holding shares in it and it’s possible for them to be both a shareholder and an employee.

Any profits that are generated belong to the company, but can be accessed by the business owner paying themselves:

  • A dividend (if they’re a shareholder) or;
  • A salary (if they’re an employee)

Limited companies pay Corporation Tax on their profits after paying their salary, but before they make their dividend distribution.

There are additional responsibilities associated with running this type of company, which range from preparing statutory accounts, to fulfilling company secretary obligations and following Pay As You Earn (PAYE) processes.

  1. Partnership

While partnerships might sound more complex, they’re effectively an extension of the sole trader set-up.

Typically, two or more people join forces to share the running of the business and the liabilities, as well as the profits. This is an ideal business structure for those who have a common business idea and have identified that their skills and talents complement each other.

Due to the nature of the business, the partners usually fund the business with the required start-up capital. The more partners there are the more money that can be invested into the business, which will enable greater flexibility and more potential for growth. It also means more potential profit, which will be equally shared between the partners.

As with sole traderships, the partners are liable for paying any business debts. In fact, they’re jointly liable, which means if one partner can’t pay their share, then responsibility will fall to the other partners within the company.

  1. Limited Liability Partnership (LLP)

An LLP is a partnership in which some, or all partners (depending on the jurisdiction), have reduced financial liability or limited liabilities.

The makeup of an LLP is very similar to a partnership company in terms of tax liability, internal management and the distribution of profits, however, unlike partnerships, one partner is not responsible or liable for another partner’s misconduct or negligence.

There is also a lesser degree of flexibility in relation to taxation and National Insurance. LLPs have enabled certain professions, that would usually operate as a traditional partnership, to benefit from the reduced financial risk of a limited company and the flexibility of a partnership.

There are plenty of different business structures for you to choose from, including the four we’ve listed above. Make sure you take the time to research the options available to you thoroughly and, if you need any further clarity or advice, don’t be afraid to ask the experts.

If you need assistance with identifying the best business structure for your company, contact our team of specialists on 01905 777600 or

About thDSC4371e Author

Tony’s likeable personality is a big hit with clients. He specialises in property management companies and supports a wide range of businesses. He also enjoys networking with the local business community.



Key considerations when starting a new business

Business start-ups are on the rise. According to the national enterprise campaign, StartUp Britain, an unprecedented number of new businesses were launched last year, at a record pace of 80 an hour.

Figures published by StartUp Britain revealed 342,927 new businesses registered with Companies House between January and June, compared with 608,110 for the whole of 2015.

Interestingly, Bromsgrove was responsible for the majority of start-ups outside of London, where 29 people for every 1,000 residents branched out on their own between January and June.

Whether you’re starting a new business because you’ve been made redundant or the idea of being your own boss has always appealed to you, it’s important you don’t rush into anything. Make sure you do your research and take the time to consider key factors, such as these:

1. Business structure

Yes, it’s an obvious starting point, but it’s a really crucial starting point that will determine the type of business you run. Generally speaking, there are three common types of business structures:

  • Sole trader – sole traders are the sole owner of their business. They’re entitled to keep all profits after tax has been paid, but are liable for all losses.
  • Partnership – partnerships are similar in nature to sole traders, but because they involve more than just one person, it’s advisable for written agreements to be put in place and for all partners to be made fully aware of the terms of the partnership.
  • Partnerships can also exist as Limited Liability Partnerships (LLP) in which some or all partners have limited liabilities. For instance, one partner is not responsible for another partner’s misconduct or negligence.
  • Company – the owner(s) have limited liability. They keep their business affairs totally separate from their personal affairs and have to comply with legal regulations.

2. Business plan

Business plans vary from organisation-to-organisation. Ideally, they should thoroughly describe your business and cover key areas, such as your objectives, strategies, sales, marketing and financial forecasts.

The most effective plans help business owners to not just clarify their business idea and spot potential problems on the horizon but help them understand and plan precisely how they intend to generate money and make their business sustainable.

You can speak to us for help and advice on putting a business plan together.

3. Record-keeping

Regardless of whether you’re a sole trader, partnership or company, it’s essential that you keep an up-to-date record of your business activity.

It’s entirely up to you how you choose to keep your records. You may decide to keep hard copies of all of your business affairs or you may prefer to do everything electronically, including logging your expenses. The main thing is, that come year-end, you have a clear audit trail of all of your business activities for the previous 12 months.

If your records are organised and kept all up-to-date, then it will be much easier to put your year-end accounts together for HMRC. In addition to compiling their books, companies and LLPs need to make their accounts publicly available on Companies House within certain time frames. They may also be audited by HMRC at any time too.

4. Taxation

Another key area that needs to be considered when starting a new business, is taxation, which can be broken down into the following three elements:

Tax on profits

The type of tax that’s applied and the amount that’s taxed will be dictated by the type of business being operated. Taxable profits are usually based on the profits shown in your business accounts after they’ve been adjusted to comply with the tax rules.

National Insurance (NI)

Contributions can be paid at different rates for sole traders and partnerships compared to company directors on a salary. The entitlements can also differ. For instance, within a company, it may be possible to avoid NI by paying dividends rather than salary. Your accountant will be able to advise you on the options to take, based on your company set-up.

Value Added Tax (VAT)

Not all businesses are VAT registered. In fact, knowing whether or not to register for VAT is a question that’s often posed by many business owners, particularly when they’re first starting out.

If your turnover (total sales) in the previous 12 months exceeds the compulsory registration threshold (currently £85,000), then yes – you must register. Failure to do so can result in you being fined by HMRC.

If you haven’t exceeded the threshold for compulsory registration, you can still register voluntarily if it makes sense for you to do so. Again, your accountant should be able to advise you on the best course of action based upon your individual circumstances.

Starting a new business is undoubtedly an exciting venture. However, it is important that business owners’ visions don’t get clouded by excitement and that they do focus on factors, such as those listed above, that will help ensure they have the right foundations in place.

Are you planning to start a new business and feel you could benefit from some expert guidance and advice? Contact our team of specialists on 01905 777600 or

Spring Budget 2017: how will the announcements affect you?

Following the UK’s historic vote to leave the EU, and with Prime Minister Theresa May poised to trigger Article 50, Chancellor Philip Hammond presented the Spring Budget against a backdrop of economic uncertainty. Figures from the Office for Budget Responsibility revealed that UK economic growth is now expected to reach 2% this year, before falling to 1.6% in 2018.

The Chancellor announced a range of significant measures for businesses and individuals, including a support package for firms in England affected by the business rates revaluation and the announcement that unincorporated businesses and landlords with turnover below the VAT registration threshold will have until 2019 to prepare for quarterly reporting.

Also unveiled in the 2017 Spring Budget was an increase in the main rate of Class 4 national insurance contributions (NICs) to 10% in April 2018 and a reduction in the tax-free dividend allowance, which will fall from £5,000 to £2,000 in April 2018.

Our Budget Report provides an overview of the key announcements arising from the Chancellor’s speech. However, it also looks beyond the more sensational measures and offers detail on the less-publicised changes that are most likely to have an impact upon your business and your personal finances.

Additionally, throughout the Report you will find handy tips and ideas for practical tax and financial planning, as well as an informative 2017/18 Tax Calendar.

Don’t forget, we can help to ensure that your accounts are accurate and fully compliant, as well as suggest strategies to minimise your tax liability and maximise your profitability.

Click the link to download the Spring Budget 2017 Summary.

Have a question on the Spring Budget 2017? Leave a question or comment below and we can offer you expert advice.

At Ormerod Rutter we understand that finances and tax can sometimes be confusing. We have 15 expert partners to hand that can offer expert advice on all financial matters, no matter how big or small. We pride ourselves on having big firm capabilities and family firm personality. Have a question or want to discuss your personal or business finances? Give us a call on 01905 777600.

* Please note that all information contained in this article is for informative purposes only and that we cannot be responsible for any errors or omissions.*

*Since the Budget the government has now made a U-turn and will not be increasing the National Insurance Contributions from the self-employed. This was overturned as it went against one of the main Conservative manifestoes promises of not raising taxes. 

VAT: Flat Rate Scheme Changes

HMRC has announced that, as from the 1 April 2017, all businesses using the Flat Rate Scheme or intending to use the Scheme will have to consider (in addition to the existing conditions) whether or not their VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period; or
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum, or proportion thereof (ie, £250.00 per quarter or (£83.33 per month).

If this criteria is met then the business will be regarded as a “limited cost trader” and MUST apply a fixed Flat Rate percentage of 16.5% to its’ VAT inclusive turnover.

All businesses using or considering using the Flat Rate Scheme should now review their status.

If you would like to discuss anything in this article please contact either David Pegg or Leanne Macgregor on 01905 777600

Record number of apprentices join Ormerod Rutter

We have taken on our biggest cohort of apprentices this autumn, welcoming 15 accountancy and IT apprentices aged between 16 and 20 to our offices in Droitwich Spa and Bromsgrove.

The successful apprenticeship programme was launched in 2012 in response to a skills shortage across the sector.

Accounts manager Doug Marshall, who devised the scheme, said: “I created the programme with the intention of recruiting young, ambitious individuals who would become the future of our company. In the first year, we recruited five school leavers and the number of apprentices taken on has risen year on year.

“We believe the scheme gives talented youngsters the opportunity to fulfil their potential by offering full study support, mentoring on site and a vibrant working environment.”

We were named medium apprenticeship employer of the year at the 2015 Worcestershire Apprenticeship Awards and sponsored the advanced level apprentice of the year category at this year’s event, which was won by Pippa Dressler-Pearson.

For more information about the apprenticeship scheme and to apply for a place in 2017, email

The Making Tax Digital consultation has ended…

On 7 November 2016 the Making Tax Digital (MTD) consultations came to an end. First outlined in the 2015 Budget, it is a move to transform the tax system to make it the ‘most digitally-advanced tax administrations in the world by 2020.’

The controversial plan is set to raise £1bn in additional tax revenue but there is criticism about the potential costs and administrative burden for businesses and individuals.

The six consultations that have taken place are:

  1. Bringing business tax into the digital age
  2. Simplifying tax for unincorporated businesses
  3. Simplified cash basis for unincorporated property businesses
  4. Voluntary pay as you go (PAYG)
  5. The tax administration consultation
  6. Transforming the tax system through the better use of information

There is also a separate overview for small businesses, self-employed and smaller landlords.

The consultation was initially planned to begin in April 2016, but was delayed until later in the year. With the reforms set to be introduced in 2018 businesses and individuals want to know how this will affect them going forward.

What we do know is that all unincorporated businesses and landlords with a turnover of less than £10,000 a year will be exempt.

Additionally, HMRC has said that it will delay the start of MTD for ‘some other small businesses’ to give them enough time to get used to the digital record keeping and submitting of quarterly updates. HMRC then goes on to say that they expect all tax returns to be done digitally by 2020.

With feedback from the consultation due before the end of January 2017, we are actively looking at any changes that may be implemented; and are here to help you during this transition.

If you have any questions or concerns about MTD please feel free to contact us at or calling the office on 01905 777600.

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