More than 750,000 employers face new responsibilities in 2017 to contribute to their staff pension schemes. Small business owners who have yet to act, should do so now to avoid large fines and potential prosecution.
From January to March 2017, The Pensions Regulator (TPR) predicts at least 147,000 small businesses reaching their staging date. This will represent a peak for the number of companies expected to comply with the previous Government’s automatic enrolment legislation introduced in 2012.
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.
This may be because unlike larger organisations, smaller businesses often do not have the financial resources or staff dedicated to look after their payroll and pensions commitments.
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.
Therefore, the best solution is to start preparing for auto enrolment as soon as possible. Business owners who are required to provide a qualifying pension scheme but fail to do so, 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.
Help is at hand
If you haven’t chosen an automatic enrolment pension scheme for your firm, then we work with Wren Sterling, a national firm of independent financial advisers, who can offer this service.
Your local TaxAssist Accountant can also help with the day-to-day running of the scheme so you can concentrate on growing your business, safe in the knowledge that your business is compliant with the workplace pension legislation.
For more information about the services from Wren Sterling or your local TaxAssist Accountant, simply call our friendly team today on 0800 0523 555 or drop use our online enquiry form.
By Fraser McKay
Last updated January 2017
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.