Hospitality hot spots
News and views for pubs, bars, restaurants and hotels
As we near the end of summer we thought it would be an opportune time to update you with some of the latest news and developments from the last couple of months as we all head into the long uphill climb to Christmas!
The vote for divorce
The biggest news from the last couple of months has undoubtedly been the vote for Britain to leave the European Union. Regardless of whether you were a Leave or a Remain voter, it’s safe to say that the implications of the vote cannot be overstated. It will affect all hospitality businesses over the next few years. Media reports of a boom in leisure spending over the summer is currently disguising the fact that this is, surely, a slow burn issue.
What Brexit will mean for the raft of employment and taxation legislation which originates in European law is even less clear. What can be said for sure is that a sector employing tens of thousands, who have chosen to come and work in the UK, will inevitably face a long period of uncertainty.
Read more of Peter Davies thoughts on Brexit here.
Government tipping consultation
In a classic case of ‘great timing’, the recent tips consultation ended just a few days after the Brexit vote. Since then we have a newly-reorganised Government department (BIS has evolved into BEIS!), a new Secretary of State, and a new Prime Minister.
At the time of writing there is no known timescale for a response and no clear idea of what, if anything, will be proposed. Many businesses are understandably seeking some “forward guidance” on this issue.
It remains likely that the Government will look to increase transparency for employees and consumers. Businesses will be expected to disclose whether a tronc system is in place and the level of service charge retained by the business. This could mean that businesses retaining higher levels or all of the service charge (quite legally), could face increased scrutiny or criticism for doing so.
We are seeing a significant number of businesses deciding to set up a tronc for the first time. Many others are looking for a cost-efficient way of reducing their service charge retention rate which allows them to reward staff at market rates and without reducing profit levels. We are currently scheduling new troncs for implementation in November and December 2016.
Please get in touch for a free initial discussion about how we can help you.
As a part of our response to the last consultation we carried out a survey of views from businesses and hospitality staff and a separate survey for consumers. Read more about the results here.
National Minimum Wage
The current rate of National Minimum Wage (NMW) payable to staff who are less than 25 years old will increase on 1 October 2016 to £6.95, with lower rates payable to staff aged below 21. This is an increase of 25p per hour or 3.7%.
The next NMW rise for all staff is scheduled for 1 April 2017 and rates will then rise each 1 April thereafter. As yet we have no announcement about how much April’s rise will be.
Keep track of the rate changes. If you are found to be in breach of NMW rules – by accident or intention – you will be publicly named and shamed by HMRC if you owe more than £100. This could have a hugely detrimental effect on your business.
Legislation to implement the apprenticeship levy is currently making its way through Parliament and is expected to take effect from 6 April 2017.
The charge will be 0.5% of a business’s paybill, although an allowance of £15,000 will mean that the levy will only be payable if your paybill exceeds £3m per annum. Connected companies will only be able to claim one £15,000 allowance.
The good news is that a paybill is defined as ‘amounts within the scope of employer’s National Insurance Contributions (NICs)’. This means that tronc payments do not count towards your paybill for apprenticeship levy purposes – another reason to use tronc!
Enquiries from HM Revenue & Customs
The last few months have seen an upturn in the number of enquiries from HMRC aimed at hospitality businesses. Employer Compliance reviews of payroll, tronc and benefits in kind as well as NMW inspections have risen significantly. These may be carried out in response to a complaint or as part of HMRC’s initiative to monitor compliance across various business sectors, including hospitality.
We are seeing a much stronger line being taken by HMRC inspectors, particularly in relation to:
- Staff paid by shift where no record is kept of start/finish times each day
- Staff treated as salaried where the contract is not written in the correct form
- Staff accommodation, the Accommodation Offset, and other bills and costs
- Deductions other than tax and NICs from employee paypackets – very few are allowable for NMW purposes and it makes no difference if paid from gross or net or even by agreement with the employee
- Security deductions (eg for uniforms) or week in hand deduction repaid on leaving employment
We can help you to avoid errors that attract HMRC’s attention or assist you if you are under enquiry. Please get in touch with Peter Davies for help or for a confidential discussion.