Statutory Sick Pay (SSP)

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Statutory Sick Pay (SSP) is a standard rate state benefit payable by the employer from the fifth day of sickness. The first three qualifying days of a period of incapacity for work are called waiting days and there is no SSP payment.

In order to qualify for SSP you must meet the following conditions:

• you have to be sick for at leat four days in a row (including weekends and bank holidays)

• you must earn at least £90 per week or £95 a week from 08/09 tax year. This is to do with National Insurance contributions. (If you have two jobs, you may even be able to get SSP from each of your employers, depending on how many hours hours you work.)

Also you would need to provide your employer with some sort of medical evidence.

The standard rate of SSP is £79.15 a week. The way your employer will work out a daily rate is by dividing the weekly rate by the number of days you would normally work in that week.

It is important to remember that SSP payments is subject to tax and NI just like any other type of earnings.

If your employer does not pay you SSP or pays you less you have to clarify with them the reason.

Company sick pay schemes vary from employer to employer, but most state that you should have been working for at least 3 months before you make your claim for sick pay. After this you would then receive your normal pay during any period that you are off to work due to illness, but this is only up to a specific number of weeks. After that you are probably going to receive only half pay for another further period before taking any sick leave as unpaid.

We hope that you have found this information useful, and if you still have any unanswered questions regarding SSP, please fill free to pop in to our offices in South London, Tulse Hill or Exeter.

Types of CIS cards in the Construction Industry Scheme

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Subcontractor? Claim your CIS tax refund!

There are five types of registration cards and certificates used in the Construction Industry Scheme:

CIS 4(P) is the permanent registration card issued to most subcontractors. It entitles the holder to be paid with a deduction on account of tax and National Insurance contributions. It does not have an expiry date but it shows the photograph and signature of the authorised holder, along with their National Insurance number.

CIS 4(T) is the temporary registration card issued to subcontractors who do not hold or do not know their National Insurance number. It enables the holder to be paid with a deduction on account of tax and National Insurance contributions while they obtain a valid National Insurance number.

CIS 6 is the subcontractor certificate issued to individuals, partners in firms and directors of most companies that meet the required turnover, business and compliance requirements. The certificate shows the photograph and signature of the holder and entitles them to be paid gross.

CIS 5 is the subcontractor certificate issued to companies that can’t be issued with a CIS 6. There is no photograph on the certificate but it bears the company secretary’s signature. It entitles the subcontracting company to be paid gross.

CIS 5 (Partner) is the subcontractor certificate issued to one partner in business partnerships that can’t be issued with a CIS 6. There is no photograph on the certificate but it bears the signature of the partner nominated to hold the certificate by the firm. It entitles the partnership to be paid gross.

Sometimes a subcontractor’s payment status will change from payment under deduction to gross payment. If this happens, the Tax Office will tell the subcontractor and any contractors who have verified or used the subcontractor in the current or previous two tax years. The revised payment status should then be applied to all subsequent payments to the subcontractor as soon as it is practical for the contractor to do so.

Subcontractors who meet certain qualifying conditions get the tax certificates and those who do not get the registration cards.

Only a minority of subcontractors will qualify for a Tax Certificate which then entitles them to gross payments. To qualify you must pass three tests; the turnover test, the business test and the compliance test.

  1. The turnover test
    To meet the turnover test as an individual you must show that for a continuous three year period you have had a net turnover of £30,000 a year or more.
  2. The business test
    You need to be in a business that provides labour to carry out construction work, conduct your business primarily through a bank account and also keep proper business records.
  3. The compliance test
    Tax affairs must be kept up-to date during the three years before application. You need to show you have paid all tax, including any PAYE and subcontractor deductions and submitted all tax returns on time.

If you qualify, you should receive your certificate within 30 days of application; if not you will automatically be sent a registration card. If you do get a subcontractor’s tax certificate it will be one of three types; either a CIS6, which is the most common type, a CIS5 which is issued to some companies because of their size, or a CIS5 (Partner) which is again issued to firms which have complex operations or geographical spread. Only the CIS6 shows the authorised user’s photograph and signature.

If you need further information about types of registration cards and CIS tax certificates, Taxfile’s tax accountants in South London, Battersea, Devon, Yorkshire or Carlisle can help you with your registration.

Call 0208 761 8000 or learn more about our tax and accountancy services for CIS contractors and subcontractors in the construction industry here.

Subcontractor? Claim your CIS tax refund!

April’s tax reforms

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One of the most significant changes in the tax year 08/09 is the adjustment to income tax bands. The 10% band is being scrapped and the 22% band is being replaced by a 20% band. The income above £41,435 is taxed at 40 %.
There will also be changes to the amount of national insurance contributions we pay.
The upper earnings limit, up to which you pay the standard rate of 11%, is being increased from £670 a week to £770 . Any earnings above the limit are then taxed at 1%. This change will affect those with weekly earnings between £670 and £770, that previously used to pay 1% on these earnings and now they have to pay 11 %.

In terms of Capital Gains Tax (CGT), the top rate of 40% is being replaced by a flat rate of 18%. But this good news is balanced by the abolition of two tax reliefs: indexation relief and taper relief which would normally reduce the investor’s gain and so minimize his or her tax.

Changes also affect non-domiciled residents. At the moment, non-UK residents who are working in this country pay tax here on their earnings in this country but not on any of their non-UK income. From today, non-domiciled residents who have lived in the UK for more than seven years will be taxed on their worldwide earnings, rather than just those in this country, or have to pay an annual charge of £30,000.

Ed Green, financial planning manager for Chartwell Private Client, warns: “On the face of it, this looks like good news as the basic rate of income tax is going down. But the reality is that the changes to your pocket will hardly make a difference. However, one area that should be of concern is for people with a personal pension. At present, tax-relief means that, for a basic-rate taxpayer, a contribution of 78p into a pension fund is made up to £1 – this will soon be only 97-and-a-half pence. The changes will also affect higher-rate taxpayers. Now is therefore a good time to put in a lump sum.[…]Another group that will be hit by the income tax changes are those on low incomes, currently paying only 10 per cent on pay above their £5,225 basic allowance. This benefits those on an income of up to £7,455.[…] Pensioners could also be particularly hard hit by the change as they will be forced to pay the higher 20 per cent rate of tax on pension income above the initial tax-free allowance, currently £7,550 for individuals aged 65 to 74 or £7,690 for those aged 75 or more. Previously they paid a tax rate of just 10 per cent for the following £2,230 of income above this allowance, but this will now only apply to savings income.(…) “(The Independent, Saturday, 8 March 2008 )

Tell us at Taxfile in what way you are being affected by these changes and whether it has a positive or a negative impact on you as a the taxpayer.

What is the basic state pension?

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The basic State Pension is money you may be able to get when you reach State Pension age. The amount you receive depends on the qualifying years you have built through your National Insurance contributions.

There are two circumstances to be considered:

If you reach State Pension age before 6 April 2010, you normally need to have 44 qualifying years to be entitled to the full basic State Pension if you are a man, or 39 qualifying years if you are a woman. In this case, to get any State Pension you need to meet two minimum conditions:

• you must have at least one qualifying year where you have paid or have been treated as having paid enough NI when you are in employment or voluntary Class 3 contributions.you cannot get any basic state Pension based on NI credits alone.(You will normally get NI credits when you are ill, unemployed or getting Carer’s Allowance)

• you must have at least 25% of the qualifying years needed for for a full basic state pension(11 years for a man and 10 years for s woman)to get any basic state Pension.

You will not be entitled to a refund of the NI contributions you have paid because those contributions pay towards other benefits like sickness, unemployment, and bereavement benefits.

If you reach State Pension age on or after 6 April 2010, the current contributions conditions are being replaced with new rules:

• the number of qualifying years needed to get a full basic State Pension will be reduced to 30 for women and men .

• you will no longer need to have 25% of the qualifying years needed for a full basic state Pension to get any basic State Pension.

• you will no longer have to have at least one qualifying year where you have paid NI contributions.

The minimum state pension amount is £21.83 a week and the maximum amount is £87.30 a week in 2007/08 tax year.

In order to make up for time when you did not pay NI , you may be able to pay NI Class 3. You have to pay the contributions within six years of the end of the tax year the payment is for.

If you are still confused about State Pension, Taxfile in South London can help you get a better understanding of it, explaining you the importance of filling in a retirement pension forcast form called BR19 so you know exactly where you stand.

National Insurance Contributions (NICs)

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National Insurance was introduced in 1948 to build up your entitlement to certain social security benefits including the state benefit.
The type and level of NiC’s depends on how much you earn and whether you are employed or self-employed.
You stop paying National Insurance when you reach pension age, 65 for men and 60 for women.

If you are employed, the following rates apply:
• if you earn above £100 a week (earning threshold) and up to 670 per week you pay 11% of this amount as class 1 NIC’s
• you pay 1% of earnings above £670 per week.
If you are self-employed you pay two types of National Insurance:
• Class 2, at a flat rate of £2.20 a week.
• Class 4, as 8% of your taxable profits between £5225 and £34840 and 1% on any taxable profit over that amount.

There are certain benefits that depend on National Insurance Contributions:

•contribution based Jobseeker’s Allowance ( Class 1 NIC’s only)
•Incapacity Benefit( if you can’t work for long periods due to illness or injury)
•State Pension
•Additional state pension( Class1 NIC’s only)
•Widowed Parent’s Allowance
•Bereavement Allowance
•Bereavement Payment.

If you think you need more information about your National Insurance Contribution Taxfile in South London can help you.