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Employer
fined for not providing pension scheme
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For the first
time, an employer has been fined for failing
to give its employees access to a stakeholder
pension scheme. The Occupational Pensions Regulatory
Authority (OPRA) imposed the fine of £10,000
on the company in question, which has around
300 employees. OPRA said this reflected the
number of employees involved and the length
of time the company took to comply.
OPRA became involved after an employee complained
that the company denied him access to a pension
scheme. Since October 2001 employers with more
than four employees have been required to designate
a stakeholder scheme that their staff can join,
or else provide alternative pension arrangements.
Employers must start the process of designating
a scheme as soon as they take on a fifth employee,
even if the employment is only temporary. There
is a set process to go through, including consultation
with employees. Employees do not have to join
and the employer does not have to contribute
on employees' behalf.
OPRA has the
power to fine employers up to £50,000,
but emphasises that a fine is a last resort.
In the first instance, the regulator wants to
help employers comply with the law. OPRA maintains
a register of schemes that meet the stakeholder
requirements, which currently lists 46 providers.
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OPRA's register includes
information about any restrictions a scheme imposes
on employers. For example, some schemes will only
accept designation through a financial adviser.
Some providers have closed their schemes to very
small employers, and OPRA's register lists only
nine schemes that place no restrictions on employer
designations. Any employer having difficulty in
designating a scheme should let OPRA know.
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Small
firms loan guarantee scheme
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Businesses that
are experiencing difficulties raising finance
could benefit from the government's Small Firms
Loan Guarantee Scheme. The scheme guarantees
loans from banks and other lenders to small
businesses that have a viable business proposal
but lack security.
New businesses can borrow from £5,000
to £100,000 for between two and ten years
and businesses that have been trading for at
least two years can borrow up to £250,000.
The scheme guarantees 75% of the loan. In return,
the borrower must pay the Department for Trade
and Industry a premium of 2% a year on the outstanding
amount of the loan. This is in addition to the
interest on the loan at a rate fixed by the
lender.
Companies, partnerships and sole traders can
apply, provided they have annual turnover of
no more than £3m (£5m for manufacturers)
and a maximum of 200 employees. Many business
activities are eligible but there are a number
of exclusions, such as insurance, betting shops,
actors and musicians, tied houses, transport
and some aspects of property development. There
are various restrictions on the loans, which
must be used to develop the business of the
applicant and not to replace existing borrowing
or to fund exporting.
Interested businesses should apply to one of
the approved lenders, which include all the
major banks. The business must satisfy the lender's
commercial criteria for lending and must demonstrate
that it can repay the loan. Applicants will
need a clear business plan and financial forecasts
to demonstrate the viability of their proposal
and to identify their finance requirements.
We can help you in preparing these.
A booklet on
the scheme is available on the DTI website at
www.dti.gov.uk/sflg
or from the DTI Publications Orderline, tel
0870 1502500.
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More
time to report employee share awards
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Anyone who has
incorporated or bought a company in which the
shareholders are (or may become) directors or
employees must report details of the issue of
shares to the Inland Revenue on form 42. Employers
who have issued, sold or given shares to employees,
including past and future employees, must also
make a report.
This new rule has caught many people by surprise.
2003/04 is the first year for which the form
has to be completed. Even the Inland Revenue's
online diary for employers did not mention form
42 until recently. There have also been reported
difficulties in printing the form from the Inland
Revenue's website. Because of this, the Inland
Revenue has extended the deadline for completing
the form to 6 September 2004 instead of 6 July,
unless a form was issued to the employer in
April.
Shares issued under share incentive plans,
saving-related share option schemes and approved
company share option plans do not have to be
reported. The grant of enterprise management
incentive share options need only be included
if the value of options granted is more than
£100,000.
The persons responsible
for completing the form include employers, persons
from whom the securities or options were acquired
and anyone issuing the securities. That could
include a company formation agent who issues
shares to the person for whom the company is
formed. If one responsible person makes the
report, the others do not have to. Passing on
shares to a spouse or children may be reportable
if the recipient is a director or employee,
unless the transfer is wholly for personal reasons
unconnected with the employment. Penalties may
be charged for failure to report the information
on time.
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Shopping
around for insurance cover
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Half of UK businesses
do not shop around before renewing their insurance
cover.
However, no business should buy insurance purely
on price. They should also review and understand
the different types of insurance cover that
they need. The basic insurances that every business
needs include employers' liability insurance,
public liability insurance and cover for buildings
and contents. But businesses face other types
of risks that they may wish to deal with through
insurance. Such risks include business interruption,
professional indemnity and product liability.
In almost any small or medium sized business,
key person insurance could be worthwhile in
case directors or managers are no long able
to work through long-term sickness or they die
Some businesses consider insuring trade debtors
against loss, especially if they are involved
in exporting.
For many, renewing insurances is regarded as
a tiresome chore to be cleared off the desk
as fast as possible. However, this approach
could be expensive; you could be paying more
for your insurance than necessary and the cover
might not be adequate, especially if your business
has grown or changed significantly since it
was last properly reviewed.
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