Director-only companies and auto enrolment
Pensions auto enrolment began in 2013, and since then nine million workers have signed up to company schemes, with only nine percent choosing to opt out.
For small companies and micro employers (the latter defined as having between one and nine employees), the new legislation has inevitably led to extra administration, not to mention an increase in outgoings in the form of employer contributions.
But what are the rules if you are a director-only company, for example a tradesperson or contractor who does not employ any staff? Are you required to offer yourself the option of a company pension scheme, even if you do not wish to take up the offer?
Fortunately, The Pensions Regulator (TPR) - the public body that protects workplace pensions in the UK - has clarified its guidelines on this issue. Director-only companies are exempt from auto enrolment contributions, even if they have a contract of employment that classes them as a worker.
However, if you are sole director of your one-person company, but work for another company as an ordinary member of staff, you will be classed as a worker in the latter position, and as such you will not be exempt from automatic enrolment in that position.
For those directors that are exempt, it's your responsibility to contact TPR to confirm that you're not an employer. You will also need to advise TPR as soon as possible if your company's circumstances change and you decide to employ staff.
Did you know?
There's been an explosion in non-employing UK businesses over recent years, and they now account for 76% of all private sector businesses. Freelancers, contractors, sole traders and locums make up the vast majority of these businesses, operating in all kinds of sectors from IT and media to construction, healthcare and leisure.
Need bookkeeping help? Talk to AMR
Running your own business can be all-consuming, and there are times when it pays to call in the experts. Here at AMR, we can streamline your business accounts, offering expert advice and help with anything from budgeting and VAT accounting to record keeping and credit control. If your company does expand, we can help with payroll too.
For more information, don't hesitate to get in touch on 01892 559480 or via our contact form