Ian explains ‘Tax Free Childcare’…

The government is launching a new scheme called ‘Tax Free Childcare’ which has the aim of helping working parents with their childcare costs.

 

In the UK the average cost of sending a child under the age of two to nursery can range from  around £115 to £220 per week depending on if the parent is part time or full time.  The cost of this often means that it simply isn’t feasible for both parents to work full time whilst they have young children.

 

The government are aiming to help working parents by offering to pay £1 for every £4 paid by the parents towards childcare.  A total of £2,000 can be received each year per child up to the age of 12, this changes slightly for disable children as £4,000 a year can be received up to the age of 17.

To be eligible for the scheme parents must earn at least £115 each and not in excess of £100,000 each.  The scheme will be launched in early 2017 with parents with the youngest children able to apply and benefit from the scheme first.  By the end of 2017 the scheme will be available to all eligible working parents in the UK.

 

The scheme currently in place is the Employer-Supported Childcare scheme.  From this you can receive up to £55 per week for childcare depending on how much you earn and how long you have been on the scheme.  However, unlike the current scheme, with Tax Free Childcare self-employed parents will also be able to take advantage of the new scheme, so this is definitely something to look out for in 2017.

There are other ways of gaining help to pay for childcare such as salary sacrifice schemes through payroll, Child Tax Credits, Working Tax Credits, Free Childcare and Education for 2 – 4 year olds and also schemes to help whilst you are at college or university.  A lot of helpful information can be found on the following link, or if you would like more information regarding eligibility for different schemes then please feel free to contact us.

https://www.gov.uk/help-with-childcare-costs/approved-childcare

Chloe explains about Payments on Account…

31^st July is the deadline for the second payment on account for 2016/17 self-assessment tax returns to be paid to HM Revenue & Customs.

 

Payments on account are payments in advance towards your next tax bill, they are paid twice a year before the 31^st January and 31^st July deadline.

 

Each payment is half your previous year’s tax and, if you’re self-employed, Class 4 National Insurance liability.

 

For example, if your 2014/15 tax liability was £2,000, you will have had to pay £1,000 to HM Revenue & Customs by the 31^st January 2016 and £1,000 by the 31^st July 2016. These two payments relate to the tax year 2016/17. Therefore you are making the payments in advance.

 

If the tax liability ends up being more than the payments on account the balancing payment is due by the 31^st January following the end of the tax year. In the example above the balancing payment would be due on the 31^st January 2017.

 

You only fall in to the payments on account scheme when your last self-assessment liability is over £1,000 and less than 80% of your income is taxed at source.

A lot of people are not aware of these rules and can get in a bit of a pickle if their tax liability suddenly goes over £1,000 and at the end of January they have to pay the last year’s tax bill plus the first payment on account for the next tax year!

 

It can be very confusing so if you are worried about payments on account or would like to know if you will be affected by them please do not hesitate to contact us on 01772 735865.

Lucy explains the change from annual returns to confirmation statements…

You will all be pleased to know that from June 2016 the never ending paged Annual Return you have to sign each year has changed to a more simplified form known as a ‘Confirmation Statement’.

The Confirmation Statement is intended to serve exactly the same purpose as the Annual Return, however instead of showing a snapshot of your company at a specific date, all you need to do now is check and confirm the data held at Companies House is correct.

The main difference is that on filing your company’s first Confirmation Statement you will need to include information of anyone with significant control. This is anyone who:

• Has more than 25% shares or voting rights in your company
• Can appoint or remove a majority of directors
• Can influence or control your company or trust

Even if your company does not have anyone with significant control, you will still need to have a register.

The Confirmation Statement will be made up to the same yearly date as your Annual Return was. Be aware though, as the 28 day grace period to file the return has changed to 14 days. If we currently prepare your Annual Return, you will be receiving lots of friendly reminders from us to meet your deadline each year. Companies that file their Confirmation Statements late could be fined up to £5000 and face the risk of their company being struck off!

Should you have any questions on preparing your first Confirmation Statement or would like RT to prepare and file the Statement on your behalf, please do not hesitate to contact our office!

Ian tells us about how to get benefits without a tax implication…

It’s a stressful time in the office at the moment with the P11d filing deadline approaching.  All forms have to be filed by 6^th July and any Class 1A National Insurance paid over to HMRC by 19^th July.  Fortunately HMRC are set to reduce the requirements for reporting in the coming years but they still remain one of our clients (and our) least favourite piece of paperwork!

 

One of the things that employers probably aren’t aware of are trivial benefits.  Although HM Revenue and Customs don’t actually put a general statutory limit it is thought that they accept claims for benefits to be exempt when they are around or less than £50.

The best way to find out if a benefit will be considered trivial is to give the employer helpline a call on 0300 200 3200 and if they agree it is trivial you will need to ask your local employer office to confirm this in writing.

 

There are further rules regarding this to stop directors taking advantage of this and continually buying themselves small gifts.  There is an annual cap for directors (and members of their household) of £300 per year, however there is no limit to employees, so feel free to give them a small treat as often as you like, providing it isn’t a reward for work done ie. Meeting sales targets for the month.  Anything else such as taking them out for their birthday, flowers if they have been ill or a  work anniversary gift would be fine.

If you have any further queries regarding trivial benefits for either yourself or your employees then feel free to get in touch with us.

Chloe talks about the rise of Airbnb…

 

Until recently many people may not have heard of Airbnb but the announcement of tax breaks by the government has resulted in an increase of popularity of the site where you can book a stay with a local host and experience a place like you live there.

 

 

The new tax breaks in the UK for people who use Airbnb (or rent out a room in their home) came in from 6th April 2016 and saw the ‘Rent a Room’ relief rise to £7,500 per year.

 

So anyone renting out a room in their main residence can receive up to £7,500 gross income tax free per year, this includes guest houses and B&Bs if the property is the landlord’s main residence.

 

The government’s objective is to support individuals and living standards. It will also reduce the admin burden for many people.

There are a number of restrictions which need to be considered, these include:

 

• All extras, such as meals, cleaning or laundry, must be included when calculating the £7,500 gross income

 

• Expenses cannot be deducted

 

• If £7,500 gross income is exceeded you must prepare a tax return, in this instance you can choose to pay tax on the income over £7,500 without the deduction of expenses or deduct expenses from income and pay tax on the profit. The former option will probably be most beneficial unless you expect to make a loss.

 

• The property must be fully furnished

 

• The relief cannot create a loss

 

• You must check with your mortgage lender or landlord to ensure no regulations are being breached. It also advisable to check your insurance cover too.

 

For properties that are owned jointly each owner can have gross income of £3,750 tax free, one quirk of the system is that even if there is more than two owners each owner still gets £3,750 each.

 

If you are thinking about renting out a room please do not hesitate to contact us with any questions you may have info@rtaccountants.co.uk 01772 735865.

 

Nick Smith explains the ‘Panama Papers’

 

On 3 April 2016, the world’s media broke the news on the “Panama Papers”.

 

The Panama Papers are a set of 11.5m documents leaked by the Panamanian law firm Mossack Fonseca which provide information about more than 214,000 offshore companies. The Papers document how wealthy individuals have hidden assets from public scrutiny.

 

High profile names mentioned to date include Vladmir Putin, the brother-in-law of China’s President Xi Jinping, Ukraine’s President Petro Poroshenko, Argentina’s President Mauricio Macri and Pakistan’s Prime Minister Nawaz Sharif.

 

Not surprisingly perhaps, football’s world governing body FIFA, has also been implicated.

 

In the immediate fall out, Iceland’s Prime Minister, Sigmundur Gunnlaugsson, announced his resignation.

 

Whilst the use of offshore business entities is not illegal, it has been reported that some of these companies may have been used for illegal purposes, including fraud, drug trafficking, money laundering and tax evasion.

 

The ramifications of the Papers is expected to be huge with the volume of data dwarfing that of WikiLeaks in 2010 and Edward Snowdon’s release of classified NSA files in 2013.

 

By coincidence, 3 days after the leak, legislation came into force requiring UK companies to maintain a Register of Persons with Significant Control. In its simplest form, this will be a list of individuals with a holding of more than 25% in a company or who have significant influence or control by other means. After 30 June 2016, however, this list with accompanying Confirmation Statement will need to be filed at Companies House thereby replacing the traditional Annual Return.

 

If you want further information or guidance on this new legislation in the UK and ensure you are aware of your responsibilities as directors and business owners, please call your RT contact who will be able to advise.

 

Amy Sharples shares her tips to save some pennies…

5^th April  is an important date in the diary for accountants! The new tax year brings about changes in the world of tax which can bring opportunities to save money. With this in mind, I’ve been thinking of easy ways to save money for me personally, which I have decided to share in this blog.

 

1. Help To Buy ISA

The new tax year is a great opportunity to open a Help to Buy ISA, as you don’t need to worry about whether you have already reached your ISA limit for the year. This ISA is a no brainer if you’re saving for a deposit for your first home. The government will pay a bonus of 25% of your savings, up to a maximum bonus of £3,000. When else would you get given £3,000 from the government!

2. Cash back credit cards

There are many credit cards on the market which offer cash back on spending which is paid out annually. As long as you always pay off the total balance and never incur any interest charges, the extra cash can be a welcome boost, and is especially great for large planned expenses such as holidays. Often the cash back is paid in January which really helps with the cost of Christmas!

3. Swap your bank account

Some bank accounts offer cash back on payments such as household bills and then pay the money directly into your bank account, helping to boost your monthly income. Other bank accounts offer a bonus for swapping your current account of up to £100. Banks are trying to make changing accounts much easier, so this is definitely worth considering.

4. Pensions

With many smaller companies entering into auto enrolment this year, now may be a good time to consider saving for your pension. Once your employer reaches their staging date, and if you are an eligible employee, you must be automatically enrolled into the company pension scheme. Opting out of the scheme will mean you’ll miss out on the additional contribution made by your employer which would result in extra pension income for when you retire.

5. Swap your utility provider

Although it may seem like a hassle, swapping your utility provider can save you money. There are plenty of websites out there which allow you to quickly compare prices, so do some research and see how much money you can save.

Nick Smith, our Director, says…

Making Tax Digital

 In his November 2015 Autumn Statement, as part of HMRC’s strategy to go fully digital, the Chancellor announced plans to require the self-employed and small businesses to file quarterly tax returns.

The Government’s vision is that, “by 2020, most businesses, to include companies, partnerships and individual taxpayers who are self-employed and those letting out property, will be required to keep track of their tax affairs digitally and update HMRC at least quarterly. By reporting information closer to real time, businesses will find it easier to understand how much tax they owe, giving them far more certainty over their tax position and helping them to budget accordingly. By the end of 2016, every individual and small business will have access to their own secure digital tax account, like an online bank account, that enables them to interact with HMRC digitally”.

However, in the face of strong opposition from taxpayers and a public petition to scrap the plans which has now been signed by over 100,000 people, the Government has scheduled a parliamentary debate for 25 January 2016.

Many petitioners will no doubt have concerns over the costs of purchasing compliant technology or additional accountancy support, not to mention the time commitment to what they view as 4 self-assessment returns each year. Others will be worried about the cash-flow impact of having to pay tax earlier.

There are many, however, who take a different view and cite the new plans towards digitalisation is long overdue with many European countries having well-established monthly or quarterly filing regimes. Others applaud the plans as bringing a more equitable playing field – employees pay tax instantly through PAYE, why should business owners have ‘time-to-pay’?

Evidently, plenty of debating to be done!

For further information and the government’s response to date, please click here

Amy Sharples, our staff accountant, says…

Tax at Christmas

As Christmas is nearly upon us once again, I thought I’d give a quick reminder of the tax treatment of seasonal gifts and benefits to staff.

VAT

In general, input VAT on entertaining is not recoverable, however employee entertaining is. So if you’re treating your employees to a Christmas party you can claim the VAT on the bill. However, if partners and guests are also invited, they are not employees and so the VAT on their meal cannot be claimed!

Gifts to employees

If you are feeling particularly generous and intend to give gifts to your employees this Christmas, they may need to pay tax on these. If the gift is a cash gift or a voucher, then it is taxable as with all other earnings. However, if the gift is a seasonal present such as a turkey, a bottle of wine, or box of chocolates then as long as the cost is “reasonable” HMRC won’t seek to tax it.

Social events for employees

The tax exemption for employee entertaining is capped at £150 per head. This relief applies to annual events and must be available to all staff. If the cost per head rises above £150, then the full amount is taxable as a benefit in kind.

Employee entertaining is allowed to be deducted for tax purposes. If you invite clients and customers to your party though, the amount spent must be apportioned as client entertaining is not an allowable expense for tax purposes.

 

 

Now we’ve got the tax sorted, we hope that everyone going on a Christmas party this week has a wonderful time!

Michael Barton, our CEO, says…

The End of the Residential ‘Buy to Let’?

Since the liberalisation of tenancy agreements in the Housing Act 1988 and the greater availability of investment mortgages from the early 1990’s there has been a rapid expansion in the number residential landlords.

The Government stated aim is that owner occupation should be the normal position, there have been measures taken to help first time buyers and to increase supply to the owner-occupier sector but in regards to residential landlords the extra costs, both financial and compliance, are increasing.

The following are financial changes:

• Stamp Duty is now up to 12%

• Annual Tax on Enveloped Dwellings is required for properties worth more than £500,000 from April 2016 owned by non-natural persons.

• Wear & Tear Allowance of 10% ceases from April 2016.

• Deductibility of interest will be available only at basic rate of income tax for properties held by individuals after a 4 year taper from April 2016. This change alone makes a typical buy to let property with a mortgage at 50% LTV cash flow negative on an annual basis over the life of the loan.

• Non-Resident CGT applies to gains made after April 2015.

• Reduction of PPR and Let Property relief after April

• Interest Rates have only one way to go!

 

The following are compliance changes:

• Substantial penalties for non-compliance with Tenants Deposit Protection.

• Landlords responsibility to verify tenants right of UK Residency.

• Carbon Monoxide alarms must be fitted and maintained.

• Annual inspections of gas appliances.

• Energy Performance Certificates are required for new tenancies and properties must be a minimum of ‘E’ by 2018.

• Assessments and monitoring are required for Legionella on HMO’s.

• Written schedules on Health & Safety Assessments on Repairs are now mandatory on all repairs and improvements.

• Payment of Housing Benefit is now direct to tenants under Universal Credit

Changes to come?

• Compulsory Registration & Licencing of Landlords is already being trialed in certain areas.

• Compulsory Registration of Tenancies would be a short extension to the TDS Scheme and therefore direct reporting of rental payments to HMRC

Our clients are asking about these things with increased urgency, I’ll leave you to draw your own conclusions; consult us for mitigation strategies.