Below I have summarised all the main tax related updates we have seen this week.
• Kickstart Scheme Opens
• Child Trust Funds
• Certain Property Business Owners are Liable to Class 2 NICs
• Company Vans Were Motor Cars
If you have any queries about this week’s content, please do not hesitate to contact me.
I hope you have a great weekend!
Steven Hillman BSc (Hons) ACA
Tel: 01934 444100
Kickstart Scheme Opens
The Department of Work and Pensions (DWP) has launched the Kickstart Scheme, designed to create new 6-month job placements for young people who are currently on Universal Credit and at risk of long-term unemployment.
The £2 billion Kickstart Scheme is designed to create hundreds of thousands of new, fully subsidised jobs for young people across the country.
The 6-month placements are open to those aged 16-24 who are claiming Universal Credit and at risk of long-term unemployment. They will be available across a range of different sectors in England, Scotland and Wales. The first placements are likely to be available from November.
Employers will receive funding for 100% of the relevant National Minimum Wage for 25 hours a week, plus associated employer National Insurance contributions and employer minimum auto-enrolment pension contributions.
There will also be extra funding to support young people to build their experience and help them move into sustained employment after they have completed their Kickstart funded job.
If you are an employer looking to create jobs placements for young people, you can apply for funding as part of the scheme.
Who can apply
You can submit your application online.
If you are applying for 30 or more job placements, you can apply directly.
If you are applying for less than 30 job placements, you must apply through a representative of a group of employers. They can submit an application on your behalf, using other employers to create 30 or more job placements in one application.
What you need to provide during the application
You will need:
• the Companies House reference number or Charity Commission number
• the organisation address and contact details
• details of the job placements and their location
• supporting information to show that the job placements are new jobs and meet the Kickstart Scheme criteria
• information about the support the organisation can give to develop employability skills of young people
After you have applied
Your application will be reviewed to check it meets the requirements of the Kickstart Scheme. It will then go to a panel for consideration. This is not a competitive process, but Kickstart will only provide funding when the job placements meet the criteria.
DWP aims to respond to applications within 1 month.
If your application is successful
If your application meets the requirements of the scheme, you will receive a letter with a grant agreement. This agreement will include what your company has agreed to provide, and how much funding you will receive from the Kickstart Scheme.
Kickstart employers guide
Read the guide here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/913209/kickstart-scheme-employer-guide.pdf
Child Trust Funds
18-year olds now get a chance to access their Child Trust funds! Children born from September 2002 were given vouchers by the Government.
The government initially put £250 into the tax-free account during a child's first year, then added another £250 when he or she reached the age of seven.
For lower-income families, the payment was £500. with access to the money at 18. Parents, family and friends could also contribute to the account, up to set limits. The scheme was ended in January 2011.
Certain Property Business Owners are Liable to Class 2 NICs
Class 2 National Insurance Contributions (NICs) are currently paid at the rate of £3.05 per week by self-employed earners. A person who is liable to Income Tax on the profits arising from the receipt of property rental income will only be a self-employed earner for NICs purposes if the level of activities carried out amounts to running a business.
HMRC have recently issued clarification which states that in order for a property owner to be a self-employed earner, their property management activities must extend beyond those generally associated with being a landlord which include, but are not limited to, the following:-
• undertaking or arranging for external and internal repairs
• preparing the property between lets
• advertising for tenants and arranging tenancy agreements
• generally maintaining common areas in multi-occupancy properties; or
• collecting rents.
The HMRC guidance suggests that the ownership of multiple properties, actively looking to acquire further properties to let, and the letting of property being the property owner’s main occupation could be pointers towards there being a business for NICs purposes.
A landlord will also be a self-employed earner if any of their activities amount to a trade for Income Tax purposes. This could include, for example, receiving income from other services provided to tenants.
Company Vans Were Motor Cars
The Court of Appeal have now ruled on the tax status of certain vehicles provided to employees of Coca Cola. The court has upheld the HMRC view that vans with windows and a second row of seats behind the driver are not goods vehicles but motor cars for benefit in kind purposes.
Consequently, the income tax and national insurance payable by employee and employer is significantly higher than if the vehicles had been classified as goods vehicles.
The income tax legislation defines a “goods vehicle” as “a vehicle of a construction primarily suited for the conveyance of goods or burden of any description…”
At the Tax Tribunal it was decided that modified VW Kombi vans failed this test whereas modified Vauxhall Vivaro vans did fall within the definition of goods vehicles.
It has now been determined that the Vauxhalls should also be taxed as motor cars for P11d benefit in kind purposes. This means that where the vehicle is available for private use the taxable benefit will be based on the original list price multiplied by a percentage based on the vehicle’s CO2 emissions.
The decision means that employers may need to reconsider providing such vehicles. They may also need to rectify the P11d reporting in respect of earlier years and we await further guidance from HMRC.
What is also particularly confusing, and thus difficult for businesses to deal with, is that the benefit in kind rules are not the same as the rules for recovery of input VAT and it would be useful if there was a common definition for tax purposes.
VAT Definition of "Motor Car"
For VAT purposes the definition of a motor car has been amended several times over the years.
The current definition states: “Motor car” means any motor vehicle of a kind normally used on public roads which has three or more wheels and either:
a) is constructed or adapted solely or mainly for the carriage of passengers; or
b) has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows;
There are a number of exceptions to this rule: notably vehicles constructed to carry a payload of one tonne or more, i.e. double cab pick-ups such as a Toyota Hilux.