Tax-Free Childcare can help your employees pay for approved childcare across the UK, including nannies and childminders, before and after school clubs and nurseries.
For every £8 a
parent pays into their Tax-Free Childcare account, the government adds £2.
Eligible
parents with children under 12 could get up to £2,000 per child, per year or up
to £4,000 for each disabled child under 17.
Your employees
can learn more about Tax-Free
Childcare and the support available.
It’s important to tell HMRC about any Class 1A National Insurance contributions that you owe for the tax year ending 5 April 2022 by 6 July 2022 at the latest. You also need to send them any P11D forms due by 6 July 2022. Failure to do so may result in a penalty. Any Class 1A National Insurance you owe must reach HMRC by 22 July 2022.
Remember, it’s
important that you complete your P11D forms correctly the first time. If you make
a mistake, it’s time-consuming to correct and your employees will pay the wrong
tax in the meantime.
Further
guidance is available here: how to complete forms P11D and P11D(b)
The cost of living increase means it’s never been more important for your employees to claim tax relief on work-related expenses. HMRC want to encourage employees to claim money they are entitled to using the HMRC online service.
You can support
HMRC and your employees by passing on the useful messages below using your
internal newsletters, websites, meetings, notice boards and other communication
routes.
Message
to employees
Some employees
can get tax relief on expenses their employer has not reimbursed them for. This
includes things like:
●
uniforms
and work clothing
●
equipment
purchases
●
professional
fees and subscriptions
●
using
their own vehicles for work travel (excluding their journey from home to work)
●
working
from home
The first step
in making a claim is to check if you are eligible using the eligibility
checker.
If you qualify, then you can go ahead and make a claim using your Government
Gateway account. If you do not have a Government Gateway account, it
is easy to set one up. Submitting a claim is quick and straightforward.
There are also
other ways to make sure you keep more cash in your pocket, such as Tax-Free
Childcare, marriage allowance, Child Benefit and more. You can check what financial support is available from
HMRC.
Make sure you do not miss out!
In the Spring Statement 2022, the UK Government announced an increase in National Insurance thresholds affecting the 2022 to 2023 tax year.
We want to take
the opportunity to remind our clients that the threshold changes will take
effect from 6 July 2022, meaning
employees will pay National Insurance contributions on less of their income.
The primary
threshold from 6 July 2022 to 5 April 2023 will be £242 per week and £1,048 per
month, equivalent to £12,570 per year (increased from £9,880 per year). See the
guidance Rates and thresholds for employers 2022 to 2023, ‘Class 1
National Insurance thresholds’ for further information.
The National
Insurance lower profits limit for self-employed people has also increased in
line with the changes for employees. The annual lower profits limit is now set
to £11,908 for 2022 to 2023. This is equivalent to 13 weeks of the threshold at
£9,880 and 39 weeks at £12,570, mirroring the position for employees.
Self-employed people are also no longer required to pay Class 2 National
Insurance contributions on profits between the Small Profits threshold (£6,725)
and Lower Profits limit (£11,908), but they are still able to build National
Insurance credits.
Please contact
us about these changes – we are here to help!
The UK government has closed the plug-in car grant scheme to new orders. This follows a public evaluation report highlighting that while the grant was vital in building the early market for electric vehicles, it has since been having less of an effect on demand. Other existing price incentives, such as company car tax, continue to have an important impact. The report also found the plug-in van market will benefit from grant incentives more to support businesses and their fleets in making the switch.
To continue the UK government’s drive towards net zero, £300 million in grant funding will now be refocused towards extending plug-in grants to boost sales of plug-in taxis, vans and trucks, motorcycles and wheelchair accessible vehicles, as announced in the autumn statement.
See: Plug-in grant for cars to end as focus moves to improving electric vehicle charging - GOV.UK (https://www.gov.uk/government/news/plug-in-grant-for-cars-to-end-as-focus-moves-to-improving-electric-vehicle-charging)
Hubbub and Starbucks have launched a £1 million fund to support innovation in the food and drink packaging industry in the UK.
They are looking for innovators with pioneering approaches to challenge single-use packaging in the food and drink sector. The fund is looking to support consumer-facing reuse systems in the UK in both ‘return from home’ and ‘return on the go’ models. If you feel you have a solution to support reuse systems and remove barriers for users and businesses, they want to hear about it.
The fund is open to the following types of organisations:
● Charities
● Academic bodies
● Community Interest Companies
● Social enterprises
● Registered companies
The fund will provide grants between £150,000 to £300,000 and fund up to 5 different projects based in the UK. Applications close at 5pm on 24 June 2022.
See: Bring It Back Fund — https://www.bringitbackfund.co.uk/about
HMRC have recently updated their guidance to employers on travelling time with reference to National Minimum Wage calculations. Travelling for the purpose of working (i.e. in connection with the employment) which does not fall under a daily average agreement is counted as working time.
This includes the time a worker spends travelling between “assignments” which need to be carried out at different places, to which the worker is obliged to travel. An example here would be a care worker visiting several clients in their own homes.
Travelling between a worker’s place of residence (including temporary residence) and the place of their work is not considered as travelling for the purposes of work. Any time spent on such “home to work” travelling is not considered as working time.
For more details see: NMWM08490 - Working time: unmeasured work: travelling time - HMRC internal manual - GOV.UK (https://www.gov.uk/hmrc-internal-manuals/national-minimum-wage-manual/nmwm08490)
All workers are legally entitled to be paid the National Minimum Wage (NMW). This includes temporary seasonal staff, who often work short-term contracts in bars, hotels, shops and warehouses over the summer.
The National Minimum Wage hourly rates from 1 April 2022 are:
● £9.50 - age 23 or over (National Living Wage)
● £9.18 - age 21 to 22
● £6.83 - age 18 to 20
● £4.81 - age under 18
● £4.81 - apprentice
Employers can contact the Acas helpline for free help and advice.
Please contact us if you need help with your payroll.
See: https://www.gov.uk/national-minimum-wage-rates
HMRC have issued guidance for VAT-registered business and their agents on how to avoid penalties for non-compliance with the Making Tax Digital for VAT (MTD) rules.
In particular, there is a new £400 per return penalty if you file a return but do not use functional compatible software.
There are additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.
Key extracts from HMRC guidance include:
You must file your VAT return using functional compatible software
Functional compatible software means a software program, or set of software programs, products or applications (apps) that can:
● record and store digital records.
● provide HMRC with information and VAT returns from the data held in those digital records.
● receive information from HMRC.
You must keep records digitally
You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:
● your business name, address and VAT registration number.
● any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
● the VAT on goods and services you supplied, meaning everything you sold, leased, rented or hired (supplies made).
● the VAT on goods and services you received, meaning everything you bought, leased, rented or hired (supplies received).
● any adjustments you make to a return.
● the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
● the rate of VAT you charged on goods and services.
● your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
● copies of documents that cover multiple transactions made on behalf of your business, like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash.
All transactions must be contained in your electronic account, but you do not need to scan paper records like invoices and receipts.
Please contact us if you need assistance in complying with MTD.
See: Compliance checks: How to avoid penalties for Making Tax Digital for VAT – CC/FS69 - GOV.UK (https://www.gov.uk/government/publications/compliance-checks-how-to-avoid-penalties-for-making-tax-digital-for-vat-ccfs69/
Below I have summarised all the main tax related updates we have seen this week.
• Prepare your payroll for the National Insurance changes in July 2022
• Tax-efficient finance for your company
• Buying an Electric Car? Does it need to be new?
• Penalties for overclaimed SEISS grants
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a great weekend.
Cheers,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
From 6 July 2022, some National Insurance Contributions (NICs) thresholds will increase. The primary threshold for 6 July 2022 to 5 April 2023 will rise to:
● £242 per week
● £1,048 per month
● £12,570 per year
See Class 1 National Insurance thresholds for 2022 to 2023.
To accommodate this change, payroll software, including HMRC's Basic PAYE Tools, will need to be updated. This may happen automatically, or you might need to take action.
It is important that payments due to be made on 6 July 2022 or later are calculated using the correct thresholds. Employers who run their payroll early should check that their software has been updated before processing and reporting these payments.
HMRC expect that all software will be updated by 6 July 2022, so any payments processed after that date should not need to be delayed. If you are unsure about whether or not your software has been updated, please contact your software provider.
If you use Basic PAYE Tools, please note that this software will be updated to take account of National Insurance threshold increases from 4 July 2022. HMRC advise you to wait until after 4 July 2022 to run payroll for any payments made on or after 6 July 2022.
Please talk to us about these changes and how we can help you with your payroll.
See: Rates and thresholds for employers 2022 to 2023 - GOV.UK (www.gov.uk)
HMRC have recently updated their guidance for companies looking to attract investors to buy shares in their company. If structured correctly, and if the company qualifies under the Enterprise Investment Scheme (EIS) or the Seed EIS rules, the investors can potentially take advantage of a number of generous tax breaks.
Under the EIS, the company can raise up to £5 million each year, with a maximum of £12 million raised in the company’s lifetime. This also includes amounts received from other venture capital schemes. The company must receive investment under a venture capital scheme within 7 years of its first commercial sale.
The size of the issuing company is crucial as the company and any qualifying subsidiaries must:
● not have gross assets worth more than £15 million before any shares are issued, and not more than £16 million immediately afterwards.
● have less than 250 full-time equivalent employees at the time the shares are issued.
The investment must meet the “risk to capital” condition, which means:
● the company must use the money for growth and development.
● the investment must be a risk to the investors’ capital.
‘Growth and development’ means the company will use the investment to grow things like its revenue, customer base or number of employees.
There are several other complex scheme rules that need to be followed so that the investors can claim and keep EIS tax reliefs relating to their shares. Tax reliefs will be withheld or withdrawn from the investors if they, and the company, do not follow the rules for at least 3 years after the investment is made.
It is advisable to apply for Advance Assurance from HMRC that the company is an ‘EIS qualifying company’ before the shares are issued.
For more details see: Use the Enterprise Investment Scheme (EIS) to raise money for your company - GOV.UK (www.gov.uk)
Seed EIS (SEIS) is designed to encourage investment in small start-up companies and, like EIS, provides a number of tax breaks for individuals who buy new shares in a company. The company must not have been trading for more than 2 years when the SEIS shares are issued.
Only the first £150,000 of share capital raised by the company qualifies for Seed EIS relief. However, this can form part of a larger share issue with subsequent share issues qualifying for EIS relief up to a £5 million annual limit.
Like EIS, the tax reliefs will be withheld, or withdrawn, from investors if the rules are not followed for at least 3 years after the investment is made.
There is a key condition that the company is an unquoted company carrying on, or preparing to carry out, a qualifying trade at the time that the shares are issued.
Another important condition to qualify under Seed EIS is the company and any of its subsidiaries must:
● not have gross assets over £200,000 when the shares are issued.
● not be a member of a partnership.
● have less than 25 full-time equivalent employees in total when the shares are issued.
Like EIS, it is advisable to apply for Advance Assurance from HMRC that the company is a qualifying company before the shares are issued. For more details see: Use the Seed Enterprise Investment Scheme to raise money for your company - GOV.UK (https://www.gov.uk/guidance/venture-capital-schemes-apply-to-use-the-seed-enterprise-investment-scheme)
The shortage of semiconductors has meant long delays in the delivery of new cars. This has caused many company car drivers to choose a second hand car instead, but what are the tax consequences?
Unless the car has zero emissions, the capital allowance rules are the same for new and used cars bought by the business. Plant and machinery capital allowances may be claimed on the purchase price of the car at either 18% or 6%, depending on whether the CO2 emissions for the vehicle are below or above 50g CO2 per km.
Where a zero-emission car is acquired by the business, a special 100% first year allowance only applies to new cars. There is however an exception for certain ex-demonstrator cars. HMRC accept a car is unused and not second hand provided it has been driven for a limited number of miles for the purposes of testing, delivery, and test driven by potential purchasers.
When calculating the P11D benefit of company cars the original list price inclusive of extras should be used, not the purchase price. Hence the P11D value for a secondhand company car may be significantly higher than the price paid for the vehicle.
HMRC have updated their guidance setting out the procedure for reporting and repaying overclaimed Self-Employed Income Support Scheme (SEISS) Grants. HMRC are also reminding sole traders and partners who have received these grants that there are potential penalties of up to 100% of the amount overclaimed under certain circumstances.
A penalty of up to 100% would apply where the trader knew that they were not entitled to the grant and did not tell HMRC within a 90-day notification period. The law treats the failure as ‘deliberate and concealed’. This means that HMRC may charge a penalty of up to 100% of the amount of the SEISS grant that the trader was not entitled to receive or keep.
Traders are required to notify HMRC if there is an amendment to any of their tax returns on or after 3 March 2021 which either:
● lowers the amount of the fourth or fifth grant they are eligible for; or
● causes the trader to no longer be eligible for the fourth or fifth grant.
If the tax return was amended before claiming the fourth or fifth grant, traders had to tell HMRC within 90 days of receiving the grant.
If the tax return has been amended after receiving the fourth or fifth grant, traders must tell HMRC within 90 days of the amendment.
If the tax return has been amended on or after 3 March 2021, traders do not need to tell HMRC if the grant amount is lowered by £100 or less.
For more details see: Self-Employment Income Support Scheme – receiving grants you were not entitled to (CC/FS47) - GOV.UK (https://www.gov.uk/government/publications/penalties-for-not-telling-hmrc-about-self-employment-income-support-scheme-grant-overpayments-ccfs47/self-employment-income-support-scheme-receiving-grants-you-were-not-entitled-to-ccfs47#penalty-for-not-telling-us-about-the-income-tax-charge)
• Form P11D Due By 6th July
• Need some inspiration?
• Tax reliefs available for innovative companies
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a great weekend.
Cheers,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
P11D forms for reporting expenses and benefits in kind
provided to employees and directors in 2021/22 need to be submitted by 6 July
2022.
Remember that reimbursed expenses no longer need to be reported where
they are incurred ‘wholly, exclusively and necessarily’ in the performance of
the employee's duties. HMRC do however expect internal controls to be in place
to ensure that the reimbursed expenses qualify under these terms.
Note also that non-cash ‘trivial benefits’ that cost no more than £50 do
not usually need to be reported. This typically covers non-cash gifts to
employees at Christmas and on their birthdays.
After the Jubilee celebrations and as we return to work, hopefully ready to face new challenges, if you are looking for some new business ideas then ask us for a copy of our guide called “57 Ways to Grow Your Business”! Our publication is packed full of bright ideas for the Serious Entrepreneur and starts with the four basics of growth.
All the ideas in this guide ultimately revolve around four basic insights about growing a business:
• Increase the number of customers
• Increase the number of times each one does business with you
• Increase the average value of each transaction
• Increase your own effectiveness and efficiency
Here are some other business principles that we explore in the guide:
• What you can measure you can manage
• Build in unique core differentiators and focus on them constantly
• It’s more important to be different than it is to be better
• Cutting the price is always an option but there is usually a better way – increasing value
• Break compromises and lower the barriers to people doing business with you
• Systemise every aspect of your business
• Empower your team to make it right for every customer
• Create a clear and detailed action plan
Ask us for a copy – you never know there may be a gem or two in there for you to help you grow faster!
A summary of tax reliefs available for innovative companies
Here is a summary of information provided by
HMRC on tax reliefs available for innovative companies. Please contact us if
you need more information.
Patent Box
The aim of the Patent Box is to provide an additional
incentive for companies to retain and commercialise existing patents and to
develop new innovative patented products:
• Corporation Tax: The Patent Box – GOV.UK
• Guidance CIRD200000 and pages following set out the
qualifying criteria
• CIRD275000 includes a flowchart for the computation required.
Research and Development Tax
credits (R&D), (including Advanced Assurance)
Research and Development (R&D) tax relief
(or credit) is a company tax relief that may reduce a company’s tax bill or in
some instances involve a payment of credit by HMRC to the company. It is based
on the company’s expenditure on R&D:
• Corporation Tax: Research and Development tax relief –
GOV.UK
• CIRD80000 and
pages following set out the qualifying criteria
• CIRD100000 includes a flowchart for the computation required and further information.
Creatives Tax Reliefs (Film,
Animation, High End TV, Children’s TV, Video Games, Theatre, Orchestra, and
Museums and Galleries)
These are a group of eight reliefs that allow
qualifying companies to claim a larger deduction for certain expenses. The
company will receive a reduction in their Corporation Tax liability, or in some
circumstances a payable tax credit.
Creative industry tax reliefs for Corporation Tax – GOV.UK
Venture Capital Schemes (EIS,
SEIS, VCT)
The schemes are intended to incentivise
investment in smaller, higher risk, unquoted trading companies that would
otherwise struggle to access finance for growth by providing a range of income
tax and capital gains tax reliefs to individual investors:
When a married couple or civil partners separate, tax planning is understandably not at the top of the list of their thoughts. However, a ‘no gain/no loss’ rule allows capital assets to be transferred between them free of capital gains tax (CGT) up to the end of the tax year in which they permanently separate. Beyond that date, asset transfers between the couple will often give rise to a CGT liability. With many divorce settlements taking several months this is worth careful consideration.
The Office of Tax Simplification has recommended to the Treasury that the no gain/no loss rule should be extended to two years from the date of permanent separation. The government have accepted this recommendation, but the change in rules is yet to be legislated.
The actual date that assets are treated as transferred between the separating couple depends upon how the marriage or civil partnership is dissolved.
It is also important to consider private residence relief (PRR) on the family home. It should be noted that where one spouse or civil partner leaves the matrimonial home, they may continue to be eligible for PRR even if they no longer live in the property. There are specific conditions that need to be satisfied for this to apply.
All in all, CGT on separation is a complex area and please do talk to us if any issues may be in point. We understand the sensitivity of the situation and are here to help.
• Advisory fuel rate for company cars
• Basis Period Reform – for self-employed individuals and all partnerships / partners
• Don’t forget to claim the Employment Allowance
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
Just a courtesy note that our office will be closed for the Jubilee Bank Holiday weekend, closing at 5pm on Wednesday 1st June and reopening at 9am on Monday 6th June.
I hope you have a great weekend.
Cheers,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
Unbelievably there were very few changes to the HMRC advisory fuel rates from 1 March 2022, which may not have been your experience at the filling station! Now that the increased road fuel prices have fed through into the HMRC calculations there are some significant increases from 1 June 2022. These are the suggested reimbursement rates for employees' private mileage using their company car.
Remember that provided any private fuel is fully reimbursed the employee will not be taxed on the fuel benefit and there is no class 1A employers NIC.
Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys from 1 June 2022.
