Parents and carers need to be aware that if either of the couple have ‘adjusted net income’ in excess of £50,000 then the one with the higher income will potentially be charged to tax on some or all of the child benefit and will need to request a self-assessment tax return to report the amount of child benefit received in the tax year. The High Income Child Benefit Charge (HICBC) was introduced in 2012/13 and imposes a 1% charge on the amount of child benefit received for every £100 that the taxpayer’s adjusted net income exceeds £50,000. ‘Adjusted net income’ is an individual’s total taxable income before any allowances, but after deducting Gift Aid, pension contributions, and trade union subscriptions.

Where the adjusted net income is £60,000 or more, then 100% of the child benefit is charged, effectively fully clawing back the child benefit. Note that the £50,000 threshold has not been increased since it was introduced in 2012 which means that more and more parents are being caught by the HICBC each year. It has recently been announced that in future years the government plans to deduct HICBC directly from salaries via PAYE.

It is possible to opt out of receiving Child Benefit payments where adjusted net income exceeds £60,000. Consequently, the HICBC would not apply and the child benefit would not need to be reported on the tax return. That may mean that a taxpayer who has their tax collected under PAYE would not be required to submit a self-assessment tax return.  It is important to still fill in the Child Benefit claim form but state on the form that you do not want to get payments. That is important as the claimant would then receive National Insurance credits for that year, which count towards their State Pension entitlement.

One of the problems with the HICBC is that those taxpayers who pay their tax under PAYE are not normally required to file a self-assessment tax return. However, if they are parents and one of the couple is in receipt of child benefit then they are required to request a self-assessment tax return from HMRC to report the child benefit if their adjusted net income exceeds £50,000 a year. HMRC have started assessing taxpayers to HICBC where they have not reported their child benefit in earlier years. Several taxpayers have successfully challenged these assessments through the courts in a number of recent tax cases. Whether or not a successful appeal can be made will depend on the circumstances in each case.

The Government’s Tax-Free Childcare Accounts provide a 25% subsidy towards the cost of childcare. The account can be used to pay nursery fees, breakfast clubs, after school clubs and registered childminders.

The scheme operates by topping up savings of up to £8,000 per child by 25%, potentially an extra £2,000 a year from the Government to spend on qualifying childcare. The scheme generally applies to children under 12. In the case of disabled children the age limit is 16 and the amount that can be saved is £16,000 a year, topped up by the Government by a further 25% to potentially £20,000.

Unlike childcare vouchers, still provided by some employers, tax free childcare accounts are available to both employees and the self-employed. To be eligible, the parent generally needs to be working and earning at least the National Minimum Wage or National Living Wage for at least 16 hours a week on average. However, parents are not eligible if either of the parents’ adjusted net income is more than £100,000 a year.

Note that where an employer provides Childcare Vouchers then the parents are not allowed to set up a Tax-Free Childcare Account as well. Please contact us for advice on whether or not it would be beneficial to leave your employer’s Childcare Voucher Scheme, noting in particular that the voucher scheme applies to children up to age 16, rather than age 12.

Date	What’s Due
01/08	Corporation tax payment for year to 31/10/22 (unless quarterly instalments apply)
19/08	PAYE & NIC deductions, and CIS return and tax, for month to 5/08/23 (due 22/08/23 if you pay electronically)
01/09	Corporation tax payment for year to 30/11/22 (unless quarterly instalments apply)
19/09	PAYE & NIC deductions, and CIS return and tax, for month to 5/9/23 (due 22/09 if you pay electronically)

Taxpayers could take advantage of four key benefits when filing their tax return early, HM Revenue and Customs (HMRC) has stated.

The Self-Assessment deadline for the 2022 to 2023 tax year is 31 January 2024. Taxpayers who file early will have more control over their financial affairs and beat the January rush.

The four benefits HMRC promote are:

• Planning: find out what you owe for the 2022 to 2023 tax year as soon as you have filed, which allows for more accurate financial planning;
• Budgeting: spread the cost of your tax bill with weekly or monthly payments using HMRC’s Budget Payment Plan;
• Refund: Check if you’re due a refund in the HMRC apponce you’ve filed; and
• Help: you can access a range of online guidance and information to help you file your return and get help if you are unable to pay your billin full by the 31 January deadline. You may be able to set up a Time to Pay plan

There are rumours circulating in the press of the possible abolition of inheritance tax (IHT) in a bid by the Government to secure the support of wavering Conservative voters. This may cause some individuals to delay IHT planning, but remember these are just rumours, and it may not be actually happen.

It should be noted that under the current IHT rules there are a number of generous reliefs and exemptions that would apply, as opposed to speculation of possible future changes. For example, business property relief is available on the transfer of shares in an unquoted trading company during lifetime or on death, such that no IHT would be payable. However capital gains tax potentially applies to a lifetime transfer of shares, subject to a possible claim to hold over the gain.

So, the current rules allow tax planning to be undertaken with an element of certainty, as opposed to speculating about possible future changes. Please talk to us if you would like to discuss inheritance tax planning.

Employers may meet the cost of certain social events for staff without creating a tax liability. This used to be a concession but is now a statutory exemption provided certain conditions apply.

The exemption applies to an “annual party or similar function” provided it is available to all employees or available generally to those at a particular location. During the Covid-19 pandemic HMRC confirmed that a ‘function’ could include a virtual party, where employers were unable to host a traditional party at which employees would have been physically present.

A key condition is that the cost per head of the party or function must not exceed £150, inclusive of VAT. If an event costs more than £150 then it is taxable in full, not just on the excess over £150.

If you have already held a Christmas Party for staff it may be possible have another event, and for that to also be exempt from tax, provided the combined cost per head is no more than £150 a year. If the combined cost exceeds £150 for the year the employer can designate which ones should be taken into account to make best use of the exemption. If, for example, the cost per head of the Christmas party was £100, and the Summer event was £70 the employer can nominate the Christmas party to be covered by the exemption, but the £70 Summer Event would be taxable (not just the excess £20)

Rather than the employee being taxed on the £70 the employer can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.

Tax-Free Childcare accounts can be used to pay for approved childcare for children aged 11 or under, or 16 if the child has a disability.  This can include paying for a summer holiday club or childminder.

The account can also be used to pay nursery fees, or to pay for breakfast or after school clubs in term-time, as well as out of school activities.

Opening a Tax-Free Childcare account is quick and easy and can be done at any time of the year. Families who have not yet signed up should check their eligibility and apply online today.

For every £8 paid into an online account they will receive an additional £2 from the government. This means parents and carers can receive up to £500 every 3 months (£2,000 a year for each child), or £1,000 (£4,000 a year for each child) if their child is disabled.

Money can be deposited at any time to be used straight away, or whenever it is needed. Unused money in the account can be withdrawn at any time.

 

Eligibility

Families could be eligible for Tax-Free Childcare if they:

• have a child or children aged 11 or under. They stop being eligible on 1 September after their child’s 11th birthday. If their child has a disability, they can receive support until 1 September after their child’s 16th birthday;
• earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average;
• each earn no more than £100,000 per annum; and
• do not receive tax credits, Universal Credit or childcare vouchers.

The latest Finance Act includes two changes that will affect all R&D claims:

(1) a requirement to provide additional information before an R&D claim is made; and

(2) a requirement for certain companies to make a claim notification within six months after the end of the accounting period for which they want to claim R&D relief.

When a limited company intends to make a claim for research and development (R&D) tax relief, from 8 August 2023 onwards it will need to provide detailed information to HMRC in advance. We can assist you in preparing the notification or prepare it on your behalf.

You will need to set out details of the R&D project(s) undertaken, including, in particular, the scientific or technical uncertainty that the work was seeking to overcome, along with details of the work done to resolve that uncertainty.

For accounting periods beginning on or after 1 April 2023, there is also a new R&D claim notification form which must be submitted within the ‘claim notification period’, which ends six months after the end of the accounting period for which the company wants to claim R&D relief.

Broadly, new claimants or those who haven’t claimed for three years will need to complete this claim notification form for accounting periods beginning on or after 1 April 2023.

Date	What’s Due
01/07	Corporation tax payment for year to 30/9/22 (unless quarterly instalments apply).
05/07	Last date for agreeing PAYE settlement agreements for 2022/23 employee benefits.
05/07	Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2022/23.
06/07	Deadline for forms P11D and P11D(b) for 2022/23 tax year. Also, deadline for notifying HMRC of shares and options awarded to employees.
19/07	PAYE & NIC deductions, and CIS return and tax, for month to 5/07/23 (due 22/07/23 if you pay electronically).
31/7	50% payment on account of 2023/24 self-assessment tax liability due.
01/08	Corporation tax payment for year to 31/10/22 (unless quarterly instalments apply).
19/08	PAYE & NIC deductions, and CIS return and tax, for month to 5/08/23 (due 22/08/23 if you pay electronically).

HMRC frequently warn taxpayers that when a tax avoidance scheme looks “too good to be true”, it probably is. They publish “Spotlights” on their website to alert taxpayers of schemes being marketed by promoters that are under scrutiny, and, in their opinion, do not work. Tax avoidance schemes need to be notified to HMRC under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, normally by the scheme promoter. HMRC then issue a DOTAS scheme reference number (SRN). This does not mean that the scheme is HMRC approved, although some promoters claim this in their marketing literature.

If taxpayers have used the scheme and received the SRN from a promoter or supplier, they must tell HMRC that they have used the scheme, usually when submitting a tax return.

The school fees plan that HMRC are challenging broadly involves the grandparents of the children investing in the parents’ company at an undervalue, and then transferring those shares to a trust. The company then pays dividends to the trust, which are used to pay the grandchildren’s school or university fees. It is argued that the payments from the trust are the children’s income and takes advantage of their £12,570 personal allowance and lower tax rates.  HMRC contend that the arrangements are a “settlement” by the parents and, as such, the payments should be taxed on them at their rates of tax.

Not all school fees plans are tax avoidance schemes. Please contact us if you are approached to implement a scheme similar to that outlined above.