Category Archives: Business News

Government extends childcare voucher scheme for additional six months

Working parents across the UK will be delighted to hear that the Government has agreed to a six-month extension of the childcare voucher scheme.

It has been estimated that around 80 per cent of working parents may be better off using Childcare Vouchers rather than the new tax-free childcare scheme.

The voucher scheme allows employees to gain access to funding for childcare through their employer and, in return, employers can save up to £402 per year in National Insurance Contributions for every employee who signs up.

Following a number of debates in Parliament, the Secretary of State for Education, Damian Hinds, confirmed that the Government has agreed to a six-month extension of the Childcare Voucher scheme. Therefore the scheme will not be closing in April as previously reported.

The Government’s extension to the popular scheme was announced following criticism, which claimed that the tax-free childcare scheme is poorly understood and its rollout has been botched.

The childcare voucher scheme is available to all working parents in the UK and allows parents to take up to £55 each week from their salary before tax and National Insurance, or £243 a month, to spend on childcare no matter how many children they have, as long as the parent is a basic-rate taxpayer.

However, using the alternative tax-free childcare scheme parents have 20 per cent of their childcare costs met by the Government each year, up to a limit of £2,000 a year per child, or £4,000 if a child is disabled.

This scheme is open to self-employed people, who are excluded from the childcare voucher arrangements.

Subject to eligibility, both parents (if they are together) must be working 16 hours a week and paid at least the National Living Wage of £7.83 an hour, if over 25, or £125.28 a week to receive tax-free childcare.

For families within the basic-rate tax bracket who qualify for either scheme, anyone who spends less than £9,336 in total on childcare would likely be better off with vouchers. The same goes for those who pay the higher tax rate and spend less than £6,252 in total.

However, families with a larger number of children are more likely to benefit from tax-free childcare, as the system works on a per-child basis rather than per parent.

Anyone who is claiming tax credits or universal credit or if either parent earns more than £100,000 will not be eligible for tax-free childcare.

The two schemes cannot be used in conjunction with one another, but either can be used alongside the 15 or 30 hours of free childcare offered to children aged three and four.

Link: www.childcarechoices.gov.uk

Are you one of the 90 per cent of businesses that are unprepared for GDPR?

With less than 60 days left until the deadline for compliance with the General Data Protection Regulation (GDPR), more than 90 per cent of UK small businesses admit they are not yet fully ready.

In fact, a poll conducted by the Federation of Small Business (FSB) found that only eight per cent of SMEs have completed their preparations for the new data protection regulations, while a further 35 per cent said preparations are only at an early stage and 33 per cent said they had not even started.

This latter figure is not surprising as the survey also showed that 18 per cent of small business owners were completely unaware of the GDPR; with 34 per cent admitting they had little understanding of its requirements or complexity.

When breaking down the sectors of those asked, arts and entertainment businesses were the least prepared for the regulations followed by the retail and wholesale sector, construction, manufacturing and the scientific professions.

The most prepared were those in the financial services sector, where 82 per cent of respondents said that they had either started or completed their GDPR preparations.

Mike Cherry, National Chairman of the FSB, said: “Many small businesses will be concerned the changes will be too much to handle. It’s clear a large part of the small business community is still unaware of the steps they need to take to comply and may be left playing catch-up.”

UK Information Commissioner, Elizabeth Denham, welcomed the FSB’s campaign. She said: “Research suggests the SME sector is less prepared than others for the changes. We know that many small businesses are keen to get it right, but with so much misinformation out there, it’s difficult for them to know what’s right and what’s not.”

Link: Federation of Small Business GDPR Research

HMRC takes new steps to tackle online VAT fraud

HM Revenue & Customs (HMRC) has been granted new powers to help combat online VAT fraud conducted on digital marketplaces.

Originally outlined by the Chancellor in the 2017 Autumn Budget, the new powers – known by the term ‘joint-and-several liability’ (JSL) for online marketplaces – strengthen existing arrangements to make online marketplaces accountable for VAT fraud committed by online sellers on their platforms.

In its announcement, HMRC said: “Online marketplaces can help those who sell through their platforms to understand the tax rules and therefore avoid fines from HM Revenue & Customs (HMRC).

“And, indeed, they have the responsibility to make sure that fraud does not happen on their watch.

“This sends a clear message that businesses in the UK and overseas, online and on the high street, must all play by the same rules, protecting traditional high street and legitimate online sellers who pay what they owe.”

Under the JSL powers, sellers based either in the UK or overseas who are not paying the correct VAT when completing sales in the UK must be removed by the marketplace once HMRC issues a notice to them.

If marketplaces do not remove the seller then HMRC will pursue the site for any future unpaid tax by those sellers.

The new rules, which came into force in March, also make marketplaces liable for VAT where they knew, or should have known, that an overseas online seller should have been VAT-registered but was not.

In order to help enforce the rules, marketplaces must now also make sure sellers using their platforms display a valid VAT number on the site if they possess one.

Financial Secretary to the Treasury, Mel Stride, said: “Whilst the honest majority pay what they owe, some businesses that sell goods online to UK shoppers are failing to pay the correct amount of VAT.

“This behaviour unfairly undercuts businesses trading in the UK that play by the rules, abuses the trust of buyers and deprives the government of significant revenue that funds vital public services.

“We are clear that everyone must pay their fair share of tax, and tackling tax evasion in all its forms is a top priority for the government.”

Businesses operating in this sector are also being encouraged to register for the Fulfilment House Due Diligence Scheme, which began on 1 April 2018.

This scheme requires businesses that store imported goods for or on behalf of overseas sellers from outside the EU to keep records and perform checks on the goods they are storing.

It has been estimated that these measures will help to protect around £1 billion of tax revenue by 2023.

Link: VAT: online marketplace seller checks

Quarterly digital reporting to HM Revenue & Customs opens to self-employed individuals

Since March this year, self-employed individuals have had the option of reporting their income digitally to HM Revenue & Customs (HMRC) as part of a pilot of the Government’s Making Tax Digital (MTD) programme.

The Government has long had the ambition of taking most taxes including Income Tax, VAT and Corporation Tax onto a system of quarterly reporting using ‘designated software packages’ under the auspices of MTD.

However, the scheme was delayed repeatedly, with the relevant provisions of the Finance Bill being removed ahead of last year’s snap general election to ensure its safe passage through Parliament before voters headed to the polls.

Initial plans to introduce MTD for VAT on a mandatory basis in April of this year were ultimately pushed back to April 2019 and it is not yet known when MTD will become mandatory for other taxes.

HMRC has now opened up a limited test of MTD for Income Tax to all self-employed individuals and it is expected that the trial will be opened to all unincorporated landlords as well at some point this month.

However, with software providers concentrating their efforts on preparing for the start of MTD for VAT next year, there are currently just two packages supporting MTD for Income Tax, something that is likely to put off many self-employed individuals in the short term.

Link: MTD income tax pilot revealed

Late payments in the spotlight after Carillion collapse

Small businesses in the UK have long been scourged by late payments, but the problem was brought into sharp focus earlier this year following the collapse of construction giant, Carillion, emphasising the importance of careful credit control.

According to the Federation of Small Businesses (FSB), some suppliers were waiting as long as 120 days to receive payment from Carillion.

FSB National Chairman, Mike Cherry, said: “It is vital that Carillion’s small business suppliers are paid what they are owed, or some of those firms could themselves be put in jeopardy, putting even more jobs at risk besides those of Carillion’s own employees.

“These unpaid bills may well go back several months. I wrote to Carillion back in July last year to express concern after hearing from FSB members that the company was making small suppliers wait 120 days to be paid.

“Sadly these kinds of poor payment practices are all too common among some big corporates. Perhaps if they weren’t it would be easier to spot the warning signs of a huge company in financial trouble.”

With similar practices at other large corporates continuing to create problems for SME suppliers, the Chancellor announced a consultation into the problem as part of his Spring Statement.

FSB research has found that 30 per cent of payments to small businesses are late, with late payments costing the UK economy £2.5 billion annually.

Link: UK Government to consult of late payments to SMEs

Millions of people have not checked their online tax accounts for errors

Millions of people from across the UK could be paying more tax than they need to, it has emerged, after figures from HM Revenue & Customs (HMRC) showed that more than 15 million individuals have not checked their Personal Tax Accounts.

The figure means that less than half of taxpayers have accessed their accounts, risking errors in the amount they pay.

Personal Tax Accounts were introduced by the Revenue in 2015 and include details of income, state pension records and National Insurance contributions.

They were intended to make taxpayers responsible for ensuring they are on the correct tax code.

Personal Tax Accounts can be accessed at gov.uk/personal-tax-account. Registration requires your name, an email address and a password. This will generate a 12-digit Government Gateway ID which will be needed in future when you log in.

You will also need to enter a phone number to generate a separate access code, which will be sent by text or automated call.

To access your account, you will be asked to enter information from a passport, payslip or P60 as well as to answer some security questions.

Under the income section, you will find information on your tax code, including deductions made by HMRC.

It is worth checking your Personal Tax Account as soon as possible. Figures show that 6.7 million people paid the wrong amount of tax last year because their tax code was wrong.

Link: Is your online tax account riddled with mistakes?

Spring Statement 2018

By the time Chancellor Philip Hammond rose to his feet in the House of Commons to deliver the first Spring Statement, he had already offered plenty of hints that this would be a low-key affair.

Gone was the primetime Wednesday slot after Prime Minister’s Questions, gone was the trailing of policy announcements in the days and weeks beforehand and gone was the set-piece photo call with the red box outside Number 11.

This was all carefully orchestrated. Mr Hammond could not have been clearer that there were to be no rabbits pulled from hats.

In line with the move towards a single fiscal event each year, this was to be a straightforward response to the Office for Budget Responsibility’s (OBR) updated economic forecasts, dispensing with the usual drama of Budget Day.

Indeed, Mr Hammond may well be relieved that he does not need to deliver a Budget until the Autumn. A year ago, his first Budget was widely seen as disastrous for the Government, with the Chancellor having to quickly backtrack on heavily-criticised tax rises for the self-employed, providing helpful ammunition for the opposition at the subsequent general election.

Nevertheless, being the first of its kind, the Spring Statement was still something of an unknown quantity and the business community was still curious to see what he might have to say as they waited for the cheers and jeers to quieten in the Commons.

As it turned out, the Chancellor stuck to his guns, saying at the start of the speech that the UK had been unique amongst major economies in making tax changes twice each year. He added the move to a single fiscal event is intended to give greater certainty to business.

The Economy

There was a strong emphasis on jobs in the Chancellor’s assessment of the state of the UK economy. He noted that the wages of the lowest paid have increased by seven per cent since 2015 and that there are three million more people in work since 2010. He told MPs that the OBR now predicts 500,000 more people will be in work in 2022.

The OBR revised up its GDP growth forecast for 2018 from 1.4 per cent to 1.5 per cent. This is then predicted to remain in line with previous predictions at 1.3 per cent in 2019 and 2020, before rising to 1.4 per cent in 2021 and 1.5 per cent in 2022.

Following the recent rise in interest rates, the OBR now expects that inflation will now return to its two per cent target over the next year, while wages are expected to rise faster than prices over the next five years.

The Chancellor said figures show that the manufacturing sector has enjoyed its longest period of expansion for half a century.


The Public Finances

Moving to the state of the public finances, the Chancellor noted that the UK has now had its first sustained fall in public sector debt for 17 years, saying that this represents a ‘turning point’ for the economy.

Debt as a percentage of GDP is expected to fall from 86.5 per cent in 2018-19 to 77.9 per cent in 2021-22.

Meanwhile, borrowing is now forecast to be £45.2 billion in 2018, £4.7 billion less than had been predicted by the OBR in November 2017.

In the wake of what he was eager to present as positive predictions, the Chancellor said that he is on course to increase public spending at the Autumn Budget, so long as the OBR’s predictions for the public finances are borne out.


Business measures

Mr Hammond said he was keen to support British business, before promising that the next business rates revaluation exercise will be brought forward by one year to 2021, meaning rates will better reflect current rental values.

He also said that there will be a review of how to tackle the problem of late payments, which are seen as an ever-increasing problem for SMEs in particular.

Continuing the theme, and appearing to go against the suggestion that there would be no spending commitments in the speech, Mr Hammond said the Education Secretary will make up to £80 million available to small businesses to take on new apprentices.


Consultations

As had been widely expected, Mr Hammond took the opportunity to announce a number of consultations on the future of the tax system.

Top of the Chancellor’s list was a consultation on ‘Reducing single-use plastic waste through the tax system’. He said the Government is inviting views on how to tackle the problem of plastic waste through the tax system.

He also set his sights on large multinational digital businesses, publishing a position paper on ‘Corporate tax and the digital economy’, including measures relating to VAT.

Maintaining the focus on the digital economy, the Chancellor announced a consultation on the role cash will play. He said the Government will seek views on how to support consumers and businesses to use digital payments, while ensuring those who need to can continue to use cash. The consultation will also seek views on the use of cash in tax evasion and money laundering.

Meanwhile, the Chancellor also said that the Government would consult on extending tax relief for employees and the self-employed who fund their own training.

Although not mentioned in the Chancellor’s speech, the hours following the Statement also saw the Treasury publish a consultation into the VAT registration threshold, suggesting that the current flat threshold disincentivises businesses from pursuing growth.


Summary

One of the biggest advantages a politician has in Government is the ability to set the terms of the political debate and to mark where the dividing lines should fall.

That is what the Chancellor appears to have aimed for with his first Spring Statement. He made a clear statement of intent on the Government’s direction of travel on tax and spending by hinting at spending increases in the Autumn Budget.

Much of the debate in the coming months is likely to revolve around the question of who should benefit from any increases.

So while there were no specifics on tax and spending for businesses to take away from the speech, there were important indications about what may be to come for businesses and the economy.

Tax-Free Childcare launches for all parents of under-12s

A scheme, enabling parents of children aged 12 and under to benefit from up to £2,000 towards the cost of childcare, has now been extended to all working parents with children in the age group.

The scheme provides a Government top-up worth £2 for every £8 contributed by parents, up to a maximum of £2,000 a year.

Tax-Free Childcare can be used towards all registered childcare providers, including nannies, nurseries, childminders and after-school clubs.

In order to benefit from the scheme, parents need to sign-up for an online childcare account.

Liz Truss, Chief Secretary to the Treasury, said: “Tax-Free Childcare will cut thousands of pounds from childcare bills and is good news for working parents.

“More parents will be able to work if they want to and this demonstrates our commitment to helping families with the cost of living.

“All eligible parents with children under 12 can now apply through Childcare Choices and should take advantage of the available support.”

The Government expects that by the end of the Parliament, Tax-Free Childcare will support around one million families with the cost of childcare.

Link: Tax-Free Childcare opens to all parents with children under 12

SMEs invest three working weeks a year on tax compliance

A new study, prepared by the Federation of Small Businesses (FSB), has found that the UK’s average small business spends nearly three working weeks every 12 months complying with tax rules.

This costs SMEs around £5,000 a year on average, according to the survey of 1,000 small businesses.

Of the challenges they face, around half (46 per cent) say determining the tax rates at which they are required to pay is most difficult, while a further 40 per cent say that reliefs and exemptions are too confusing.

Payroll functions, such as PAYE and National Insurance (NICs), and VAT are deemed the most time-consuming by SMEs, with the average small business estimating that it spends around 95 hours a year on these tasks.

Specialist professional advisers are used by 77 per cent of SMEs to ensure their taxes are paid correctly, with almost all choosing the services of a qualified accountant.

Of the issues they face, 47 per cent say business rates have made it harder to grow their firm, with a similar proportion saying Corporation Tax has had a similar effect. Meanwhile, 44 per cent said that their plans had been stifled by employers’ NICs.

Mike Cherry, FSB National Chairman, said: “We hear a lot about the need to simplify the UK tax code.

“In fact, our priority should be simplification of the tax compliance process. Small firms, by and large, understand a tax like VAT, for example, but the sheer complexity of VAT administration means they spend 44 hours a year filing returns.”

When asked about changes to tax compliance, the majority (53 per cent) say the ability to pay in instalments would make the process less burdensome. Nearly half (52 per cent) also said that they would like an early estimation of their tax.

Of those asked, 40 per cent also said that the automation of tax calculations would be useful.

The Taxing Times report prepared by the FSB also revealed that 55 per cent of small firms are not aware of tax reliefs available to them, while 73 per cent had not heard of either the business rates relief offered to those based in enterprise zones or the enhanced capital allowance for clean technologies.

In comparison, 78 per cent were aware of, or had claimed, small business rates relief, while two thirds had used standard capital allowances. The majority (51 per cent) had also used the dividend allowance.

Mr Cherry added: “There are lots of useful tax reliefs out there but many small firms simply don’t know they exist or don’t have the expertise to access them.

“Lots of firms actually employ consultancies to help them apply for R&D tax credits, for example. When applications are complex, it is big firms, not time-strapped small business owners, which stand to gain.

“There needs to be a real push from local and central Government to ensure small firms are aware of all the reliefs available.”

Link: FSB Study

Does Nesquik attract VAT? It depends on the flavour, Revenue says

An apparently counterintuitive judgement was handed down last month by the Upper Tier Tribunal as it ruled VAT should be applied to the strawberry and banana flavours of Nesquik milk powder, but not to the chocolate equivalent.

The case arose after Nestlé, the manufacturer of the powders made a repayment claim to HM Revenue & Customs (HMRC), which was refused on the basis that the strawberry and banana powders are standard rated for VAT.

Nestlé appealed this decision but lost, before appealing that judgement at the Upper Tier Tribunal, where the claim was dismissed by Mr Justice Snowden and Judge Charles Hellier last month.

HMRC and Nestlé agreed that the chocolate version should be zero-rated on the basis that it includes cocoa butter, which is zero-rated.

However, while Nestlé held that both strawberry and banana Nesquik should be zero-rated because they encourage the drinking of milk and milk itself is zero-rated for the purposes of VAT, the Tribunal rejected the arguments.

It found that the three powders should not be treated the same for VAT even though they are essentially the same and also that the banana and strawberry versions should not be zero-rated just because they create a new beverage that would itself be zero-rated.

The ruling stated: “it does not seem to us that the anomalies which arise on the basis of the First Tax Tribunal decision require any answer other than that Parliament has chosen to zero-rate certain foods, generally because they were everyday foods, tax on which would be ‘particularly sensitive’ for much of the population, and has chosen not to zero-rate others.”

Link: VAT ruling on fruit-flavoured Nesquik leaves sour taste for Nestlé