Category Archives: Latest Business News

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

Only a third of EIS taken up by companies outside London

New data from HM Revenue & Customs (HMRC) shows that businesses in London and the South East account for 66 per cent of the Enterprise Investment Schemes (EIS) uptake.

Despite accounting for 62 per cent of the UK economy, businesses outside London and the South-East only account for £610 million out of nearly £1.9 billion of EIS investments.

The report shows that since the EIS was created in 1993/94, 26,355 companies have received investment worth almost £16.2 billion.

In 2015-16, the last year for which data is available, 3,470 companies raised a total of £1.88 billion of funds under the EIS scheme.

In comparison in the year before some 3,370 companies used the EIS, 100 less than the following year, but they managed to raise £1.92 billion of funds – £41 million more.

The EIS is designed to help small businesses raise finance and offer appealing incentives for investors who purchase new company shares.

The scheme offers Income Tax relief of up to 30 per cent, as well as possible Capital Gains Tax exemptions and deferral to investors who buy new shares in the company.

Data from HMRC also showed that one sector, in particular, dominated the use of EIS. Companies from the business services sector accounted for over £800 million of investment – more than 40 per cent of all EIS investment – in 2015/16.

The latest data also looked at the Seed Enterprise Investment Scheme (SEIS). This can carry more risk than the EIS, but there is substantial tax relief available to offset potential losses. Investors may invest up to £100,000 per tax year and claim back 50 per cent tax relief regardless of their marginal rate of Income Tax, which makes it particularly useful for those wanting to put in larger sums of money.

Key findings for SEIS data from HMRC include:

  • In 2015/16, 2,360 companies received investment through the SEIS and £180 million of funds were raised.
  • In comparison 2014/15 saw 2,365 companies raise a total of £180 million.
  • Over 1,800 of these companies raised money under SEIS for the first time in 2015/16, representing £154 million in investment.
  • The tech and business services sectors made up 68 per cent of all SEIS investment received.

Link: Enterprise Investment Scheme Seed Enterprise Investment Scheme and Social Investment Tax Relief

Cash payments plunge as digital payments become the default for many consumers

New research from finance and banking trade body, UK Finance, has found that debit card transactions will overtake those made with cash this year.

Meanwhile, ATM usage peaked several years ago, with more than 2.9 billion transactions taking place in 2012, falling to 2.7 billion in 2016, which amounted to £6 billion less than in the previous year.

Underscoring the scale of the change, figures from the Bank of England show that the volume of cash in circulation is increasing at its slowest rate in 46 years.

An important driver of the trend towards digital payments is likely to be the rise of contactless debit and credit cards, as well as mobile phone payments.

Figures from UK Finance show that the number of contactless payments has increased from 17.8 million in March 2014 to 469.6 million in June 2017 (the most recent month for which figures are available). This is equivalent to a 2,500 per cent increase over a three-year period.

Over the same period, the value of contactless transactions has increased from £116 million to £4.3 billion.

This trend is echoed by statistics from the industry body, showing a dramatic fall in the proportion of payments made using cash from 62 per cent in 2006, to 40 per cent in 2016.

Cash payments are expected to continue to fall into the next decade, dropping to 21 per cent by 2026.

However, while this might be welcome news for some, questions have been raised about the impact on cash-reliant businesses and vulnerable individuals.

Speaking to the Guardian Lady Tyler, Chair of the House of Lords Select Committee on Financial Exclusion, said: “I’m really concerned about this move toward a mainly cashless way of doing things. These changes might suit people who are very digitally competent, they might suit banks who can reduce their costs, [but] I really don’t think they are thinking about more vulnerable groups.”

Link: Revealed: Cash eclipsed as Britain turns to digital payments

Chancellor calls for Inheritance Tax review to make regime “fit for purpose”

The Chancellor, Philip Hammond, has asked the Office of Tax Simplification (OTS) to undertake a review of the Inheritance Tax (IHT) system to ensure that it meets the needs of modern households.

In a letter to the OTS, an independent branch of the Treasury, Mr Hammond said that the current system is “particularly complex” and that he wants the OTS to find new ways of simplifying it.

He wants the review to look at the technical and administrative issues that make IHT so complex and wants the OTS to see if changes can be made to the process of submitting returns and paying any tax due to aid estate planning and disclosure.

Mr Hammond said: “I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible.”

The Chancellor’s letter also singled out the current gifting rules and how they relate to the wider IHT system.

In the 2016/17 tax year, HM Revenue and Customs received £4.84 billion in IHT. In recent years its take of IHT has grown as property prices have risen, but in 2017 new rules –  the Residence Nil-Rate Band – were introduced to allow a larger proportion of property wealth to be passed on to direct descendants.

Some experts are concerned that unless the Government reduces the amount it collects in IHT – which they feel is unlikely – they may instead make certain allowances/exemptions less generous under the guise of simplification.

Link: Chancellor requests OTS review of Inheritance Tax

Remain-supporting former minister strikes optimistic note on post-Brexit economy

Former Conservative Treasury Minister, Lord Jim O’Neil has told the BBC that gloomy predictions for the post-Brexit UK economy are likely to be ‘dwarfed’ by global growth figures surpassing expectations.

He said: “I certainly wouldn’t have thought the UK economy would be as robust as it currently seems.

“That is because some parts of the country, led by the North West, are actually doing way better than people seem to realise or appreciate.

“As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK.”

Meanwhile, speaking at the World Economic Forum in Davos, Stephen Schwarzman, CEO of Blackstone Group, said: “It’s a time of enormous ebullience, part of which was created by really good economic growth.”

However, also at Davos, Barclays CEO, Jes Staley warned against excessive optimism about the state of the global economy.

He said: “Equity markets are at an all-time high and volatility is at an all-time low – that is not a sustainable proposition”.

Link: UK growth upgrade could ‘dwarf’ Brexit hit

Millennials set for ‘inheritance boom’… but not until the 2030s

A new report from think-tank, the Resolution Foundation, predicts that so-called ‘millennials’, those aged between 17 and 35, will receive the biggest inheritance of any post-war generation from their baby boomer parents and grandparents.

The think-tank estimates that the average value of inheritances will more than double over the next two decades, peaking in 2035. By this point, the average age of beneficiaries would be 61.

In contrast, only approximately one in three adults born in the 1930s received an inheritance.

According to the Resolution Foundation, around two in every three young adults have property-owning parents.

Thirty-year-olds today are only half as likely to own their home as baby boomers were at the same age.

Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Older generations have benefitted hugely from the big increases in household wealth in Britain over recent decades.

“While the millennials have done far less well in accumulating their own assets, they are likely to benefit from an inheritance boom in the decades ahead.

“This is likely to be very welcome news for those millennials, including some from poorer backgrounds who in the past would have been unlikely to receive bequests.

“They have the good fortune to benefit from the luck of the baby boomer generation.”

Link: Millennials to secure ‘inheritance boom’

Ban on passing credit card fees on to consumers hits small businesses in the pocket

A ban on passing on charges from credit card providers to consumers, which came into effect last month, is hitting small businesses in the pocket.

Businesses are now faced with the option of either increasing prices for all customers to cover the charges or taking a hit to their own bottom lines.

Before the ban came into force, the Government said the “rip-off card charges” were “unfair for millions of people across the country.”

Estimates from the Treasury show that such charges cost UK consumers a total of £166 million in 2015.

However, the Federation of Small Business (FSB) expects the impact on small businesses to be short-lived.

Lorence Nye, Policy Adviser at the FSB, said: “The most optimistic outlook is that businesses will have to shoulder a higher cost in the short term, but that will drive more innovation and new kinds of payments that allow them to reduce costs.”

The new rules, which are now in effect across Europe, are already spurring innovation in peer-to-peer payment apps, including Barclays Pingit in the UK.

The same rules have also prevented HM Revenue & Customs (HMRC) from passing on credit card charges to personal taxpayers, leading the Revenue to take the decision to stop accepting payments made in this way.

Link: Small businesses complain at new credit card rules (original source)

Link: Card surcharge ban means no more nasty surprises for shoppers (alternative source)

Excuses, excuses: HMRC reveals top late tax return apologies

HM Revenue & Customs (HMRC) has once again revealed the worst excuses that taxpayers have given them for failing to meet the 31 January Self-Assessment (SA) deadline.

Whilst there are sometimes reasonable excuses for a late submission, such as a serious illness, disability or a serious mental health condition that makes a person incapable of filing their tax return, others can be imaginative.

HMRC’s most recent list of top excuses, includes:

  • I couldn’t file my return on time as my wife has been seeing aliens and won’t let me enter the house.
  • I’ve been far too busy touring the country with my one-man play.
  • My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.
  • My business doesn’t really do anything.
  • I spilt coffee on it.

As well as the excuses, HMRC also receives some questionable expense claims including:

  • A three-piece suite for a partner to sit on when the taxpayer is doing their accounts.
  • Birthday drinks at a Glasgow nightclub.
  • Vet fees for a rabbit.
  • Hotel room service – for candles and prosecco.
  • £4.50 for sausage and chips meal expenses for 250 days (£1,125 in total).

Angela MacDonald, HMRC Director General of Customer Services, said: “Each year we’re making it easier and more intuitive for our customers to complete their tax return, but each year we still come across some questionable excuses, whether that’s blaming a busy touring schedule or seeing aliens.

“However, help will always be provided for those who have a genuine excuse for not submitting their return on time.

“We also receive absurd expense claims from vet fees for a rabbit to room service at a hotel. It is unfair to make honest taxpayers pick up the bill for other people’s spurious claims, so HMRC will only accept sincere claims such as legitimate expenses for a job.”

The deadline for sending 2016-17 SA tax returns to HMRC, and paying any tax owed, was 31 January 2018.

Those who may have missed the deadline may find that they have already received an automatic £100 fine, but the longer a tax return is left the more the penalties can increase, so it pays to act quickly and get professional advice if a return is submitted after the deadline.

Link: HMRC’s top tax return excuses