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10 Key Facts About Updated “Tax-Free” Childcare Regime Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Tuesday, 18 March 2014 00:00

 

  1. Works in a similar fashion to the Basic Rate Tax Relief mechanism for personal pensions or Gift Aid: pay in £0.80 for every £1 and the government will contribute £0.20 to the pot.
  2. Unlike with personal pensions or Gift Aid, there appears to be no Higher Rate relief to claim through Self Assessment.
  3. For each child, the maximum government contribution is £2,000 – meaning that parents will have to pay in £8,000 per child to maximise the contribution. This is an increase of £800 per child on the original announcement.
  4. In a further improvement to the original scheme, implementation will be accelerated as it will be rolled out to under-12s within the first year, starting in Autumn next year.
  5. Applies to registered / approved childcare provision, including nurseries, childminders, nannies and school-based care.
  6. Available only where both parents work, or where the sole parent works – no relief where a parent stays at home.
  7. Available to self-employed as well as employed parents providing earnings exceed £50 per week – there is a “start-up period” for self-employed where the minimum income limit will not apply.
  8. Those with incomes exceeding £150,000 will be ineligible.
  9. The current Employer-Supported Childcare Schemes (ESC) will continue but will be closed to new members from August 2015. Those remaining in ESC may transfer to the new Scheme but will have to leave ESC.
  10. Those wanting to take advantage of the new Scheme will have to open an online account with NS&I, pay into the account and the government will contribute on a quarterly basis.
 
1 Million More to Pay 40% Tax Under Current Government? Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Wednesday, 12 March 2014 00:00

The Independent Newspaper has reported that it expects the 2014 Budget is likely to result in even more people being "eligible" to pay the 40% tax rate, thanks to an anticipated below-inflation 1% rise in the Higher Rate Threshold. Continuing to maintain the Threshold, or to raise it only slightly, is projected to drag a further 400,000 taxpayers into the 40% net - a total of 1.1 million since 2010, according to the newspaper, reporting on research by the Institute for Fiscal Studies.

It also predicts that the Personal Allowance will be increased to £10,500.

However, it is also widely reported that the government is under pressure from its own benches to ease the tax burden for middle-income families.

 
HMRC Reminder to Fix Protection for High-Value Pension Funds by 5 April Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Thursday, 06 March 2014 00:00

HMRC is reminding taxpayers and agents that claims to "Fix the Protection" for pension funds with values in excess of the reduced Lifetime Allowance (soon to be reduced from £1.5 million to £1.25 million) must be submitted by 5 April 2014.

There is an online application form in order to submit a claim; there are of course significant restrictions on any further pension savings which can be made if Fixed Protection is granted.

Further information can be found at Reminder to Submit Fixed Protection 2014 Applications by 5 April 2014.

 
HMRC Analyses Late Tax Returns by Region Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Monday, 20 January 2014 00:00

HM Revenue & Customs has broken down Self Assessment taxpayer by region, and finds that it's Londoners who have the poorest record when it comes to late filing.

Londoners are more likely to miss the tax return deadline than taxpayers in any other part of the UK, figures released today by HM Revenue and Customs (HMRC) reveal.

Around one in nine (11 per cent) of the 560,000 people in Inner London who had to send in a tax return last year didn’t do so by the relevant deadline – 31 October for paper returns and 31 January for online submissions.

The one million taxpayers in Outer London were more punctual, with one in 11 (9 per cent) failing to meet the deadline, but they were still the second worst offenders. The tardiest taxpayers outside of London were in the North West of England, with 8 per cent of their 890,000 returns failing to meet the deadline.

Taxpayers in the rest of the English regions fared better. The most punctual were in the South West, with only 6 per cent of their one million tax returns arriving late. The other English regions, as well as Wales, Scotland and Northern Ireland, all registered 7 per cent of late tax returns, which was the UK national average.

The UK Self Assessment filing populations on which the figures are based are as follows:

  • Inner London – 560,000;
  • Outer London – 990,000;
  • North West – 890,000;
  • East Midlands – 640,000;
  • West Midlands – 750,000;
  • East of England – 1,040,000;
  • South East– 1,710,000;
  • South West – 1,000,000;
  • Yorkshire & The Humber – 680,000;
  • North East – 270,000;
  • Northern Ireland – 240,000;
  • Scotland – 660,000; and
  • Wales – 400,000.
  • HMRC Director General of Personal Tax, Ruth Owen, said:

    “Whether you’re from London, Livingston, Lisburn or Llandudno, the consequences of missing the tax return deadline are the same – an automatic £100 late-filing penalty.

    The longer you delay, the more you have to pay. So if you still have to send us your tax return, take action now.”

    Around 10.9 million people are expected send a tax return for the 2012-13 tax year. Anyone with an outstanding 2012-13 tax return must send it online, and pay any tax they owe, by 31 January. Visit HMRC’s website at www.hmrc.gov.uk to register for Self Assessment and file your online tax return for free. Using a search engine to find HMRC’s online filing service can produce results which include third party websites that charge to file on your behalf.

    Therefore, if you want to file for free, type the HMRC website address directly into your internet browser’s web address bar.

    For general help and advice on completing a return, visit www.hmrc.gov.uk/sa or call the Self Assessment helpline on 0300 200 3310 (open 8.00am to 8.00pm, Monday to Friday, and from 8.00am to 4.00pm on Saturdays).

    The penalties for late Self Assessment returns are:

    • an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
    • after 3 months, additional daily penalties of £10 per day, up to a maximum of £900;
    • after 6 months, a further penalty of 5 per cent of the tax due or £300, whichever is greater; and
    • after 12 months, another 5 per cent or £300 charge, whichever is greater.

    There are also additional penalties for paying late of 5 per cent of the tax unpaid at: 30 days; 6 months; and 12 months.

     
    New HMRC Campaign for Landlords of Residential Property Print E-mail
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    Tax News - Personal Taxes
    Written by Lee Sharpe   
    Friday, 04 October 2013 00:00

    TW Ed questions HMRC's facts and figures for its new residential property letting tax campaign.

    HM Revenue & Customs (HMRC) has announced a "campaign" that focuses on persons letting residential property. HMRC claims to offer more favourable terms to those who come forwards during the campaign, to settle outstanding taxes from earlier years. We have previously warned that campaigns need to be considered carefully.

    There are one or two points of note:

    • HMRC apparently estimates that there may be as many as 1.5 million 'residential' landlords who are (presumably in aggregate) underpaying as much as £500million tax every year. It is difficult enough to believe that there are 1.5 million landlords who let residential property, let alone 1.5 million residential landlords who aren't paying enough tax.
    • This campaign will last much longer than previous campaigns - HMRC says that it will be open for "at least" 18 months.
    • However, HMRC also says that, from next year, they will start to contact landlords and those whom they contact will no longer be able to benefit from the campaign. Which suggests that the eligible period of the campaign may be rather shorter for some, than for others.
    • HMRC also says that, unusually, the opportunity to come forwards will last throughout the campaign. Normally, campaigns are split in two: a period where the taxpayer notifies HMRC that he or she intends to make a disclosure, and then a subsequent period in which the taxpayer must make full disclosure and, broadly, settle up.

    It seems likely that HMRC's change of approach when compared to earlier campaigns is predominantly attributable to the unprecedented and, frankly, incredible scale of the target population. Practically speaking, it must be questionable whether or not HMRC has the resources to process 1.5 million disclosures even within 18 months, and this despite the fact that the taxpayer is doing most of the work.

    From a technical perspective, one has also to question the veracity of comments attributed to Marian Wilson, HMRC's Head of Campaigns, amongst them:

    "All rent from letting out a residential property or holiday home has to be declared for Income Tax purposes"

    Presumably, Ms Wilson is aware of HMRC's own guidance which clearly states  that a tax return (or notification) is not required unless there is actually a tax liability – after Personal Allowances, etc.; likewise the Rent a Room scheme does not need a tax return in order to be claimed– the exemption is effectively automatic until the threshold is breached. Ms Wilson’s comments seem more than a little at odds with the normal HMRC approach, which is to ask for a tax return only when there is something (tax) in it for them.

    Given that HMRC seem keen to shake some landlords out of the campaign long before it has officially finished, one might be forgiven for looking look askance at "support" and "help" in HMRC's statement that they will work with "a variety of bodies over the next few months to develop tools and guidance to support landlords, and to help them get their affairs up to date".  Only time will tell whether “working with bodies” means developing channels to communicate information to landlords, or simply approaching letting agents and related intermediaries, and demanding information  with menaces.

    HMRC is keen as always to raise the profile of its “digital intelligence system”, “Connect”, which it uses to suggest possible suspects. One of its champions told me recently that it is now one of the biggest databases in Europe.  Tax advisors will of course know that HMRC has long had access to data on landlords from councils and housing associations; I understand that HMRC has for some time been approaching estate and letting agents to obtain details of landlords on their books, and procuring information from Internet portals such as “Rightmove”. Given the vast amount of information it must now contain on all UK taxpayers and the use to which it is being put, it seems a shame HMRC wasted the opportunity to call it “Big Brother”, or “HAL”.  

     
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