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Tax-free childcare – don’t miss out!

HMRC are currently running a campaign to remind people that they could get up to £2,000 per child, per year, towards childcare costs.

Broadly, eligible parents/guardians may receive government top-ups of £2 for every £8 that they pay into a tax-free childcare account, up to a maximum of £2,000 per child (or £4,000 for disabled children). There is an overall maximum limit of £10,000. The scheme is open to all working parents across the UK with children under 12, or under 17 if disabled.

Under the scheme, the parent/guardian opens…

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HMRC clarify VAT zero-rating of transport of disabled passengers

HMRC have issued Brief 3 (2019), which aims to clarify that the Department’s policy on the scope of the VAT zero rate for transport services has not changed following the Upper Tribunal (UT) decision in Jigsaw Medical Services Ltd (2018) UKUT 0222.

In this case, the UT heard an appeal by HMRC against the First-tier Tribunal’s decision that emergency transport in a specially adapted ambulance was zero-rated, rather than being exempt.

This decision may be of interest to suppliers that provide transport services in emergency vehicles (ambulances), or in…

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Capital allowances SBA update

HM Treasury and HMRC have recently published a summary and response document relating to the consultation on a new capital allowance for structures and buildings (SBA).

Broadly, the SBA allows businesses that invest in new builds or renovations on or after 29 October 2018, to claim tax relief at 2% a year on eligible costs.

A technical note outlining the key features of the allowances was published at Autumn Budget 2018, with the subsequent draft legislation released for consultation at Spring Statement 2019. Power to introduce the new allowance was…

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Tax-efficient remuneration with pension contributions

Tax relief is generally available on pension contributions at the taxpayer’s highest rate of income tax paid, meaning that basic rate taxpayers get relief on contributions at 20%, higher rate taxpayers at 40%, and additional rate taxpayers at 45%. In Scotland, income tax is banded differently, and pension tax relief is applied in a slightly different way.

Pensions are a particularly tax-efficient form of savings since nearly everyone is entitled to receive relief on contributions up to an annual maximum regardless of whether they…

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Moving into partnership

A partnership may be a simple trading vehicle enabling two or more people to own and run a business, but there are few practicalities worth considering before making the move.

Whilst there are no legal formalities involved in establishing a partnership, and a partnership may come into existence under an oral agreement, it is advisable that a formal partnership deed is drawn up. This is a legal document that sets out what each partner is responsible for and what he can expect from…

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MTD for VAT: guidance updated

HMRC have published an updated version of their guidance for businesses on Making Tax Digital for VAT. In particular, the guidance now includes information on how businesses should deal with petty cash transactions.

Petty cash is traditionally a small amount of cash on hand that covers day to day expenses of a business, such as buying a pint of milk. In some businesses it can be used to describe costs that are not attributable to an individual account in their records. Requiring businesses…

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Making use of gift exemptions for IHT

According to a recent survey undertaken on behalf of HMRC, only 25% of people making financial gifts have a working knowledge of inheritance tax (IHT) rules surrounding such payments.

The report entitled Lifetime Gifting: Reliefs, Exemptions, and Behaviours, reveals a significant lack of awareness of the gifting rules, liability for inheritance tax and the risk of making financial gifts without considering tax rules, which can apply for any gifts over £3,000 in value in a given tax year.

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New NIC treatment of termination payments

The National Insurance Contributions Bill was introduced into Parliament on 25 April 2019. The Bill contains provisions designed to align the income tax and national insurance contributions (NICs) treatment of termination awards and sporting testimonials, closing a loophole which currently allows effective tax planning. If enacted, the new rules are expected to take effect from April 2020.

HMRC believe that ‘the current misalignment incentivises well advised employers to disguise final payments as compensatory termination payments that benefit from a NICs exemption’. Consequently, the…

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Rent-a-room tax break remains

HMRC’s rent-a-room scheme currently allows individuals to receive up to £7,500 of gross income from renting out spare rooms in their only or main home without a liability to tax arising. Broadly, as long as income is below the annual threshold, it does not need to be reported to HMRC.

However, the emergence and growth of peer-to-peer online marketplaces and digital platforms (for example Airbnb) has made it significantly easier to advertise rooms and put those with spare accommodation in touch with a national and global network of…

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VAT Flat rate scheme

The VAT flat rate scheme (FRS) is used by many small businesses to help simplify their VAT reporting obligations, although some VAT experts would argue that the scheme is not simple to use.

Broadly, the FRS is a simplified VAT accounting scheme for small businesses, which allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. When using the FRS, the business ignores VAT incurred on purchases when reporting VAT payable, with the exception of capital items which cost £2,000 or…

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