November 2023 | DSK Partners LLP

Childcare support from HMRC

Posted on November 9, 2023 by

Parents may be eligible to receive childcare support from HMRC using the Tax-Free Childcare (TFC) scheme. The TFC scheme can help parents of children aged up to 11 years old (17 for those with certain disabilities) to pay for approved childcare.

The TFC scheme assists working families with their childcare costs. There are many registered childcare providers including childminders, nurseries, breakfast and after school clubs and approved play schemes signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays.

The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by Government up to a maximum total of £10,000 per child per year. This will give parents an annual saving of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.

The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

Source: HM Revenue & Customs Tue, 07 Nov 2023 00:00:00 +0100

What is a business repair?

Posted on November 9, 2023 by

HMRC’s internal manuals provide some useful information on the definition of a business repair. This is important because it is required to identify the asset on which work has been carried out.

This is because:

the cost of repairing a worn or dilapidated asset is normally an allowable expense;
the cost of replacing the whole or the ‘entirety’ of an asset is not a repair; it is capital expenditure and not an allowable expense.

HMRC’s guidance goes on to explain that what forms the asset or entirety is a question of fact. It is important to ascertain whether the ‘asset’ is in fact a separate asset or is part of a bigger asset.

The basic starting point is to establish the facts about the specific asset you are considering and then to ask the question; does this look like a separate asset? Is it something that stands apart from other assets, is it freestanding or is it something that is removable? This is a question of fact and degree; there are no ‘tests’ that can be applied.

With buildings and structures, the question is whether the item replaced appears to be a free-standing asset. The fact that it is connected to another structure, for example by a flue, does not make it part of that larger asset.

It also needs to be considered whether something has become part of something else. If something is a ‘fixture’ then it has become part of the building and not an entirety in its own right.

Source: HM Revenue & Customs Tue, 07 Nov 2023 00:00:00 +0100

Cost of living payments

Posted on November 6, 2023 by

You may have been entitled to a Cost of Living Payments of £301 (paid April/May 2023) and should be about to receive £300 (payable early November 2023) and a further £299 due spring 2024. Payments are limited to persons claiming the following benefits.

income-based Jobseeker’s Allowance (JSA)
income-related Employment and Support Allowance (ESA)
Income Support
Pension Credit
Universal Credit
Child Tax Credit
Working Tax Credit

The payments will be made separately from your benefit payments.

You will not get a payment if you are only receiving New Style ESA, contributory ESA, or New Style JSA.

If you have a joint claim on the qualifying dates, a single payment of £301, £300 and £299 will be sent using the same payment method used between these dates if you are eligible.

If you are getting both Child Tax Credit and Working Tax Credit, you will receive a Cost of Living Payment for Child Tax Credit only, which will be paid by HMRC.

If you are getting tax credits from HMRC and a low income benefit from the Department of Work and Pensions (DWP), you cannot receive a Cost of Living Payment from both HMRC and DWP. You will usually be paid by DWP.

Your payment might come later, for example if you’re awarded a qualifying benefit at a later date or you change the account your benefit or tax credits are paid into. You will still be paid the Cost of Living Payment automatically.

If you have received a Cost of Living Payment, but later it is found that you were not eligible for it, you may have to pay it back.

Source: Other Mon, 06 Nov 2023 00:00:00 +0100

Taxable gains on gifts

Posted on November 2, 2023 by

Gift Hold-Over Relief is a tax relief that effectively defers Capital Gains Tax (CGT). The relief can be claimed when assets are given away (including certain shares) or sold for less than they are worth to help benefit the buyer. The relief means that any gain on the asset is 'held-over' until the recipient of the gift sells or disposes of them. This is done by reducing the donee's acquisition cost by the amount of the held over gain.

The person gifting a qualifying asset is not subject to CGT on the gift. However, CGT may be payable when the asset is sold for less than it’s worth. Gifts between spouses and civil partners do not trigger capital gains. A claim for the relief must be made jointly with the person to whom the gift was made.

If you are giving away business assets, you must:

be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company'); and
use the assets in your business or personal company.

You can usually claim partial relief if you used the assets partly for your business.

If you are giving away shares, then the shares must be in a company that is either:

not listed on any recognised stock exchange; or
your personal company.

The company's main activities must be in trading, for example providing goods or services, rather than non-trading activities like investment.

Source: HM Revenue & Customs Tue, 31 Oct 2023 00:00:00 +0100

Trusts and Income Tax

Posted on November 2, 2023 by

A trust is an obligation that binds a trustee, an individual or a company to deal with the trust assets, such as land, money and shares, and which form part of the trust. The person who places assets into a trust is known as a settlor and the trust is for the benefit of one or more 'beneficiaries'.

The trustees make decisions about how the assets in the trust are to be managed, transferred or held back for the future use of the beneficiaries. They are also responsible for reporting and paying tax on behalf of the trust. A trust needs to be registered with HMRC if it pays or owes tax.

Different types of trust income have different rates of Income Tax. For example, in respect of accumulation or discretionary trusts the trustees are responsible for paying tax on income received. The first £1,000 is taxed at the standard rate. For trust income over £1,000, the rate is 39.35% for dividend-type income and 45% for all other income.

With reference to interest in possession trusts, the trustees are also responsible for paying tax on income received. The rate is 8.75% for dividend-type income and 20% for all other income.

There are also different rules for bare trusts, settlor-interested trusts and other types of trusts. It is therefore important that the Income Tax rules are considered at the outset as well as the CGT implications of the various types of trusts.

Source: HM Revenue & Customs Tue, 31 Oct 2023 00:00:00 +0100

Current State Pension age

Posted on November 2, 2023 by

The second review of the State Pension age has been published by the Department for Work and Pensions. The State Pension age is currently 66. The review has stated that a further increase in the State Pension age to 67 for those born on or after April 1960 will take place as planned between 2026 and 2028. Following this announcement, the government has confirmed the State Pension age will rise to 67 by the end of 2028.

The Pensions Act 2014 requires the Secretary of State for Work and Pensions to regularly review the State Pension age. There had also been plans for a further gradual rise in the State Pension age to 68 between 2044 and 2046 for those born on or after April 1977. The government plans to have a further review within two years of the next Parliament to reconsider the rise to age 68.

This will ensure that the government is able to consider the latest information to inform any future decision on the State Pension age. This will include life expectancy and population projections, the economic position and the impact on the labour market.

The government has said they remain committed to the principle of providing 10 years notice of changes to State Pension age, enabling people to plan effectively for retirement. All options for the rise to the State Pension age from 67 to 68 that meet the 10 years notice period will be in scope at the next review.

Source: Department for Work & Pensions Tue, 31 Oct 2023 00:00:00 +0100

Filling gaps in National Insurance record

Posted on November 2, 2023 by

National Insurance credits can help qualifying applicants to fill gaps in their National Insurance record. This can assist taxpayers to build up the number of qualifying years of National Insurance contributions and which can increase the amount of benefits a person is entitled to, such as the State Pension.

This could happen if someone were:

employed but had low earnings;
unemployed and were not claiming benefits;
self-employed but did not pay contributions because of small profits; and
living or working outside the UK.

National Insurance credits are available in certain situations where people are not working and therefore, not paying National Insurance credit. For example, credits may be available to those looking for work, who are ill, disabled or on sick pay, on maternity or paternity leave, caring for someone or on jury service.

Depending on the circumstances, National Insurance credits may be applied automatically or an application for credits may be required. There are two types of National Insurance credits available, either Class 1 or Class 3. Class 3 credits count towards the State Pension and certain bereavement benefits whilst Class 1 covers these as well as other benefits such as Jobseeker’s Allowance.

Taxpayers may also be able to pay voluntary contributions to fill any gaps if they are eligible.

Source: HM Revenue & Customs Tue, 31 Oct 2023 00:00:00 +0100

Paying tax by direct debit

Posted on November 2, 2023 by

One of the many ways that payments can be made to HMRC is by using a direct debit. The direct debit can be set up online.

You can pay your tax bill using direct debit if you have an online account with HMRC for:

Self-assessment
Employers’ PAYE and National Insurance
Construction Industry Scheme (CIS) deductions
VAT
Corporation Tax
Machine Games Duty
Soft Drinks Industry Levy

You can also make miscellaneous payments (if your payment reference begins with ‘X’) if you have an online account with HMRC for one of these taxes.

In addition, you must be the authorised signatory on the account you want to make payments from, and it must be a UK bank account.

When making a payment for Self-Assessment you should use your 11-character payment reference. This is your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’.

It is also possible to pay HMRC by other methods including bank transfer, cheques, corporate credit cards, corporate debit cards and personal debit cards. The use of corporate cards is subject to a fee. Payment by personal debit cards is currently fee-free. There is also no charge for payment by direct debit, bank transfer or cheque. HMRC has not accepted personal credit cards since January 2018 when credit card surcharges on personal credit cards were banned.

Source: HM Revenue & Customs Tue, 31 Oct 2023 00:00:00 +0100

Do you need to pay tax when you sell your home?

Posted on November 2, 2023 by

In general, there is no Capital Gains Tax (CGT) when you sell your home. This applies to a property which has been used as the main family residence. An investment property which has never been used as your own home does not qualify for relief. This relief from CGT is commonly known as Private Residence Relief.

Taxpayers are usually entitled to full relief from CGT where all the following conditions are met:

The family home has been the taxpayers only or main residence throughout the period of ownership.
The taxpayer has not let part of the house out – this does not include having a lodger.
No part of the family home has been used exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use).
The garden or grounds including the buildings on them are not greater than 5,000 square metres (just over an acre) in total.
The property was not purchased just to make a gain.

If a property has been occupied at any time as an individual’s private residence, the last 9 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. The time period can be extended to 36 months under certain limited circumstances. There are also special rules for homeowners that work or live away from home.

Married couples and civil partners can only count one property as their main home at any one time.

Source: HM Revenue & Customs Tue, 31 Oct 2023 00:00:00 +0100

Back of an envelope

Posted on November 1, 2023 by

If you run a business and manage your planning by scribbling notes on the back of an envelope, you might be advised to read the contents of this article.

When the economy is vibrant, effectively when there are an abundance of buyers in your marketplace, cash flow and profitability tend to look after themselves; as long as you are selling your goods or services at a price that covers your overheads and drawings/dividends.

Unfortunately, since Brexit and COVID disruption and the current upward pressure on energy and raw material costs, buyers are more circumspect about purchasing and business profits and cash flow are under pressure.

In which case your business planning cannot, and should not, be restricted to a few notes scribbled on the back of an envelope.

Your current management accounts should show you what your current situation looks like:

are you making profits;
are you keeping within your overdraft limits; and
are you still solvent.

To answer these questions the use of low-cost, cloud based accounts software is the minimum you should be utilising.

A belts and braces approach should include forward planning, what will be your likely profitability, cash flow position and solvency look like in a year’s time?

If you need help maximising the use of software to achieve these basic planning objectives, or if you would like advice on business planning issues, please call. We can help you be prepared to deal with and survive the UK’s present economic challenges.

Source: Other Wed, 01 Nov 2023 00:00:00 +0100

Month: November 2023

Childcare support from HMRC

What is a business repair?

Cost of living payments

Taxable gains on gifts

Trusts and Income Tax

Current State Pension age

Filling gaps in National Insurance record

Paying tax by direct debit

Do you need to pay tax when you sell your home?

Back of an envelope

Explore More

Newsletter SignUp