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Tax-Free Childcare to Launch in Autumn 2015

Tax-Free Childcare is the government’s flagship measure to support working parents with up to £2,000.00 a year for childcare costs and is due to launch next autumn. 

As a precursor, more details on how the scheme will operate have been released.

When the scheme launches, qualifying parents will be able to open an online account through the government website into which monies can be paid to cover the cost of childcare with a registered provider.  For every 80p paid into this account, the government will add an additional 20p up to a limit of £10,000.00 of which £2,000.00 will be funded by the government.

There are three important considerations:

–          There will be no requirement for the monies to be paid in by the parents allowing, maybe, grand-parents or other relatives to contribute.

–          There will be no fixed monthly amount that needs to be paid in.  Instead, there will be the flexibility to pay in a greater amount when funds allow and to build up a balance to cover periods when more childcare may be needed such as the summer holidays.

–          These amounts are per child per year.

The scheme will be available for all children up to the age of twelve and, for children with disabilities, there will be a higher age ceiling of seventeen.

To qualify, parents have to be in work and with an annual income of less than £150,000.00.

Unlike the existing Employer-Supported Childcare schemes, Tax-Free Childcare does not depend on any involvement from an employer and will be open to parents who are self-employed.

The scheme will also be available to parents on paid sick leave and paid or unpaid statutory maternity, paternity or adoption leave.

If you have chosen receive Employer-Supported Childcare, typically from a Childcare Voucher scheme, then you will be able to continue to do so.  There will be no requirement to switch to Tax-Free Childcare and Employer-Supported Childcare can continue to run for as long as your employer offers it.

However, once Tax-Free Childcare is launched in autumn 2015, parents will no longer be able to register for Employer-Supported Childcare.

The only exception will be where an employer offers a workplace nursery which will not be affected by Tax-Free Childcare.

Finally, should your circumstances change or you opt to no longer use the account, there will be the ability for you to withdraw the funds that you have built up with government extracting their corresponding contribution.

The government promises that they will make the process as simple as possible for parents with a streamlined registration and ‘light-touch’ reporting.  However, at this stage, the details of this mechanism are yet to be released.

As a result, we will be monitoring developments on Tax-Free Childcare over the next year and publishing news alerts when more information becomes available.

In the meantime, if you would like to discuss whether Tax-Free Childcare will be the best option for your circumstances, please email welcome@cooperfaure.co.uk for an initial free consultation.

HMRC Offers a Settlement Opportunity for Employee Benefit Trust Schemes

As a precursor to writing to individuals who have open tax assessments resulting from their loan arrangements under Employee Benefit Trust (EBT) schemes, the HMRC have written to tax advisors outlining a Contractor Loans Settlement Opportunity.

There are three key points about this Contractor Loans Settlement Opportunity:

–              the HMRC documentation unequivocally states the deadline of 9th January 2015 is an opportunity to settle before a case relating your scheme reaches a Tribunal.  This seems to take the Follower and Accelerated Payment Notices that were legislated for in the 2014 Budget out of play for the moment.

–              the requirement, if you choose to settle, is to be ‘engaged’ with HMRC about a settlement by 9th January rather than to have settled and paid any tax due by this date.

–              this covers the tax years up to and including the 2010-11 tax year.

The HMRC are promoting a number advantages to taking this opportunity:

–              the certainly of closing this matter with HMRC in a legally binding manner that precludes HMRC seeking an additional amount from a more favourable future ruling.

–              this is restricted to the 2010-11 tax year and earlier years where there are open enquiries or assessments.  If a settlement is agreed, the HMRC will not pursue any earlier years where there is no open enquiry or assessment other than in ‘exceptional circumstances’.

–              the settlement is restricted to the Income Tax due on the amounts received as Loans (together with the resulting late payment interest) with no National Insurance due.

–              the HMRC will waive any pursuit of the individual having ‘culpability’ in relation to the operation of the EBT except in ‘exceptional circumstances’ which would exclude any penalties being applied.

The first consideration is that, although the HMRC makes reference that they ‘strongly believe’ that the arrangements of your EBT do not work, this is still a matter of opinion.  To date, there is no Tribunal ruling to validate this.

The second consideration is that there are frequent references to ‘exceptional circumstances’ where the HMRC could issue an assessment or penalty in the future without there being any indication of what these circumstances could be.  This seems to undermine their primary offer of the certainty that the matter is closed if a settlement is agreed and, therefore, this would need to be clarified in any negotiation.

The HMRC document focuses on the Philip Boyle v HMRC Tribunal ruling that they won last December. 

Whilst the similarities are highlighted insofar as Mr Boyle was an IT Contractor who had a contract of employment with an overseas employer and who was paid for his work in the UK partly through taxed salary and partly from the provisions of loans, the HMRC do acknowledge the not inconsiderable differences.

Firstly, the scheme in this case involved loans provided directly by the employer and not through a Trust.  Secondly, the repayment mechanism for these loans was purported to be through unusual foreign currencies that led to such arrangements being known as ‘soft currency loan schemes’.  One of the key reasons that the HMRC won the ruling was that no foreign currencies were actually supplied or transacted.

The HMRC argue that the principles that applied in this case of a contractor receiving loan payments from an employer abroad are relevant in all similar circumstances notwithstanding the clear differences. 

In deciding whether the Settlement Opportunity is the route that you wish to take, it is important to reiterate that this argument is an opinion that is yet to be successfully tested by HMRC.

Indeed, last month HMRC lost its appeal to the Upper Tier Tribunal against a First Tier Tribunal ruling that had essentially determined that large parts of the Employee Benefit Trust run by Rangers FC were compliant.

It is worth noting that this First Tier Ruling was issued in November 2012 and the whole process started in 2010 which gives an indication of how time-consuming and expensive the process is.  The HMRC are now seeking permission to appeal the Upper Tier Tribunal ruling to the Court of Session, so this case is far from over.

Finally, it is important to emphasize that the legally binding aspect of the Settlement Opportunity works both ways.  If you agree a settlement with HMRC and, subsequently, they fail to win a judgement that your EBT was not tax-compliant, you have no recourse to recover the tax paid as part of the settlement.

Despite all the aforementioned caveats, with the correct negotiation, the Contractor Loans Settlement Opportunity does present a chance to close this issue.

At CooperFaure, we are currently working with several clients who have ongoing open tax assessments from their EBT. 

In addition, in 2008 we helped to negotiate settlements with HMRC for clients who were under the same scheme as Mr Boyle and were facing the same dilemma as to whether or not to settle.

If you would like any further information or to discuss your circumstances, please contact us at welcome@cooperfaure.co.uk to arrange an initial free consultation.

Growth Vouchers – Helping Small Business Afford Strategic Advice

The government has launched the Growth Vouchers Programme to support small businesses invest in strategic business advice, under European State Aid rules.  The Programme offers matching funding of up to £2,000.00 to help a business afford:

–          finance and cash flow planning

–          recruitment and staff development

–          the improvement of leadership and management skills

–          planning a marketing campaign

–          optimizing the use of digital technology

The Growth Vouchers Programme is open to small and micro businesses, including the self-employed, which fulfil all of the following criteria:

–          have forty-nine or less full time employees.

–          have a turnover or Balance Sheet total of less than €10,000,000.

–          be independent with no more than 25% owned by outside organisations.

–          have been actively selling goods and/or services for at least one year.

–          be registered in England.

–          have an email address.

–          have received less than €200,000 in state grants in the last three years.

–          have not applied for Growth Vouchers before nor have already paid for any strategic business advice in the last three years.

In making your decision whether to apply for the Growth Vouchers Programme, an important consideration is that this Programme is being run on a lottery basis.  As a result, some of the eligible applications will be randomly selected to receive the Growth Vouchers.

Another consideration is that you need to apply for the Growth Vouchers before discussing or agreeing a package of support with a supplier against which the Growth Vouchers would be redeemed.

Finally, the Growth Vouchers may not be used to cover the cost of purchasing ‘business as usual’ services such as building a website; paying for advertising; the acquisition of software; buying any new equipment; staff training; or accountancy fees.

If you decide that it would be worthwhile for your business to participate in the Growth Vouchers Programme your application can be submitted online at https://smallbusinessgrowthvouchers.service.gov.uk.

At CooperFaure, we have extensive knowledge of government-funded schemes for SMEs and sole traders.  If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.

The Mayor of London Offers Financial Support for Businesses to Install High-Speed Broadband

London is one of twenty-two cities across the United Kingdom that is participating in the Broadband Connection Vouchers scheme funded by the Department for Culture, Media and Sport.  The scheme aimed to assist businesses cover the cost of installing High-Speed Broadband.

Broadband Connection Vouchers provide up to £3,000.00 for the installation of a faster broadband connection, usually of at least 30Mbit/s, or a dedicated business grade broadband service.

High-speed broadband makes it more practical to work in the cloud, it quicker to transfer large files securely and it offers a more productive and reliable service.  All of which could support your business to work more efficiently, to grow without the need to invest in more data hardware and, potentially, to reduce your operating costs.

Broadband Connection Vouchers are available to your business in London so long as:

–          it is a Small or Medium Enterprise (SME), registered charity, social enterprise or sole trader.

–          the installation of your new broadband connection will cost over £100.

–          the connection is for your business premises.  This can be your home if this is your main work place but not if you only work from home occasionally.

–          you are prepared to commit to a minimum six month contract with your supplier.

–          the service that you select delivers a speed or performance improvement on your current connection.

–          you have not received more than around £120,000 in government grants in the last three years.

The definition of a Small or Medium Enterprise is covered by the European Commission.

A Small Enterprise is defined as having forty-nine or less full time employees and a turnover or Balance Sheet total of less than €10,000,000.

A Medium Enterprise is defined as having two hundred and forty-nine or less full time employees and a turnover of less than €50,000,000 or Balance Sheet total of less than €43,000,000.

As part of the application process, you would need to upload a quote from a registered supplier.  Help in finding a quote that fits your business requirements can be found in the London Broadband Guide at https://www.connectionvouchers.co.uk/broadband-guide/.

At CooperFaure, we have extensive knowledge of government-funded schemes for SMEs and sole traders.  If you would like to discuss your circumstances or have any questions, please contact welcome@cooperfaure.co.uk to arrange an initial free consultation.