The Future Fund: Breakthrough scheme will help innovative technology companies grow and bring new products to market in the wake of the coronavirus pandemic, the Government has suggested.
The report comes after the initiative opened to new applications last week.
If your business is seeking investment, here’s what you need to know.
What is the Future Fund: Breakthrough scheme?Continue reading
Parents faced with the financial headache of childcare over the long school summer holidays are reminded they can get support from the Government.
HM Revenue & Customs (HMRC) is reminding working families that they can use Tax-Free Childcare to help pay for their childcare costs over the summer.
Tax-Free Childcare – a childcare top-up for working parents – has been available for some time.
It can be used to help pay for accredited holiday clubs, childminders or sports activities, giving parents and carers that extra peace of mind during the school summer holidays and saving them money.
The scheme is available for children aged up to 11, or 17 if the child has a disability.
For every £8 deposited into an account, families will receive an additional £2 in Government top-up, capped at £500 every three months, or £1,000 if the child is disabled.
Parents and carers can check their eligibility and register for Tax-Free Childcare on GOV.UK.
They can apply for an account at any time and start using it straight away.
By depositing money into their accounts, families can benefit from the 20 per cent top-up and use the money to pay for childcare costs when they need to, especially during the summer holidays.
More than 282,000 working families used their account in March 2021, the highest recorded number of families in any one month since the scheme was launched in April 2017. These families received a share of more than £33 million in Government top-up payments.
Tax-Free Childcare is also available for pre-school aged children attending nurseries, childminders or other childcare providers.
Families with younger children will often have higher childcare costs than families with older children, so the tax-free savings can make a difference.
Childcare providers can also sign up for a childcare provider account on GOV.UK to receive payments from parents and carers via the scheme.
Link: Tax-Free Childcare
Unlike other benefits, tax credits usually have to be renewed each year by 31 July to continue receiving payments from HM Revenue & Customs (HMRC).
If you are claiming tax credits, it is really important to look carefully at the information you receive.
Even if you have stopped getting tax credits, you still need to check that all your details are correct and respond if required to do so.
Each year you will be sent a renewal pack that tells you how to renew. If it has a red line across the first page and says ‘reply now’ you will need to renew.
If it has a black line and says ‘check now’, you will need to check your details are correct and if they are, you do not need to do anything and your tax credits will be automatically renewed.
If you miss the deadline your tax credits payments will stop. You will be sent a statement and will have to pay back the credits you have received since 6 April 2021.
From 6 April, you will get estimated (‘provisional’) payments from HMRC until you renew. Your payments may have changed based on information from your employer or pension provider.
If you miss the deadline for renewing, you will be sent a statement (TC607). If you contact HMRC within 30 days of the date on the statement your tax credit claim may be restored, and you will not have to pay anything back.
However, if you contact HMRC later than 30 days of the date on the statement, they will ask you to explain the reasons for the delay – known as ‘good cause’ – before they consider restoring your claim.
If HMRC stops your payments, you cannot make a new claim for tax credits.
You can renew tax credits online or renew tax credits by phone or post.
You will need:
Link: How to renew tax credits
A payroll services boss has been banned for orchestrating a multi-million-pound tax avoidance scheme.
The case puts a spotlight on company owners and should serve as a reminder that they are subject to strict conditions over keeping records.
The High Court issued a disqualification order lasting 11 years to the sole director of Magnetic Push Ltd.
The company was purportedly operating as a payroll services company and entered voluntary liquidation within a year of being formed.
However, the liquidator found the director completely uncooperative when requesting the company’s statutory records.
This was reported to the Insolvency Service, which investigated and found that the company was acting as an umbrella company in part of a tax avoidance scheme.
He had declared a VAT liability of just £609 but the tax authorities claimed more than £4 million from Magnetic Push in the liquidation.
Failure to keep accounting records can lead to a £3,000 fine and/or disqualification from acting as a director, as this case indicates.
If you haven’t reviewed your record keeping in a while, now is a great opportunity to do so.
You must keep:
You must also keep details of:
Limited companies have to keep a register of ‘people with significant control’ (PSC), which must include details of anyone who:
When it comes to accounting records you must be able to evidence:
Link: Running a limited company – Company and accounting records
Payments on account are advance payments towards your tax liability for the year, if you complete a UK Self-Assessment tax return and is a way of settling tax owed.
The two deadlines for the self-employed to pay their tax bills are 31 January and 31 July of each year.
These two payments are made during the year, calculated on the previous year’s tax bill and are designed to avoid building up debt to the taxman.
If the tax liability is greater than the previous year, a further balancing payment may also be required.
Normally this is not a problem, as you are only ever expected to make a half-payment.
However, if this is your first year filing a return then you may be required to pay tax for the year plus an additional 50 per cent of what is owed.
That can catch people out unless they have put sufficient money aside to pay the tax that they owe.
Given the challenges of the last year, many taxpayers may also find that the estimates for tax owed are inaccurate as their income has been smaller than predicted.
Your bill for the 2019 to 2020 tax year is £3,000. You made two payments on account last year of £900 each (£1,800 in total).
The total tax to pay by midnight on 31 January 2021 is £2,700. This includes:
If your tax bill for the 2020 to 2021 tax year is more than £3,000 (the total of your two payments on account), you will need to make a ‘balancing payment’ by 31 January 2022.
Payments on account do not include anything you owe for capital gains or student loans (if you are self-employed) – you will pay those in your ‘balancing payment’.
You have to make a payment on account if your tax during the previous financial year was more than £1,000.
However, that is not the case if more than 80 per cent of that year’s tax was taken off at source, for example, through PAYE.
Link: Understand your Self-Assessment tax bill – payments on account
Penalties for late submission and late tax payments will be determined by a new points system to make them fairer and more consistent, HM Revenue & Customs (HMRC) has announced.
Under the new system, penalties will be points-based rather than automatic. This means that those who consistently miss deadlines will accrue more points – and pay a larger fine than the penalty currently in force.
It is designed to penalise only the small minority of businesses and taxpayers who persistently miss their submission obligations rather than those who make occasional mistakes. The changes only initially apply to VAT and Income Tax Self-Assessment (ITSA).
The changes apply to VAT for accounting periods beginning on or after 1 April 2022 and to ITSA taxpayers with business or property income over £10,000 per year (who will be required to submit digital quarterly updates through Making Tax Digital (MTD) for Income Tax) for accounting periods beginning on or after 6 April 2023, and to all other ITSA taxpayers for accounting periods beginning on or after for 6 April 2024.
Instead of getting an automatic fine, under the new system, you will get a penalty point.
The more deadlines you miss, the more points you get until you reach your penalty threshold. Then you get a £200 fine (and another £200 fine for every subsequent deadline you miss).
Your penalty threshold depends on how often you have to submit tax information:
There are separate points totals for each obligation you have. This means that if you fail to meet one obligation but successfully meet others, you will only accrue one set of points.
But if you fail to meet multiple obligations, points will accrue for each – even if they have the same submission frequency. This could result in heavy fines if you consistently miss deadlines across all of your responsibilities.
HMRC has a time limit to apply points, for example, it cannot apply a point after 48 weeks from the day of a missed annual submission. It also has discretionary powers not to issue points and penalties under particular circumstances.
You can appeal an HMRC point or penalty as long as you have a reasonable excuse. If you have concerns about the new system, you should seek professional advice to avoid financial penalties.
Link: New points-based penalties for late tax reporting submissions
The next big step in the Government’s Making Tax Digital (MTD) initiative is rapidly approaching.
From 6 April 2023, MTD is expanding to include businesses and landlords with a combined total gross income over £10,000 per annum, from the following sources:
The changes mean affected taxpayers will have to keep digital business records of all their business income and expenses, including their earnings from self-employment or property.
They must then use MTD compatible software to send updates to HMRC every quarter. This will mean that there will now effectively be five tax updates a year sent to the tax authority, instead of just one self-assessment tax return.
The deadline for this quarterly summary information is one month following the quarter-end.
At the end of the tax year, there will then be a final declaration made to HMRC to include details of all other income and any accounting adjustments.
Taxpayers will still be required to submit their final declaration by 31 January.
There are some exemptions to this next key stage of MTD, including:
As with the existing MTD for VAT rules, taxpayers will need to use HMRC compliant online accounting software to make these regular submissions.
It is important that those affected by these new rules take action sooner rather than later to get the correct systems and processes in place by seeking professional guidance and support.
Link: Follow the rules for Making Tax Digital for Income Tax
From April 2023, the Corporation Tax rate will rise for companies with profits of more than £50,000, following the Chancellor’s announcement at his Spring 2021 Budget.
However, the new higher rate of Corporation Tax will not be the same for all companies and will instead be tied to their profits.
Companies generating profits of £250,000 or more will see their Corporation Tax rates rise from the current 19 per cent to 25 per cent.
Meanwhile, those with profits between the £50,000 and £250,000 thresholds will receive marginal relief, which means that their effective rate of Corporation Tax will increase with their profits to a maximum of 25 per cent.
The marginal relief fraction is set at 3/200. The amount of marginal relief is found by multiplying the fraction by the difference between the company’s profits and the upper profits limit of £250,000.
For example, if a company has taxable profits of £100,000, they would be entitled to marginal relief of £2,250 (3/200 x (£250,000 – £100,000)). This means that in this example, marginal relief gives an effective rate of Corporation Tax of 22.75 per cent.
The new Corporation Tax thresholds are adjusted for companies with accounting periods that are shorter than 12 months and where a company has associated companies.
Companies with profits of less than £50,000 will continue to pay Corporation Tax at 19 per cent under the new small profits rate (SPR).
The reforms are complex and require careful calculations based on various criteria.
Given that the rate of tax a business pays will be based on their profits, there may be new opportunities to minimise liabilities through careful tax planning, but it is important that strategies are put in place well in advance of the new rates being launched.
Cloud accounting has revolutionised the lives of hundreds of thousands of business owners.
Today it is reported that more than 50 per cent of small to medium-sized businesses are using the likes of Xero to keep their accounts in order.
For small businesses from hairdressers to garage owners and coffee shops, this can be a godsend, allowing them time to automate tasks to save time and money and all without the cost of installing expensive hardware and software.
HM Revenue and Customs (HMRC) reported that 150,000 UK businesses have not yet made arrangements to pay back deferred VAT payments, and therefore owe the department £2.7 billion.
As of 30 June 2021, nine per cent of the total VAT deferred by businesses during the covid-19 pandemic were unaccounted for, reveals information released by HMRC through a Freedom of Information request (FOI).