Employer Supported Child Care
From 2005/06 a company can assist with its employee's child care costs by offering to pay up to £50 per week (per employee) for childminding costs but only where the childminder is a properly trained and registered childminder. Further information can be found on the following websites:-
www.inlandrevenue.gov.uk/childcare/childfactsheet.pdf www.inlandrevenue.gov.uk/specialist/salary_sacrifice.pdf www.inlandrevenue.gov.uk/leaflets/ir115.htm
Working Family and Child Tax Credits
We would remind clients about the eligibility to claim Working Family Tax Credit and Child Tax Credits. Couples (with at least one partner working) with income of less than £15,209 between them qualify for working tax credits even if they have no children. Couples with children are also eligible to claim children's tax credits (depending on their circumstances) where joint income is less than £43,668. Any clients qualifying for such credits not already claiming should now do so.
You may currently consider that you are unlikely to be entitled to receive any such benefit. However, any entitlement will eventually be calculated on your actual income for the year to come. We recommend, therefore, that you make a formal claim by completing and submitting the form – even if this results in a nil assessment based thereon. Whilst this may initially seem to be a waste of time and effort, it could well be that your circumstances may adversely change resulting in that nil assessment being recalculated to your advantage. We must stress that any such recalculation will only start to accrue 3 months before the original claim was lodged.
We also strongly recommend that any changes in your personal circumstances (once you are in the tax credit system) are notified to the Inland Revenue as soon as possible to minimise the risk of having to repay substantial funds back to the Inland Revenue should your personal circumstances improve. In any event there are a number of changes in circumstances where the Inland Revenue must be notified within 3 months to avoid penalties.
Settlement Appeal Cases
In summary, these rules relate to those service companies in which one party generates all, or substantially all, of the income therein - but a dividend is paid there from to his or her spouse. Current guidance identifies three main options regarding the tax as follows:
1. The taxpayer takes the Inland Revenue’s view that they fall within Section 660A. It is then the responsibility of the income generator to complete the trust pages on their tax return showing the income paid to their spouse. They will then become personally liable for the tax due thereon. Please note that should, in due course, the Inland Revenue lose this case, any of the “overpaid” tax would not be reclaimable.
2. The taxpayer believes that they are not caught by the legislation either because their facts differ from the case in question or because they fundamentally disagree with the Inland Revenue opinion. In this case there are two options. Firstly you complete your tax return in the normal manner and do not draw attention to the issue or make any additional disclosures. In this situation, you are then potentially exposed to an Inland Revenue discovery assessment for any six year period the Revenue selects for review. Or, complete the tax return with substantial additional disclosures thus protecting yourself from discovery. The detail of this disclosure would include copies of the company accounts, tax computations, Memorandum & Articles of Association of the company, full description of how the business operates and the roles of the husband and wife within the running of the business, etc. This would then give the Inland Revenue only a twelve-month window in which to enquire into the offending tax return.
There is a new annual income tax charge payable by any taxpayer who has the use of property not owned by them whereby they have either previously owned the asset or where they have assisted with providing finances for its acquisition (this would normally be their dwelling, however it can relate to any other assets). This predominantly affects (but is not exclusive to) people living with their parents.
Rental Property – Energy Saving Allowances
For those clients that own property for residential letting, they can from 6 April 2004 through to 5 April 2009 obtain a tax deduction for money spent on loft or cavity wall insulation installed in a dwelling house. The allowance is not available for those properties treated as furnished holiday lettings. The maximum allowance is £1,500 per property.
New Pension Regime (transitional rule)
There are significant changes scheduled to effect the whole pension legislation, which will take effect from 6 April 2006. We therefore advise all clients to seek advice in this matter from their professional advisors before this date. In particular, from 6 April 2006 there will now be a ceiling placed on the value a pension fund can reach. There are significant tax consequences where the scheme is worth substantially more than this limit. The limit for 2005/06 is £1.5 million. For those clients who already have pension schemes in excess of this amount should again seek professional advice before the end of the coming tax year.