Tax Legislation Day this year came on 18th July. There was a substantial amount of detailed proposals, most of which would not be relevant to readers of this column.
If you are interested in the merging of different R & D tax relief schemes, changes to the tax reliefs applicable to the creative industries, further clamping down on promotors of tax avoidance schemes, VAT on Terminal Markets, etc then please contact us. However, there is one welcome proposal that will affect many of you.
Couples with children and where one of them is earning over £50,000 per annum will have their entitlement to Child Benefit progressively reduced to Nil as income increases. This is called the High Income Child Benefit Charge (“HICBC”), and will result in the higher earning taxpayer receiving a tax bill to reclaim some or all of any Child Benefit received. In order to avoid this, a couple can claim the Child Benefit but then elect not to receive it. However, this charge has resulted in many couples not registering for Child Benefit in the first place, and this can have dire consequences for a partner who is not working due to child responsibilities. Claiming Child Benefit, even if an election is made not to receive it, will result in the non-working partner receiving National
Insurance credits towards their retirement pension. Not claiming it could very easily result in them receiving a reduced pension in old age.
The government is proposing that there should be administrative changes made to the HICBC both to avoid this occurring and also to avoid the need for the higher earner to register for self assessment simply because of their liability for HICBC.
Nobody would argue that these changes are not welcome. In fact, they are long overdue. However, many people would argue that these changes to HICBC do not go far enough. One major inequality that these changes do not eliminate is that the only condition for HICBC to apply is that one of the partners earns above £50,000. Therefore, a couple where one partner earns £50,001 and the other is non-working will be subject to the charge. However, a couple can earn up to £99,999 in total without being subject to the charge if those earnings are split equally between then.
That is enough on that subject and we still have some space left. So, now a quick reminder that there are a number of Non-Monetary Tax Benefits that can be provided Tax Free by an employer to their employees. These are particularly valuable as these benefits are not only tax free but also free of employee National Insurance.
These benefits linclude:
• The provision of a private mobile or smartphone;
• Cheap or interest-free loans by the employer to the employee up to £10,000;
• The provision of car parking at or near the workplace;
• Childcare facilities provided on the employer’s premises;
• A gym and other sport or leisure facilities provided on the employer’s premises (but not outside gym subscriptions); and
• Removal expenses up to £8,000 if required by the employment.
One final tax-free benefit that could be very valuable is the provision of accommodation that is “necessary for the proper performance” or “customary for the better performance” of the job. This typically applies to caretakers, boarding school teachers, pub managers, police officers and armed forces personal, prison officers, and agricultural workers. However, it does not apply to full time directors owning 5% or more of the share capital.
WatkinsonBlack have considerable experience in all areas of taxation and business services. This includes providing a very cost-effective payroll bureau service, as well as assisting to ensure compliance with the latest Making Tax Digital legislation. If you are employed or self-employed either as a sole trader, partnership or limited company and want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us by telephone on 01925 413210 or by e-mail to [email protected].
Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
