Contact me on 020 8819 8673 or andrew.cazalet@lidotax.co.uk

New Toolkit for Childcare Vouchers

Childcare Vouchers are popular with those who work with large employers. They provide a tax & National Insurance free way to provide up £2860 per child to each employee. However largely because of the administration and hassle they are less common with smaller owner managed businesses. If you have children, run a business and pay for childcare (not schooling) please read on…

Under these arrangements an employer can establish a Childcare Voucher scheme which allows you to take up to £55.00 per week or £243.00 per month in the form of a Tax & National Insurance free voucher from their employer. This voucher can then be presented to a childcare provider who may apply to the employer for the voucher to be redeemed for cash.

The potential maximum saving for a higher rate taxpayer is £1,195 per year. For an individual who is liable at the basic rate of tax the maximum saving would be £904 per year. There is an additional saving for the employer of up to £373 being the employer’s national insurance that would otherwise be payable if cash were offered instead.

The main conditions of the scheme are as follows:

  • The child for whom the voucher is provided must be under 16 and be a child of yours who lives with you and for whom you have parental responsibility.
  • The childcare provider has to be registered/ approved with the appropriate authorities. Informal arrangements with relatives are therefore usually excluded unless they can arrange to register. Nannies or au pairs are usually allowed provided they are able to register.

The easiest way to check the provider is approved is to ask them. Alternatively you can telephone 0845 601 4771 or check at this website www.ofsted.gov.uk_

Please be aware that if you are entitled to children’s tax credits you are required to notify HM Revenue and Customs that your childcare costs have reduced. This may reduce your entitlement to tax credits.

We have developed a toolkit of documents that enable you to implement the scheme for a fixed sum rather than the % of the voucher usually charged. One flat sum means you only pay once rather than a % each time.

If you have any questions or want to consider implementing a scheme please do get in touch.

Let the Taxman pay for your bike ride to work!

Under the Cycle To Work scheme an employee is allowed the tax and National Insurance free use of a bicycle for a period agreed between the parties but typically say three to four years.

It would normally be treated as a benefit in kind but in this instance the loan is free of income tax and national insurance. At the end of the term the employee would need to hand back the bike to the employer or more likely purchase it from them.

A purchase price at that point of say 10% or 20% of the original cost would seem possible as the second-hand value of bicycles is of course not very high.

Benefits of Scheme

The loan is free of income tax and national insurance. This would save each higher rate employee 41% of the market interest charged that would otherwise arise on the loan.

Often there is a Salary sacrifice arrangement between the employee and employer where the employee agrees to forgo salary over the life of the loan equivalent to the value of the bicycle at purchase.

Reclaim VAT at 17½% of the cost of the bicycle.

Capital allowances on the cost of the bicycle. Under present rules (possibly to change soon) this means the company would have been able to claim a tax deduction for 66% of the cost of the bicycle after three years. After six years this figure rises to 90% of the cost. Both this and the VAT saving can be passed onto the employee.

Conditions for the Scheme

Bicycle must be owned by the employer for the period of the loan. It cannot be transferred to the absolute ownership of the employee until the end of the loan period. Typically the employee might purchase this for market value at the end of the term.
The bike has to be used mainly for qualifying journeys. There is no statutory definition of “mainly” and the instructions to Revenue Officers in their manuals do state that employees are not required to keep detailed records!
The scheme has to be available to all employees on the same terms.
Please do get in touch if you want me to help you establish the scheme for your company.

Why use a tax adviser or an accountant to prepare your personal tax return?

Rather an odd question for a tax adviser to ask you might think? I was asked recently by someone why they should instruct me specifically to do their tax return which set me thinking…

There are many reasons of course but mainly clients tell me they want to be sure they are doing it right and have not missed anything they can claim ie for peace of mind.

Others are just busy people and want to park the hassle with someone else.

Even for pure advisory clients I find the process of completing the return helps identify areas in which a client had not realised there might be savings.

Some clients want a second opinion on personal and business financial matters. Many clients are in the financial area themselves and they could talk about it with friends and family but some people prefer a more confidential different voice.

There is a good article here which explains why you can do better than just using google and online software. But then I would say that wouldn’t I?

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