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New Penalties, Childcare & Directors Disqualification
By Stacey McVeighty | Wednesday, 20th October 2021
As many of you know Matt has now left Change Accountants. We marked the occasion (I was going to say celebrated but it sounded like we were pleased to see him go) by eating many, many donuts and Groovy Moo Ice Cream (which, FYI, is amazing). We will all miss him and wish him the very best of luck for the future.
In other far less interesting news - here is the latest on COVID schemes, government initiatives and the like...
1. New Penalties
Right, don't shoot the messenger, but this is not pretty reading. Basically, with the future of tax changing dramatically with Making Tax Digital and quarterly (instead of annual) tax returns on the horizon, HMRC have decided to change the penalty regime.
Finance Act 2021 introduced a new regime for late returns. HMRC have now published detailed guidance on the new rules. The reforms come into effect:
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for VAT taxpayers from periods starting on or after 1 April 2022 (next year!!)
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for taxpayers within MTD for Income Tax Self-Assessment (ITSA), from the tax year beginning 6 April 2024
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for all other ITSA taxpayers, from the tax year beginning 6 April 2025
The new regime will be a points-based system, similar to motoring penalties in that the points will elapse after a period of time depending on the regularity of the returns.
Focusing on VAT for the moment, every time a VAT return is late, the client will receive a “point”. Sadly points don’t mean prizes and once you reach 4 points, then you will get an automatic £200 penalty. This applies even for nil or repayment returns.
Points have a lifetime of 2 years, unless the taxpayer is at the penalty threshold. If this is the case, then there are conditions that must be met (over a period of time) before points can be wiped.
Sounds confusing? Just wait until that is added to the new Making Tax Digital for income tax rules and the penalties for getting those quarterly returns late…I think the moral of the story is don’t send anything in late. As you are probably very aware, we tend to not allow our clients to miss deadlines anyway.
For details see: Penalties for late submission - GOV.UK (www.gov.uk)
2. Childcare Costs
Now furlough has come to an end, more parents are returning to work and there will be an increased demand for childcare.
Clients and their employees could, if they haven't already, set up a "tax free" childcare account to help pay for approved childcare costs.
For every £8 that is paid into the childcare account, the government adds £2. You can get up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year).
For more information about eligibility, the interaction with tax credits/universal credit, approved childcare and how to apply. https://www.gov.uk/tax-free-childcare
All company directors should be aware of this new legislation and if you have any queries about loans taken during the Pandemic please contact us for a confidential discussion.
3. New Directors’ Disqualification Regime to Directors of Dissolved Companies
There is a new bill currently going through parliament, snappily titled The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, and it contains implications for directors of dissolved companies.
The UK government's concern that company directors who have taken out Government-backed loans for support during the coronavirus pandemic may seek to dissolve the company rather than repay the loan.
The main provisions of the Bill are that the Insolvency Service will be able to retrospectively:
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investigate the conduct of directors of dissolved companies; and
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bring disqualification proceedings against them under the Company Directors Disqualification Act (CDDA) 1986.
Where a Court is satisfied that the conduct of a director of a dissolved company renders that director unfit to be concerned in the management of a company, penalties could include:
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disqualification from acting as a director for a period of two to 15 years; and
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the payment of compensation to creditors.
The breach of a director’s disqualification order can lead to imprisonment for up to two years and/or substantial fines.
In the notes to the bill the three main complaints about the conduct of former directors are detailed:
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allowing or causing a company to be dissolved, effectively shedding its liabilities, with a new company continuing its business, which is sometimes known as phoenix from the ashes scenarios or “phoenixism”;
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using the dissolution process as a short-circuit to avoid the costs and implications of a formal insolvency process; and
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the avoidance of investigation of conduct under the Company Directors Disqualification Act (CDDA) 1986.
All company directors should be aware of this new legislation and if you have any queries about loans taken during the Pandemic please contact us for a confidential discussion.
4. Employee Expenses
If any of your employees continue to work from home due to coronavirus (COVID-19), either because your workplace has closed, or they are following advice to self-isolate, then HMRC accepts there are non-taxable types of equipment, services or supply.
For example - if you provide a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.
Broadband - if your employee already pays for broadband, then no additional expenses can be claimed. If a broadband internet connection is needed to work from home and one was not already available, then the broadband fee can be reimbursed by you and is non-taxable. In this case, the broadband is provided for business and any private use must be limited.
Laptops, tablets, computers, and office supplies - if these are mainly used for business purposes and not significant private use, these are non-taxable.
Reimbursing expenses for office equipment your employee has bought - if your employee needs to buy home office equipment to allow them to work from home, they will need to discuss this with you in advance. If you reimburse your employee the actual costs of the purchase, then this is non-taxable provided there is no significant private use.
Employers can continue to pay their employees £6 a week to cover the additional expenses of working from home and the amount would be free of tax and national insurance. This is to cover the additional costs of electricity, heating and water whilst working from home. It has been confirmed that the amount may be paid regardless of the number of days that employees work from home.
HMRC guidance can be seen here: Check which expenses are taxable if your employee works from home due to coronavirus (COVID-19) - GOV.UK (www.gov.uk)
If you need to discuss employee expenses or would like to develop a more resilient employee expense policy for the future please talk to us.
OK, I think that is enough information for today. Don't forget that it is the Autumn Budget on the 27 October - helpfully in the middle of half term. As always I will let you know what excitement has come from that...
All information is correct at the time of publication. Please take professional advice prior to making any decisions.
Photo by Markus Spiske on Unsplash