Childcare Allowances

Tax-free childcare, off-payroll rules, and compliance statements.

April 26, 2024

Unlock the benefits of tax-free childcare, navigate off-payroll working rules together with an update on compliance statements with expert advice from TAG Accountants Group.

Ensure you are getting tax-free childcare and complying with off-payroll rules

We like to take the initiative here at TAG Accountants by providing our clients with timely reminders regarding any accounting and tax issues that may affect them or their businesses. This month, we look at tax-free childcare, off-payroll working rules and recent changes to confirmation statements.

Tax-free childcare – do you qualify?

HMRC is reminding parents about Tax-Free Childcare, a UK government scheme designed to assist working parents with childcare costs. Here are the key points to help you decide if you may qualify for this:

Eligibility: Tax-Free Childcare is available to working parents, including self-employed individuals, who have children under the age of 12 (or under the age of seventeen for children with disabilities). Both parents must be in work, earning at least the National Minimum Wage or Living Wage for 16 hours per week, or have an income of less than £100,000 per year.

Financial Support: Under the scheme, eligible parents can receive government contributions of up to £2,000 per child per year towards childcare costs. The government contributes £2 for every £8 paid by the parent, effectively providing 20% tax relief on childcare expenses.

Approved Childcare Providers: Tax-Free Childcare can be used to pay for childcare provided by registered childcare providers, including nurseries, childminders, after-school clubs, and holiday clubs. The childcare provider must be approved by the government and registered with the scheme.

Applying for Tax-Free Childcare: As a parent, you can apply for Tax-Free Childcare online through the government’s Childcare Choices website. You will need to create an account, provide details about your employment and income, and register your child with an approved childcare provider.

Managing the Account: Once approved for Tax-Free Childcare, you will have a childcare account through which you can make payments directly to your childcare provider. You can also manage your account, update your details, and view your payment history online.

Off-payroll working rules – a reminder of responsibilities

IR35, also known as off-payroll working rules, applies to both small and large companies in the UK, but there are key differences in how the rules are applied and managed:

For Small Companies:

Responsibilities: Small companies, defined as those meeting at least two of the following criteria – an annual turnover of £10.2 million or less, a balance sheet total of £5.1 million or less, and 50 employees or fewer – are exempt from certain responsibilities under IR35, e.g., they are not required to conduct IR35 assessments or determine the employment status of contractors.

Client-Led Determinations: Determining the contractors’ employment status under IR35 lies with the contractor, who must assess their own IR35 status and ensure compliance with the rules.

Reduced Administrative Burden: Small companies benefit from reduced administrative burden under IR35, as they are exempt from conducting IR35 assessments and issuing Status Determination Statements (SDS).

For Large Companies:

Responsibilities: Large companies, defined as those not meeting the criteria for small companies, have additional responsibilities under IR35 in having to determine the employment status of contractors, conducting IR35 assessments, and issuing Status Determination Statements (SDS).

Client-Led Determinations: Large companies engaging contractors must assess the contractors’ employment status for IR35 purposes and provide a written SDS to the contractor and any intermediaries involved in the engagement. They must also communicate their determination and reasons for it to the contractor.

Increased Compliance Requirements: Large companies face increased compliance requirements under IR35 in conducting IR35 assessments, issuing SDS, and ensuring compliance with the rules. Failure to comply with IR35 obligations can result in financial penalties, interest charges, and reputational damage.

In summary, the main differences between IR35 off-payroll working rules for small and large companies lie in their respective responsibilities, with small companies benefiting from certain exemptions and reduced administrative burden, while large companies face additional compliance requirements and responsibilities under the rules.

The situation is further complicated by scenarios that fall outside off-payroll working rules so, if you feel your business may be affected by these rules, please feel free to contact TAG Accountants to secure assistance in what remains a confusing area.

Changes around company confirmation statements

In addition to the requirement to file accounts with Companies House, there is a further requirement to check that the information Companies House has about your company is correct every year by filing of an annual company confirmation statement. Companies House can prosecute a company and its officers for failing to file a confirmation statement and the company can be struck off the register for continued non-compliance.

Companies House guidance on the confirmation statement has been updated with new measures introduced under the Economic Crime and Corporate Transparency Act.

A confirmation statement needs to be lodged with Companies House annually. Instead of re-submitting data annually, you only need to update the confirmation statement if there are any changes to report. If there are no changes, you simply need to confirm that the information is accurate and submit the statement. 

The due date is usually a year after either the date your company incorporated or the date you filed your last confirmation statement. The confirmation statement needs to be filed within 14 days of its due date. Any necessary updates such as to the statement of capital, shareholder information and SIC codes can be made when submitting the confirmation statement.

There are now two separate forms for completing a confirmation statement. The Confirmation Statement CS01 should be used if your confirmation date was 4 March 2024 or prior, to confirm that the company’s details are up to date. Confirmation Statement form CS01 (new version) should be used if your confirmation date is 5 March 2024 onwards, to confirm that the company’s details are up to date. Existing companies will need to give a registered email address when they file their next confirmation statement with a statement date after 5 March 2024. 

It costs £13 to file a confirmation statement online and £40 if you submit a paper form to Companies House. These fees are set to increase to £34 and £62 respectively from 1 May 2024, quite a significant increase.

Discover how TAG Accountants Group can help

Not choosing the right professional advisor could prove very costly to you or your business. 

With that in mind, please check out what our clients think of the great service they receive from us by clicking our testimonials link HERE.

The team at TAG Accountants Group are here to provide our clients with any support that may be required, so if you would like more information regarding Tax-free childcare, off-payroll working rules, changes to company compliance statements or indeed any other tax-related issues, please call 01902 783172 to speak with one of the friendly advisors, or complete our online enquiry form HERE and we will be in touch.

We very much look forward to hearing from you.