Tax information webinar - 06.2013

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I took part in an interesting HMRC webinar recently.

They didn’t tell us much that we don’t already know – but it was good to have a few points clarified. We were also given some useful links to places to find information which I will add to this document –

Starting work as a childminder
You must register as self employed as soon as you start advertising for work by filling in form CWF1 –

Registration with HMRC also registers you for Class 2 National Insurance which is important for certain state benefits -
Class 2 NI costs £2.70 weekly or you can pay biannually.

Childminders can apply for a small earnings exception certificate if you earn less than £5725 a year - fill in form CF10. An exception certificate may affect benefits and state pension in the future so you should take advice.

Some childminders might also have to pay class 4 National Insurance. Class 4 NI is payable at 9% of profit from £7755 (2013-14). It is automatically charged as part of your tax bill.

Help and support for businesses - HM Revenue & Customs: Starting a business

It is important to keep an accurate record of how many hours children attend every week.

There are percentages you can claim relating to things like energy costs, water rates, council tax and rent and this depends on the number of hours you work in the week.

This web page links to information about the percentages you can claim for gas, electricity, water rates etc - Care providers: Childminders: expenses

There were lots of questions about expenses – here are a few with answers –
Q: How do you work out the % when claiming on cleaning materials?
A: It is up to you to choose a %. You may wish to buy products for childminding separately and keep a separate record of purchases, or you can work out a percentage of total use.

Q: Are childminding related subscriptions (magazines) allowable expenses?
A: Yes

Q. Can you write a receipt and buy back toys from your children when they become childminding toys?
A: Yes, you don’t need to write a receipt - you need to include on your tax return the value of the goods taken for your own use.

Q: Please clarify clothing allowable expenses - is this childminder clothing (with or without logos) or children's aprons?
A: Allowable clothing relates to children’s aprons etc. It was clarified that it does not include childminder’s clothing.

Expenses must be related to childminded children only - not your own children.

Keeping receipts
You do not need a receipt for purchases under £10 - except food receipts which are required by FSA - not HMRC.

Do your best to get receipts for everything but HMRC are not worried if you cannot get a receipt - just add the details in your records.
Q: What happens if you lose a receipt?
A: Just keep a note of the expense – add the details in your records

Useful links about expenses
Here are some useful links for more information about allowable expenses –
Childminders Expenses - tax information IR

Freely available information with contributions from Childminding Forum members who have attended tax information evenings and who have asked HMRC for further guidance and submitted the answers to the author of the document –
expenses and tax - by Sarah.

If you are unsure about any of the advice in this document please contact HMRC for further guidance - HM Revenue & Customs: Self Employed.

Car expenses
You either claim the mileage costs @ 45p a mile OR you claim the actual costs. The mileage rate of 45p include insurance, MOT, rescue etc.
If you are doing the actual cost method then you include everything in your calculation of the total running costs and claim a proportion. There is more information here –
BIM47701 - Measuring the profits (specific rules and practices) - receipts and deductions: specific deductions - travel and subsistence: use of vehicle - mileage rates - introduction

You must keep a record of your mileage on a form which records -
• Date
• Miles travelled
• Purpose of trip
It is recommended that you keep this in your car and complete it every time you transport childminded children.

There is a useful You Tube link with more information about car expenses -
HMRC Guide: Motoring Expenses - YouTube.

Food and drink expenses
There are various ways to calculate food and drink expenses. You can keep separate receipts - or calculate an average % childminded use of your shopping bill.

Q: What if we went out for a meal with minded children and I ate too is that allowable expense?
A: Yes that’s an allowable expense

Capital Allowances
There is a useful information sheet on the Pacey website which explains capital allowances and Annual Investment Allowance (AIA) really well.
More help with Capital Allowances

Q: Is there an amount above which a purchase becomes an Annual Investment Allowance (AIA) as opposed to an expense?
A: There's no actual amount set in writing, but the figure generally used is for purchases over £200.

Record keeping
It is important to keep accurate records including -
• Payments received from parents
• Any other income received eg interest on a business bank account
• All expenses

How to pay your tax / NI class 4 bill
Your tax bill is calculated as follows -
Income / turnover / money in
LESS - allowable expenses
LESS - capital expenses
EQUALS - profit

A paper tax return arrives in April - form SA316
Important dates - accounts must be submitted by 31 Oct - paper OR 31 Jan - online

Paying HMRC

Saving money
It is good practice to put aside some money every month to save for your tax and Class 4 NI bill.
Self-employed Ready Reckoner HM Revenue & Customs: Self-employed ready reckoner introduction

Changes in circumstances
If you take on staff - you must inform HMRC
If you go into partnership with another childminder - you must inform HMRC
If you move or stop childminding - you must inform HMRC

HMRC how to contact us - HM Revenue & Customs: Self Employed

Further information
If you want to take part in future webinars - HM Revenue & Customs: Online seminars for businesses and the self-employed

HMRC’s YouTube channel (including a guide for Childminders) HM Revenue & Customs - YouTube

I would recommend that you look out for HMRC webinars and take part in one if you can - it was a very intensive way to spend an hour but it was great to clarify information.
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