Overpayment relief was introduced from 1 April 2010 and replaced error or mistake relief for Income Tax, Capital Gains Tax (CGT) and Corporation Tax. Overpayment relief allows taxpayers to recover overpaid Income Tax, CGT, Class 4 NIC, Corporation Tax, overpaid bank payroll tax or to reduce an excessive assessment.

According to the HMRC, the rules for overpayment relief are intended to:

• give a single route for persons to recover overpayments
• bring the claims process into line with self-assessment claims and
• align time limits with those for other claims.

Claims for overpayment relief must be made within 4 years of the end of the tax year or accounting period to which the claim relates. A claim for overpayment relief can only be made under certain circumstances.

For example, a taxpayer can only claim overpayment relief if they have not had a reasonable chance to correct their tax liability any other way, by making or amending a self-assessment return or appealing against an HMRC assessment or amendment of their return.

A claim for overpayment relief should be made in writing clearly stating the reason for making a claim, the period to which the claim relates and the reasons why the taxpayer considers that the overpayment or excessive assessment has occurred.

The Lifetime ISA has been designed to help those aged between 18 and 40 to save for a new home or for their retirement. Under the scheme, the government provides a 25% bonus on yearly savings of up to £4,000, and once you start saving before you are 40, you can continue using the scheme until you turn 50.

In total, this could see young savers investing up to £128,000 (over 32 years) and receiving a maximum government bonus of £32,000. The government bonus is paid annually at the end of the tax year. The £4,000 annual limit is part of the overall £20,000 ISA investment limit. Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

The money held in a Lifetime ISA can be used to purchase a first home worth up to £450,000 anywhere in the UK or withdrawn tax-free after the saver’s 60th birthday. The money invested in a Lifetime ISA can be used for other purposes but will be subject to a 25% withdrawal charge. The only other exception is if a saver is terminally ill and given less than 12 months to live.

HMRC’s guidance has been updated to provide further information on the appeal rights available to Lifetime ISA investors.

The results of a new YouGov poll published by HMRC has revealed that some 30% of parents polled are worried about balancing their job and school holiday childcare, and 54% of parents admitted they look forward to their children returning to school in September

HMRC is reminding parents that the Tax-Free Childcare (TFC) scheme can help. The TFC scheme helps support working families with their childcare costs and can be used to pay for regulated holiday clubs during the school holidays. The TFC scheme provides for a government top-up on parental contributions. For every 80p in the £1 contributed by parents an additional 20p or 20%, will be funded by Government up to a maximum total of £10,000 per child per year. This will give parents annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.

More than 58,000 registered childcare providers including school, football, art and tennis clubs have signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays. There is also an additional 30 hours free childcare available for working parents of 3 and 4 year olds in England.

The TFC scheme is open to all qualifying parents including, the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme parents will have to be in work at least 16 hours per week and earn at least the national minimum wage or living wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

Chief Secretary to the Treasury, Liz Truss, said:

‘Organising childcare for school holidays is important for parents. Tax-Free Childcare and 30 hours free childcare help make things easier by cuttings thousands of pounds from the childcare bills of working parents.’

The tax treatment of charities is complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to claim from beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.

A recognised charity may qualify for a number of tax exemptions and reliefs on income and gains, and on profits for certain activities. For example, charities don’t pay tax on most types of income as long as they use the money for charitable purposes.

This includes tax:

• on donations;
• on profits from trading;
• on rental or investment income, e.g. bank interest;
• on profits from the sale or disposal of an asset, like property or shares;
• on the purchase of a property.

The VAT rules for charities deemed to be carrying on business activities can be complex. However, certain VAT reliefs and exemptions may be available. Charities are sometimes required to pay tax if they receive income that doesn’t qualify for tax relief or have spent any of their income on non-charitable purposes. Charities are also liable to pay tax on any business activities in which case the same rules apply as to any other business. Charities should pay careful consideration when organising their trading activities. In some circumstances it can be advantageous to establish a trading subsidiary for the charities business activities.

Charities can also claim back part of the tax deducted on donations. Provided all the qualifying conditions are met charities can reclaim the basic rate tax on donations allowing for an extra 25p of tax relief on every pound donated.

Higher rate and additional rate taxpayers (not the charity) are eligible to claim tax relief on the difference between the basic rate and their highest rate of tax.

Planning note

The Charity Tax Commission has recently launched a consultation to examine the effectiveness of current tax reliefs and to see what improvements could be made. The consultation is open for comment until 6 July 2018.