Welcome to our round-up of the latest business news for our clients. Please contact us if you want to talk about how these updates affect your business. We are here to support you!
Back to school – childcare vouchers or tax-free childcare account?
Tax-free childcare accounts will gradually replace childcare voucher schemes as no new schemes could be set up after 4 October 2018. Those within voucher schemes continue to be eligible until their child is aged 16, provided the employer is willing to continue operating the scheme.
Many organisations provided the vouchers by way of salary sacrifice and there were tax and NIC advantages for both employers and employees. Despite the PAYE and NIC advantages, not all employers provided childcare vouchers. Depending upon when they joined the voucher scheme, employees could be provided with vouchers worth up to £55 a week (£2,860 p.a.) free of tax and NICs.
For more details see: Help paying for childcare: Childcare vouchers and other employer schemes - GOV.UK (www.gov.uk)
However, with many employees working from home during the pandemic and with the move to hybrid working, many families found that they were not using all of their vouchers and are choosing to leave the scheme and use the Government's Tax-Free Childcare account instead. Note that that scheme is generally only available to pay for care for children up to age 12.
Which scheme an employee is better off with depends on their personal situation. They can use the Government's childcare calculator to work out which type of support is best for them.
One other major difference between the two schemes is that Tax-Free Childcare accounts are available to the self-employed as well as to employees.
There continues to be poor take-up of the Government's Tax-Free Childcare Accounts which provide a 25% subsidy towards the cost of childcare. The system operates by topping up savings of up to £8,000 per child by 25%, potentially an extra £2,000 from the Government to spend on qualifying childcare. The scheme generally applies to children under 12 and the account can be used to pay nursery fees, breakfast clubs, after-school clubs and registered childminders.
To be eligible, the parent generally needs to be working and earning at least the National Minimum Wage or Living Wage for 16 hours a week on average. In a 3-month period, they need to earn at least £1,976 and will not be eligible if their (or their partner's) adjusted net income is more than £100,000 a year.
Note that the two schemes are mutually exclusive, and employers must stop giving their employees childcare vouchers with income tax and NIC relief if the employee informs them that they've started using the Tax-Free Childcare scheme. Employees must notify their employer within 90 days of their application for a Tax-Free Childcare account. The employer may need to stop or change the employee's salary sacrifice arrangement and must also update the employee's contract and payroll.
Does your company have a shareholders agreement?
For limited companies, when it comes to making decisions, company law states that shareholders who own more than 50% can pass a motion at a company meeting regardless of the views of other shareholders. If a shareholder(s) owns more than 75% of the shares, they control the company outright and can veto the decisions of all other shareholders.
This may not suit all business situations, especially where you have two or more founders holding equal share capital or a group of owners with varying amounts of capital, some of whom are directors and some who are not, but who are all working together for the company's success.
A shareholders' agreement is entered into between all or some of the shareholders in a company. It regulates the relationship between the shareholders and the management of the company, ownership of the shares and the protection of the shareholders. They also govern the way in which the company is run.
The agreement can help define how a business makes decisions for the benefit of all owners, and is recommended where:
- A small number of owners want to reach collective and fair decisions for the benefit of all.
- Some owners may want to be able to influence decisions that are particularly relevant to them.
- Some shareholders may not be directors and cannot influence operations on a day-to-day basis.
Typically, it is seeking to deal with the three “D's” of death, disability and disagreement. It may also cover a variety of other significant areas, for example, retirement and buyback of shares.
Key areas for any shareholder agreement
This is not a comprehensive list as each situation is different, but it may help you collect the thoughts of all shareholders before you draw up an agreement.
- Company details including structure, directors and officers
- Purpose and aims of the company
- Equity split of shareholders
- Parties to the agreement
- Shareholders' rights, obligations and commitments
- Decision-making processes on major issues, required voting majorities and day-to-day operating decisions
- Restrictions on the sale of shares
- Rights of first refusal and pre-emptive rights to acquire shares on leaving, retirement, death or disability
- Death, disability and other retirement compensation payments
- Management contracts, director approval and remuneration amounts
- Insurance and other protective requirements
- Professional advisers and change of professional advisers
- Dispute resolution
- Changes to and termination of the agreement
- Buy out provisions for leaving shareholders
- Valuation of shares on changes and valuations of the business
Our view is that a shareholders agreement is an essential document for any limited company and an equitably drafted agreement should provide comfort to all parties.
Please talk to us if you need help in planning for an agreement, especially where there are several shareholders, a new company is being formed, a shareholder wants to sell their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder. We can help with share and company valuations and put the shareholders' wishes into an agreement with a local solicitor.