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Welcome...
To June's Tax Tips & News, our newsletter designed to bring you
tax tips and news to keep you one step ahead of the taxman.
If you
need further assistance just let us know or you can send us a question for
our Question and Answer Corner.
We are
delighted to announce that Nicky & Alex became proud parents to Jake James
Larkin on Monday 24th May at 9.43am, which was a few weeks earlier than
scheduled. However, he is very healthy and was 6lb 10oz on arrival. Dena,
Patrizia & Claire are assisting with any client queries whilst
Nicky takes a little time out with Jake.
Please contact us for
advice in your own specific circumstances. We're here to
help! |
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| Changes in Capital Gains
Tax |
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The
Coalition Programme for Government, published on 20 May 2010 contains this
pledge:
We will seek ways of taxing non-business
capital gains at rates similar or close to those applied to income, with
generous exemptions for entrepreneurial business
activities.
This strongly hints at an increase in
the rate of Capital Gains Tax (CGT) due on gains arising from non-business
assets. The easiest way to do this would be to increase the rate of CGT for
all assets and provide tax relief to reduce the effective rate of CGT for
selected business assets, or for assets used for 'entrepreneurial
activities'. This could mean increasing the scope of existing tax reliefs
such as entrepreneurs' relief, or roll-over relief on business assets.
We do not expect the rate of CGT to change before 6 April 2011,
however some commentators think a change could be introduced from the next
Budget on 22 June. It would be very complicated for the Taxman to programme
his computers to calculate CGT at two different rates for the same taxpayer
within one tax year. It is also extremely unlikely that a rise in CGT would
be imposed retrospectively back to 6 April 2010. Between 6 April 1988 and 5
April 2008 CGT was charged at the taxpayer's marginal income tax rate, and
this seems to be the solution the Government is leaning
towards.
So what should you do before 6 April 2011 (or 22 June
2010 if ultra cautious), to avoid paying more tax? If the asset you plan to
sell cannot be regarded as a business asset - for example a holiday cottage
that does not qualify for furnished holiday lettings, then we should
discuss the implications of making a disposal now rather than later.
Remember a disposal need not be an outright sale, a transfer to a trust
would give rise to CGT, but possibly also inheritance tax. If you make the
disposal before 6 April 2011 rather than afterwards, the payment date for
CGT is brought forward one year, and this needs to be balanced with the
apparent tax saving.
It is not clear how far the 'generous
exemptions' for business activities will stretch. If you currently qualify
for entrepreneurs' relief as you have been a business partner, sole trader,
or shareholder and employee holding 5% or more of the voting shares, for at
least a year, it is probably reasonable to assume the assets connected with
your business will continue to qualify for that tax relief. If you don't
fall into any of those categories, you should talk to us about the risk of
increased CGT, bearing in mind the level of the expected gain.
You also need to look at your projected total income for 2011/12,
and the likelihood that the gain will be covered by your annual exemption
for CGT. This exemption is currently £10,100 per person for 2010/11,
but this could be cut back to perhaps half that amount!
The CGT
changes discussed above are currently all speculation so please talk to us
if you are concerned at all. We expect some definite changes to be
announced in the Budget Statement on 22 June 2010. Look out for our Budget newsletter when we will explain the Budget
announcements relevant to small businesses and individuals. |
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| Other Tax Changes
Ahead |
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The
Coalition Programme for Government also contains a number of other proposed
tax and law changes that may impact on you or your business if they come to
pass.
The business-focused proposals include:
- Review of the IR35 rules as part of a review of all
small business taxation.
- Refocus R&D tax credits on hi-tech
companies, small firms and new businesses.
- Review the taxation of
furnished holiday lettings so UK businesses are not penalised.
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Encourage farmers to convert existing buildings into affordable
housing.
- Increase the threshold from which employer's NI is payable
by £21 per week, to £6,812 a year from 6 April 2011. The
employees' NI thresholds will not rise, so employees and the self-employed
will bear the full brunt of the 1% increase in all NI rates.
- Provide
those out of work with business mentors and start-up loans to help them
start their own businesses.
The proposals affecting individuals include:
- No reduction in the
imposition of Inheritance Tax in the foreseeable future.
- No reduction
in Income Tax rates until the Budget deficit has been reduced.
-
Increase the personal allowance significantly from 6 April 2011, but reduce
the benefit of this allowance for those with high incomes. The personal
allowance is currently tapered away for those with total income over
£100,000, so this threshold may be lowered.
- Introduce a
transferable married couples allowance, but only for basic rate
taxpayers.
- Review of the taxation of individuals who are not
domiciled in the UK, but who have a connection to the UK so they have some
UK tax obligations.
- End Government funding of Child Trust Funds from
1 January 2010, and reduce the value of vouchers given for new-borns from 1
August 2010.
- Reform the administration of Working and Child Tax
Credits to reduce fraud and overpayments.
- Reduce the penalty for
living as a couple in the Working and Child Tax Credits system.
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Review the effectiveness of raising the Stamp Duty threshold for first-time
purchasers.
- Remove the requirement to purchase a pension annuity at
age 75.
- Phase out the default retirement age of 65.
- Bring
forward the increase in the State Pension Age (SPA), which is the age from
which you can draw the State Pension. This will be 66 years for men from
2016 and 66 years for women from 2020. The SPA has already increased beyond
60 for women, and is set to rise gradually to 68 for everyone by
2046.
We expect more detail on these proposals to be announced in
the Budget on 22 June. |
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| Post Credibility
Team |
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This is the new name for the VAT investigations
unit! This new unit is sending out computer-generated letters to
businesses who have claimed a refund for the last VAT period or periods.
The letters are very poorly worded and may well be confusing on first
reading. However, what the VATman is trying to say is that he wants an
explanation of the refund claim. He is not accusing you of doing anything
wrong.
If you receive a letter from the Post Credibility Team
please deal with it or send it on to us ASAP. If you ignore it you will
start to receive annoying phone-calls from the VAT office. |
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| PAYE Codes for
2010/11 |
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We
have heard that the Taxman has almost finished sorting out the mess his new
computer made out of the 2010/11 PAYE codes. If you have not received a P2
form for your employees that gives their PAYE code for 2010/11, carry on
using the PAYE code issued for 2009/10. You should shortly receive the
updated P2 forms for 2010/11.
One of the problems with the PAYE
codes occurs where an individual starts to receive an occupational pension,
or that pension is paid by a different pension provider, perhaps due to a
restructuring of companies.
In such cases the pension provider
should send a form P46(pen) to the Tax Office. However, the Taxman has said
that many of these P46(pen) forms contain mistakes, and this is causing the
PAYE computer to churn out crazy codes, or send out unnecessary forms P161
to the pensioner. If you need to tell the Tax Office that you have started
paying a pension to a former employee, please ask us to check the P46(pen)
form first. |
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| June Question and Answer
Corner |
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 Q. My UK based company has bought
additional bandwidth from an internet provider based in the USA. How do I
treat this purchase for VAT purposes in the
UK?
A. The supply of bandwidth as part
of your internet service is an international service for VAT purposes, as
the supplier is based outside the UK. As your company is VAT registered you
must apply the reverse charge rules to this purchase. This means for VAT
purposes you treat the transaction as if you were both the purchaser and
the supplier. You charge yourself standard rate VAT on the invoiced cost
and claim that VAT back as part of your input VAT for the quarter. The VAT
added appears twice in the calculations for your VAT return; as input VAT
on purchases and as output VAT on the reverse charge as if the purchase was
one of your own sales.
Q. My sales force all need to
connect to the internet while they are out on the road, so we provide them
each with a mobile phone dongle to provide the internet where and when they
need it. Are there any tax implications for my company or the
employees?
A. A mobile phone dongle is
treated as a piece of computer equipment and not as a mobile phone. Where
the company purchases the dongle and pays the subscription charge directly
there should be no benefit in kind charge on the employee. This applies if
the associated computer has no significant private use, and the private use
does not affect the cost of providing the equipment.
Where the
employee purchases the dongle and pays the connection charge, which he
claims back from the company, the tax situation is more complicated. The
employer needs to include the expense paid on the form P11D, and the
employee needs to claim a deduction for the costs on his tax return, as
reasonable additional costs relating to work. To circumvent this paper
chase, the company should apply for the costs of the dongles to be included
in a P11D dispensation.
Q. On 1 Feb 2010 I started a
self-employed consultancy business, which has generated profits of about
£40,000 in the first four months. I also run my own company and let a
few properties. The income from my company and the rents has been much
lower in 2009/10 compared to the previous year. Do I have to take into
account the income from my new consultancy business when I make my payment
on account for 2009/10 due on 31 July
2010?
A. You do need to take into
account the income from your new consultancy business when making your next
payment on account for income tax. However, the opening year rules for
self-employment will apply, so only two months of your first period of the
consultancy business profits are taxed in 2009/10. You can apply to reduce
the 2009/10 payment on account if your total taxable income for the 2009/10
tax year, including the two months of consultancy profits, has dropped
below the total taxable income for 2008/09. It doesn't matter if your
income for 2010/11 rises again. |
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 19/22 PAYE/NIC, student loan and
CIS deductions due for month to 5/6/2010.
22 New
Coalition Government first Budget.
30 Deadline
for UK businesses to reclaim EC VAT chargeable in 2009. |
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 Please contact us if we can help you with these or
any other tax or accounts matters.
In addition, if there's anyone
else who you think would benefit from the newsletter, please forward the
email to them or ask them to contact us to be added to the newsletter list. |
 If you are not already a client and are interested
in becoming one, we would love to come to meet with you to discuss how we
can help and provide you with a competitive quote for our
services.
All new client consultations are provided free of charge
and without obligation. |
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Goringe & Co. is an accountancy practice specialising in providing business and accounting services for companies and sole traders in West Berkshire and the surrounding area.
We deliver a professional, cost-effective, and reliable service. Visit our website http://goringeaccountants.co.uk for more information. |
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