Horswills Tax News

Emergency Budget June 2010

2010-06-23T01:03:00.003+01:00

(Reproduced from our main website)

We all knew that Chancellor George Osborne was going to announce an increase in Capital Gains Tax (CGT) today, but we didn't expect the rate to rise immediately. Other surprises included reductions in the rates of corporation tax for both small and large companies and in the rates of capital allowances for all businesses.

A rise in the standard rate of VAT to 20% was widely expected, but this increase has been delayed until 4 January 2011, which is the first working day after the Christmas break.

The 1% point increase in NI rates from 6 April 2011 is already planned, but we are assured by George that through some manipulation of thresholds this increase will not be felt by most people. However, we won't know the exact starting points for employers and employees NI until the Autumn Budget statement on 20 October 2010.

Basic rate taxpayers aged under 65 will benefit from a £1,000 increase in their personal allowance from 6 April 2011. Those aged over 65 already receive a higher personal allowance, if their total income is below £28,930.

Individuals
Capital Gains Tax

The rate of CGT is to increase from 18% to 28% from 23 June 2010, but taxpayers with taxable income and gains below £37,400 will continue to pay CGT at 18%.

All trustees and personal representatives with any level of income and gains will also rise to 28% from 23 June 2010.

We thought the Government would not increase the rate of CGT in the middle of a tax year, as that would cause so many complications when calculating the tax due for 2010/11. However, that is exactly what George plans to do. The increase in CGT is not as high as many feared, as it is still well below the highest income tax rates of 40% and 50%. Although trusts are particularly badly hit as they will pay the higher rate of CGT on all gains and only have half the annual exemption of individuals. There are special rules for trusts for the disabled.

The annual exemption remains at £10,100 for individuals and £5,050 for most trusts.

All gains that qualify for entrepreneur's relief will continue to be taxed at 10%, whether the disposal is made before or after the changes on 23 June. There will be an increase from £2 million to £5 million in the lifetime limit on gains that can qualify for entrepreneurs' relief from 23 June 2010 and this is very welcome, but many gains will never qualify for that relief. For example, the sale of a commercial property, which is not associated with the disposal of a trading business, will not qualify for the relief. Letting of commercial property does not count as a trading business for entrepreneurs' relief.

If you are in the middle of arranging a large sale, you could escape the CGT rise if you have already exchanged contracts. This is because the disposal date for CGT is the date that unconditional contracts are exchanged, not the completion date for the deal. If the contract is conditional, the disposal date is the date those conditions are satisfied. The disposal date for a gift is the date the beneficial ownership passes.

Income Tax

The personal allowance for those under 65 will rise by £1,000 to £7,475 for 2011/12. However, this generous increase in tax free income will be limited to those who pay income tax at 20%, as the threshold at which 40% tax starts will be reduced to take into account the increased allowance. We won't know the exact tax thresholds until the Autumn Budget statement, as the increases in threshold for 2011/12 will be based on the RPI to September 2010.

Child Benefit and Tax Credits

Child benefit is available to all parents of children under 16, and is not means tested. This benefit will be frozen at current levels until April 2014, and the money saved will be transferred to child tax credits.

Working and Child Tax Credits are to be withdrawn gradually from families with total income of £40,000 or more from April 2011. The special baby rate will be withdrawn at the same time, but the child element for less well-off families will increase by £150. There are a number of other changes planned for later years including a reduction in the period for which claims can be back-dated.

Child Trust Fund

Child Trust funds are special tax free savings accounts that are set up with Government funds for children born after 31 August 2002. Additional savings of up to £1,200 per year can be contributed to each account by anyone. Reductions in the funding for these accounts will be made from August 2010 and no further funding will be provided for new accounts from 1 January 2011. The accounts that are already open will remain in place until the child reaches age 18.

Retirement and Pensions

The state pension age (SPA), from which individuals can receive the state pension, is currently 65 for men and is rising to 65 for women. Legislation is already in place to increase the SPA to age 66 for everyone from 2026, but the Government wishes to bring this date forward.

From April 2011 the state pension will be increased by the greater of: the annual increase in earnings or prices, or 2.5%. The standard minimum income guarantee given under the Pension Credit will be increased by the same amount as the state pension.

When a member of a money purchase pension scheme reaches age 75 they are required to purchase an annuity to provide their future pension, or heavy charges can apply. This requirement to purchase annuity at age 75 is to be scrapped from April 2011. In the meantime if the scheme member has not reached age 75 by 22 June 2010, they can defer purchasing an annuity until age 77.

Tax relief for pension contributions is expected to be limited to around £35,000 per year per person from April 2011. This cap will replace the complex tapering of tax relief that was due to apply to individuals with total income of £180,000 or more.

Currently employees can be required to retire when they reach the default retirement age of 65. The Government is going to consult on how to remove this default retirement age.

Furnished Holiday Lettings

The changes that were announced by the previous Government will not be taking effect, although new measures will be considered to ensure the rules apply equally to properties in the EEA as well as increasing the number of days that properties have to be available for let and actually let as commercial holiday lets.

Businesses

Corporation Tax

The small profits rate of corporation tax will be cut from 21% to 20% from 1 April 2011, when it was previously expected to increase to 22%. The small profits rate applies to profits of up to £300,000 if there are no associated companies. The corporation tax rates for large companies will reduce from 28% to 27% from next April and then fall by 1% per year eventually down to 24%.

Capital Allowances

The previous Government was always messing with capital allowances in an attempt to incentivise businesses to invest in this or that type of equipment. The new policy is to cut back on capital allowances with effect from 1 April 2012.

The main pool rate is reducing from 20% to 18% from that date and the special pool rate from 10% to 8%. The Annual Investment Allowance (AIA) Limit is also reducing from £100,000 to £25,000 from 1 April 2012.

Small businesses will not be affected if all of their expenditure on equipment is within the annual investment allowance, which gives 100% deduction for costs in the year of purchase. Unfortunately expenditure on cars cannot be covered by the AIA. However, expenditure on new (not second-hand) low emissions cars and vans can be covered by a separate 100% allowance.

NIC

2011/12

Although we know the rates of NI that will apply from 6 April 2011, (2010/11 rates + 1%), we don't know the new thresholds, so we cannot construct a meaningful table for 2011/12. We know the employer's secondary threshold for class 1 NICs will increase by £21 per week above the RPI increase. The RPI increase is based on the RPI to September 2010. We will provide a full NIC rates and thresholds table when we have the full details in October.

NIC Holiday

The Treasury are feeling guilty about cutting loads of public sector jobs in the less prosperous regions of the UK, so they have come up with the idea of an 'NICs holiday'. A business will be exempt from paying the employer's class 1 NICs for 12 months for up to 10 employees, capped at £5,000 per employee.

This scheme will start in September 2010 but will apply to new businesses set up on and after 22 June 2010. It will only apply in Scotland, Wales, Northern Ireland, the North of England, Yorkshire, the Midlands and the South West regions. Certain businesses are excluded, such as those under the IR35 or Managed Service Company rules, and businesses in grant-supported sectors such as agriculture, fisheries and coal. More details are expected to be made available shortly.

VAT

Change of Standard Rate

The standard rate of VAT will increase from 17.5% to 20% from 4 January 2011. Goods and services that are currently exempt from VAT or are subject to VAT at the zero, or 5% rates will not be affected by this change.

If you are planning to invoice or pay in advance to avoid the VAT rise, think again. There will be a special 2.5% VAT charge on such advance sales where the customer cannot recover all the VAT on the supply, and one or more of the following applies:

* the supplier and customer are connected,
* the supplier funds the purchase,
* the payment is not due for at least six months;
* the value of the supply is £100,000 or more, unless the prepayment or advance invoice is normal commercial practice.

Flat Rate Scheme

Small businesses can start to use the flat rate scheme if their VAT exclusive turnover is no more than £150,000, but must leave the scheme if their VAT inclusive turnover exceeds £225,000. This exit turnover figure will rise to £230,000 on 4 January 2011.

The flat rates that are applied to gross sales under the flat rate scheme will increase on 4 January 2011 to reflect the increase in the standard rate of VAT. If your business will no longer benefit from using the flat rate scheme you can leave scheme at any time.

Payments on Account

Businesses who have annual VAT due of £2 million or more must make monthly VAT payments on account. This threshold will be increased in 2011.
Tax Avoidance

A corporate tax avoidance schemes has been blocked from 22 June 2010 that uses financial instruments to remove profits from UK tax or is used to create an artificial tax credit.

The Government is to consider whether a General Anti-Avoidance Rule would be effective in reducing tax avoidance. It will also examine the following anti-avoidance measures:

* Expand the disclosure of tax avoidance schemes regime to include schemes involving IHT on trusts.
* Block the manipulation of consortium relief.
* Restrict the use of employee trusts, including employer finance retirement benefit schemes (EFRBS).
* Amend Stamp Duty Land Tax due on high value property transactions.

Other Duties

* Landline duty of £6 per year will not go ahead from 1 October 2010.
* Alcoholic duties rates on strong cider will reduce from 30 June 2010, back to the levels which were in place before the March 2010 Budget.
* A bank levy on bank's balance sheet values will be introduced from 1 January 2011 at 0.04%, which will rise to 0.07%.

Election Fiasco

2010-05-07T03:11:00.002+01:00

I thought I'd be very clever and embed the BBC's election night coverage on here - it worked but it was too big.

The not enough papers/not enough time fiasco at some stations had me hunting in the loft for my old law books. Unfortunately they fell victim to the last roof leak and no doubt the rules have changed anyway.

Our polling station was the local church hall and there were queues to use the three-position booth they had set up. They could easily have put a few tables and extra pencils out. A quick "poll" of those queuing found 100% didn't care about their vote being hidden. And what happened to the policeman we used to see on the door of every polling station years ago? No doubt heads will roll and every fighter for democracy will turn in their grave.

Another nearly 100% result was the number of people who didn't realise that they were voting in the local election as well. I hadm't heard of any of those candidates. Not exactly finger on the pulse here...

Happy Easter from Sharon and John

2010-04-04T02:19:00.001+01:00

Greeting generated with Smilebox

Kudos to.....

2010-03-15T15:49:00.004Z

Amazon, BlueOrange and Sunshine Scrapbooking ....

Customer service is not a difficult concept and yet so many companies fob us off with standard responses. Even worse is the alleged support system where you have to jump through endless "did this help you?" hoops and read irrelevant pages before you even get to send a support ticket, never mind get a reply.

Amazon.co.uk: I'm planning to add associate pages to a website but had complicated questions about multiple accounts, an old account, mutiple product categories etc. I set a long message then thought of something else and sent another one. That's usually a mistake as the next message could go to someone else not even in the same country with some support systems. They replied within 12 hours (I'd sent my questions at the end of the business day) and the chap dealing with it had pulled togaher all my questions, including the ones I should have asked but didn't, tied up what had happened with amazon.com and made very helpful suggestions. Excellent!

BlueOrange: BlueOrange sell Camtasia software and related products. I'd bought this a while ago but had lost my activation keys along with an old email addy. Now, a lot of companies will only recognise you by your original email address and then send what you want to the old email address to get lost in th'internet ether. That's a tad - nay, completely - useless. Julie at BlueOrange found my account, treated me properly as a past (and future) customer and provided exactly what I needed before I even got up this morning. Brilliant!

Incidentally clients may now expect scintillating videos on how to set up spreadsheets and my scrapbooking friends will get plenty of help with digi software.

Sunshine Scrapbooking: This UK website has an astounding range of stash for all your holiday albums. A package from them made my weekend. Sent really quickly, beautifully packaged and very reasonable postage costs. Now that's how to look after customers!

Bribery and Corruption at Horswills ....

2010-03-05T14:06:00.002Z

Yes, really. We are throwing morals to the wind and bribing you in the best way we know how - with chocolate.

All you need to do is become a fan of our Horswills page on Facebook - HERE. Names of fans will be put into the Easter Bunny's hat and there will be two draws - one for our clients and one for other friends. Each winner will get a £25 M & S voucher so they can choose their own Easter treats. We even have our own bunnies on the payroll. Two draws, two bunnies. With their own blog HERE.

The draw closes at midnight on Palm Sunday 28th March.

Horswills fans get thrilling news about the exciting world of tax and even accountancy jokes. They don't get bugged with marketing messages!

Support Haiti Earthquake Relief with Gift Aid

2010-01-16T07:55:00.008Z

I've worked with relief organisations in the past and what they all need is

1) Money
2) People to keep out of the way
3) More money

Gift Aid enables charities to get back the tax you paid on the money before you gave it to them. It enables them to plan ahead and know what money is coming in; it essentially helps their cashflow. The first sentence in this paragraph is a clue to how it works - you must be a UK taxpayer in order to tick the Gift Aid box when you make a donation. If you're not you will in theory get a tax bill or a deduction in your coding. It complicates things unnecessarily. So, if you don't pay tax (ie in the tax year you make the gift)you can simply not tick the gift aid box or untick it depending on the form/website OR why not get another member of the family who does pay tax to make the donation on the family's behalf?

Higer rate taxpayers get higher rate tax relief on their Gift Aid donations. Just send the details to your accountant at the end of the year of fill in the relevant section of the return if you're doing it yourself.

Horswills clients - print out the donation details and put them in the folder marked "Send to Sharon way before 31 January" along with every other piece of information I need. I wish ....

You can find more information on Gift Aid HERE (Go to Tax Efficient Charitable Giving. Facebook members can get help on the Horswills page HERE

To make a donation go to the DEC site HERE

Read how Twitter and Facebook users has responded to the crisis HERE

Tax Return Hell

2010-01-09T04:17:00.004Z

I thought you'd like me to share this with you..... basically every January is worse than the one before with clients - many who have been with us for years - sending their tax return info later and later until we eventually crack and kick them out. Turning up with the stuff on 29 January was the worst one!

I don't think the snow makes it any easier (see my website for snow pics) The fact that I can't leave the house anyway doesn't make me feel any better about not being able to go out because I have too much to do.

So the daily routine is

1) Get up virtually any time I might have had 5 hours' sleep. Sleep patterns are all over the place.

2) Send yet more reminders to those who haven't sent me their info at all. That stops in the next few days when their files go into storage and we forget about them

3) Set up constant supplies of coffee, chocolate, smoked salmon sandwiches, J2O and nurofen. As you can imagine, that diet requires much time spent on Wii Fit but there's no time for that. I might have to make time for that if I want to fit into any clothes when I do go out.

4) Get as much work done as possible then post it where it will go nowhere because the Post Office can't deliver in the snow

5) Spend odd moments playing daft games on King, chatting on forums and writing in too many blogs ....

Just to add to the time constraints, web maestro Keith and I are working on the new Horswills website. There will be a progress report in my next post. The new header on this blog is a sneak preview. No, of course that's not me! As if ...

Merry Christmas from Sharon and John

2009-12-21T19:16:00.002Z

Can you spell M-U-P-P-E-T?

2009-11-10T16:11:00.003Z

Some clients, mainly those in marketing, will remember an information site I used to run. Those who don't know what I'm talking about can ignore this post! I let the domain lapse and someone has bought it. Fair enough. But the muppet has taken my content and code from archive.org. The fact that archive.org establishes who wrote what and when, is something lost on the muppet.

Muppet and Co appear to run a website design and SEO management business. What a joke! What kind of website designer steals other people's work and doesn't realise how having archive.org all over it affects SEO? My neighbour's 8 year old knows that. Heck, my pregnant neighbour's bump knows that ....

I've done all the usual things and written to the domain owner etc. They're ignoring me except to put a nonsense disclaimer which spells the word "website" incorrectly. But then they spell copyright as "copywrite" and are trying to claim 2010 copyright already. What a bunch of bozos. They even took the code from another web designer's site to look as if they were their clients!! That poor designer then had to waste shedloads of time dealing with Muppet & Co.

Do these people want a whole load of grief raining down on them? Do they think I'm not capable of sending a notice to Google's copyright infringement department and the hosting company? Do they have a massive budget for legal fees? Come on down!!

Is it arrogance? Ignorance? Sheer bone idleness? Who knows? There is no limit to the stupidity of some people. The irony is that I took the site down because it sucked up too much time and here it is again sucking up valuable time!

What happened to our website?

2008-10-08T11:20:00.002+01:00

It will be back soon!

We're rewriting chunks of it and making everything easy to find. We're also busy adding articles relevant to our particular client base(s).

Ths is not really a good time to be messing around with a website since we're busy with accounts and tax returns; we're regarding the website as light relief!

Thanks to all those who have sent in their accounts in the last few weeks. It will make January a lot easier. We might even be able to have Christmas for the first time in ten years.

On yer bike ...

2008-09-02T00:52:00.001+01:00

Inspired by the efforts of our cycling squad at the recent Beijing Olympics? Then why not implement a Cycle to Work scheme and award yourself a gold medal for achieving tax savings for both you and your employees. How is this possible?

Let's say, Mark, under his employer's scheme, chooses to have the loan of a bike retailing at £499. His employer buys the bike and reclaims the VAT - reducing the cost of the bike immediately to £425 (£499 x 100/117.5). By Mark agreeing to a salary sacrifice, his gross pay is reduced by £23.61 per month over say 18 months to meet this net amount. However, the monthly net cost to Mark will only be £16.29 (£23.61 x 69%) because he saves income tax (at 20%) and NI (at 11%) on what would have been his gross pay.

At the end of the 18 month agreement period Mark's employer offers the ex-loan bike for sale at a fair market price which will be substantially reduced from the new price, perhaps just £40. The cost to Mark is: net salary given up £16.29 x 18 months = £293.22 plus the cost to buy the bike at end of the period = £40 .Total cost £333.22 or 67% of the price the employee would have to pay outside such a scheme. As well as saving employers NI on the salary sacrificed Mark's employer can include the cost of the bike within their new Annual Investment Allowance claim, and obtain a 100% write off in the first year against Tax.

This is just an example. There are various ways the tax savings could be structured between employee and employer but you get the idea!

The Cycle to Work exemption removes the tax charge (and need for a P11D entry) on a benefit-in-kind that would otherwise apply to cycles and cyclists safety equipment loaned to employees. The key conditions, other than those for any salary sacrifice scheme, are that:

- ownership of the equipment must not be transferred to the employee during the loan period;

- employees must use the equipment mainly (say 50%) for qualifying journeys; i.e. between the home and workplace, or part of (for example, to the station), or between one workplace and another ; and

- the Cycle to Work scheme must be made available generally to employees of the employer concerned and not confined to directors or offered to them on more favourable terms. This scheme can be used by one person companies but not the self-employed.

Employees are not expected to keep mileage logs but you should make it clear to them that if they do not use the cycle mainly for qualifying journeys, they may lose the benefit of the tax exemption. Finally, you do not need approval from HMRC to set up or run such a scheme.

Getting more out of mileage rates

2008-09-02T00:50:00.001+01:00

In our August newsletter we reminded you about tax and NI free mileage rates for using your own car for business journeys. However, questions about mileage are still very topical given recent rises in running costs. How can you maximise a tax-free payment from your company?

When an employee takes colleagues on business trips in their vehicle, they can be paid up to 5p per passenger mile without deduction of tax and NI, provided the passenger is also using it for business purposes. This effectively extends the current tax and NI free mileage rate to 45p and 30p respectively on journeys with one passenger; 50p and 35p on journeys with two passengers, and so on. However, the additional passenger rate of 5p must be paid to you; it's not something you can later claim through your tax return.

More significantly, you might just not realise how many business errands you and your family run, during a tax year...

- Who picks your customers up from the railway station?

- How many times have you called for a lift after a late night function?

- And what about the last minute dashes to: the bank to pay in cheques; get something urgent in the post; or collect cheques from late payers rather than have them say "it's in the post".

Small amounts of mileage claimed from the company can add up to large amounts that are tax and NI free.

For 2008/9 why not get your company to pay out a lump sum now, to cover your mileage for the whole tax year. For example, if your anticipated business mileage for 2008/9 is 2,500 miles then you could take a lump sum of £1,000 (2,500 miles x 40p per mile). You then keep a note of the mileage as you go along, settling up with the company before the tax-year end with a balancing payment or refund. A simple way of proving the mileage between two points is to use one of the route planners available on the internet. In fact this is the method a tax inspector would use if he was checking mileage claims.

This article is from our September newsletter. There will be more articles on Horswills.com about mileage allowances shortly.

Planning to sell your company?

2008-08-06T11:38:00.000+01:00

The process of selling an established business can take some time. Even when you find a buyer the negotiations over exactly what will be sold can be drawn out. It makes sense to smarten up the company financially first. For example, dispose of any assets which are not really pulling their weight, such as obsolete machinery. Also any assets which have a personal connection with the directors, such as holiday homes or valued cars, can be put in the directors' own names.

Now look at what tax reliefs you could benefit from on the sale. If you leave the country before the sale and stay abroad for a period of five years or more, you could avoid paying UK capital gains tax on the gain. However, you may pay tax on the profits in your new country of residence, so be careful about the country you choose!

Entrepreneurs' relief can be claimed for most company sales, which reduces the effective rate of tax from 18% to 10% on the first £1 million of gains made by each shareholder. This can reduce the tax by up to £80,000 for each shareholder who qualifies for the tax relief. To qualify each shareholder and the company must meet all of these conditions:

The shareholder must hold at least 5% of the ordinary shares of the company and 5% of the voting rights for the company for at least one year ending with the sale;
The shareholder must be an employee, or director, or company secretary of the company for at least one year up to the date of the sale;
The activities of the company must be at least 80% trading, as opposed to investments, or it must be the holding company of one or more trading companies.
Where family members hold a small number of shares check whether they will each meet the 5% threshold based on their own shareholdings alone. Consider gifting some shares to your grown up children or spouse to achieve this threshold. Where shareholders do own over 5% of the shares but do not work for the company, consider making them a director, or giving them a small part time position at the company for the year before the sale.

Mileage Expenses and Rocketing Fuel Prices

2008-08-06T11:36:00.001+01:00

Fuel prices are rocketing, so employees are increasingly reluctant to use their own cars for business journeys. As an employer you can pay a tax free mileage rate to your employees of 40p per mile for the first 10,000 business miles driven in one tax year, and 25p per mile for extra miles in the same year. These rates haven't been changed for over 6 years. To keep your employees happy you could pay a higher mileage rate, but you need to report the excess amount paid on the form P11D and the employee will be taxed on that extra payment.

Where an employee uses a company car, but pays for all the fuel, the company can pay a fuel-only mileage rate for business journeys. This fuel-only rate is guaranteed to be tax free when it is equal to or less than the advisory fuel rates set by the Taxman every six months. This advisory fuel rate has just been increased with effect from 1 July 2008, although due to the escalating fuel prices the Taxman has said the higher rates can be used for journeys made in June.

The new advisory fuel rates, with the old rates in brackets, are:

1400cc or less:
Petrol: 12p (11p)
Diesel: 13p (11p)
LPG: 7p (7p)

1401cc to 2000cc:
Petrol: 15p (13p)
Diesel: 13p (11p)
LPG: 9p (8p)

Over 2000cc:
Petrol: 21p (19p)
Diesel: 17p (14p)
LPG: 13p (11p)

These rates are based on average fuel prices per litre of 114.8p (petrol), 127.2 (diesel) and 57.1p (LPG). If the prices in your local area are much higher, or your company cars are less fuel efficient than average, you can pay a higher mileage rate. You need to keep a note of how you calculated the higher mileage rate.

eToro - The Innovative Forex Program

2008-06-03T01:31:00.003+01:00

The Forex trading industry

With a daily turnover of over $3.2 trillion, as estimated by The Bank of International Settlement, the Forex market has quickly become the world’s biggest and most liquid financial market. Nevertheless, it is a market that has up until now allowed very narrow access to private traders, since it customarily uses terminology and procedures that can take years to grasp.

About eToro

eToro has developed a cutting edge Forex trading software, catering to novice and veteran traders alike by way of a user friendly trading interface, and various additional features that render the vast world of Forex trading accessible to new traders. eToro’s easy to use platform makes foreign exchange trading almost entirely intuitive, through its extensive use of trade visualization. eToro’s platform is also designed to make Forex trading a community oriented experience, with such features as private and public chats, forums and championships.

eToro’s provision of an opportunity to acquire trading experience by trading for virtual money, makes this platform hugely attractive to beginner traders, since it enables them to get their chops without risking any of their money. This way, novices can get a fundamental understanding of the world of Forex, before they dive in. Furthermore, eToro makes the learning experience a smooth and painless one, by replacing the complex charts and lingo that the Forex market is famous for, with step by step instructions, tutorials, professional support and creative graphic representations of trading activity.

eToro’s forward thinking approach combines all the advantages of the Forex market, namely its scale, its liquidity and its extent of opportunity, with all the advantages of online technology, in order to create a user friendly access to an enormous and complex industry.

Overall, eToro has produced the ultimate trading environment, where one can learn, develop, communicate, and grow according to one’s individual needs.

eToro’s Features:

eToro has designed a cornucopia of features that make trading, monitoring, communicating and staying informed simpler than ever. These features include:

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Download eToro for FREE now to experience the world of Forex trading to the fullest.

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CGT Relief for Entrepreneurs

2008-02-28T12:20:00.001Z

Small businesses had been promised some sort of concession from the proposed hike in Capital Gains Tax (CGT) from 5% or 10% (see below) to 18%. We thought a form of retirement relief would be introduced, but instead a brand new entrepreneurs' relief has been announced.

The new entrepreneurs' relief can apply when you sell part or all of your business, or shares in your own company after 5th April 2008. The capital gain will be cut by 4/9ths leaving 5/9ths taxable at 18%. This makes the effective CGT rate on the gain before allowances just 10% instead of 18%. Currently where full business asset taper relief applies a higher rate taxpayer pays CGT at 10% and a lower rate taxpayer pays CGT at 5% on the same gains.

From sale of a business in 2008/09 £
Gain from selling your business: 450,000
Less Entrepreneurs' relief (4/9 x 450,000) (200,000)
Taxable gain before allowances: 250,000
Less annual exemption for 2008/09 say: (9,500)
Net gain: 240,500
CGT due at 18% 43,290

Any capital losses can also be set-off after the deduction of the entrepreneur's relief, which was not the case with taper relief.

There are some tight restrictions to the new entrepreneur relief:

You must be disposing of part or all of your business, and there are likely to be some detailed rules on what 'part of a business' means. If you are selling a single asset, perhaps one field from your farm, entrepreneurs' relief is unlikely to apply.
You must have held the assets or shares for at least one year before the sale.
The business must fall under the definition of a trading business, which means a property letting business will not qualify.

Where you are disposing of company shares you must have worked for, or have been a director or company secretary of that company, and have held at least 5% of the ordinary voting shares. The relief only applies to the first £1 million of qualifying gains made after 5 April 2008. Gains in excess of £1 million, or which do not qualify for other reasons will be taxed at 18%.

More restrictions may emerge when the full details are known.

If you are planning to sell your business the entrepreneurs' relief may allow you to defer the sale until after 5 April 2008, but where the gain is expected to run into millions, the maximum tax you will save by claiming that relief is £80,000.

Kevin Greening

2008-01-20T05:47:00.000Z

Kevin Greening died suddenly on 29 December. He had been a client of mine for many years. It was always a joy to spend time with him, whether on the 'phone or eating a pizza. He was kind and considerate and the kind of client every accountant loves to have - one who presents everything in a logical and careful way and is happy to discuss the tedious minutiae of tax legislation whilst ultimately trusting my judgement.

Much has been written about Kevin's boundless broadcasting skills and his amazing wit so I won't add to it, except to say it is so sad when we lose any talented person, for talent is in short supply and is not appreciated until it is gone.

Kevin was a good friend to lose him is painful and heartbreaking. Our thoughts and prayers are with Andy.

January Q & A

2008-01-04T17:40:00.000Z

Q. How do I know the VAT number on my supplier's invoice is genuine?

A. It's a good idea to check any VAT number you have doubts about, as you can't reclaim the VAT charged if the VAT registration is invalid. The quickest way to do this is to ring the VAT helpline on 0845 010 9000. The VAT officer will tell you if the VAT number and address details you read out match theirs. If they don't match, they won't tell you the details they have on file, but then you know you have a problem, so go back to your supplier.

Q. What will I gain by sending in my monthly CIS return online?

A. Your CIS return needs to be with the Taxman by 19th of every month, even if you have no payments to report. If you submit the return online you don't have to allow for the time a letter takes in the post. The online service is available 24 hours a day, so you can do your return at any time it suits you. You gain peace of mind knowing your return has arrived safely as you get an instant acknowledgement with an online return. As long as you receive this acknowledgement by midnight on 19th of the month you can also be sure you won't get fined for submitting a late return.

Q. I'm going to be a bit short of money for the self-assessment payment due on 31st January and was wondering what the Taxman would do if I paid another creditor I have instead of the Taxman?

A. If you don't pay your income tax bill by 31 January 2008 you will have to pay interest at 8.5% on the unpaid balance. Also if you delay paying beyond 28 February 2008 you will have to pay a surcharge of 5% on the outstanding tax due for 2006/07, which will also carry interest at 8.5%. What's more the Taxman marks late payers as high risk cases. A high risk marker means you are more likely to get investigated and end up paying penalties for any tax errors you have made in the last six years. If you are really going to struggle to pay it is sensible to talk to them to arrange a payment plan.

See more in the Practice News on Horswills.com

New Fuel Rates

2008-01-04T15:47:00.001Z

Where you pay a mileage allowance to your company car drivers to compensate for the cost of fuel used on business journeys, those payments can be paid tax free if they fall within certain limits. These limits are called advisory fuel rates and are set by HMRC every few months.

Please click HERE for a table of the rates from 1 January 2008

Protect Yourself Against ID Theft

2008-01-04T15:44:00.000Z

It's a huge scandal that HMRC have lost a copy of the database containing the personal details, including bank account numbers, of every family that claims child benefit. HMRC have written to all child benefit recipients to apologise, and say the lost discs containing the data are probably still in a Government office somewhere, but they can't be sure! This does not remove the very real risk that every individual named on those discs, including the partners of the claimants and their children could be the target for identity or bank fraud, now or at any time in the future.

If the missing data does fall into the hands of criminals they could use it to obtain loans, buy goods on credit, or set up bank accounts through which they could launder proceeds from criminal operations. You need to be constantly vigilant about odd bills arriving for items you haven't ordered, or confirmation of loans you haven't applied for. If your post suddenly goes missing this can be a sign that someone has applied to redirect your post for criminal aims.

It is unlikely that criminals could access the funds in your existing bank accounts without further information such as passwords or pin numbers. However as many people use a memorable date for a pin number, such as a child's birthday, it may be advisable to change the relevant pin number immediately. Also don't forget to check bank accounts held in the names of your children. The money in a child trust fund account can't be withdrawn until the child reaches 18, but from that date this security is removed.

As a matter of routine you should never dispose of bank or credit card statements in your normal household rubbish. In any case you need to keep all the documents used to complete your tax return for at least one year after the tax return filing date. So bank statements covering the year to 5 April 2007 must be kept until at least 31 January 2009. All business records, including receipts, need to be preserved for at least six years after the end of the year they refer to. When you do decide to have a clear out shred all your statements, including utility bills, before you throw them away. Shredded paper makes an excellent addition to the compost heap!

Never give personal details over the phone or to personal callers, even if they claim to be from your bank, water board or power company. If the transaction is important call them back on a telephone number you already know. It also goes without saying you should never open emails which are supposedly from your bank asking you to confirm security details. There is a particularly nasty scam doing the rounds at the moment in the form of an email apparently from Paypal confirming payment into your account. Be suspicious of all unexpected emails and never click on links embedded an email from someone you don't know.

[from our December newsletter]

STEP Comment on Conservatives' Plans

2007-10-02T13:02:00.000+01:00

The Society of Trust and Estate Practitioners (of which I'm a member) has this to say on the Conservative Party's plans re Inheritance and Non-domicile tax status

The Conservatives have announced plans to cut inheritance tax and tax resident non-domiciles. Tax cuts would be paid for by a £25,000 annual levy on non-domiciles - those individuals who live in this country but who do not pay tax on non-UK income unless they bring it into the UK.

John Riches Deputy Chair of STEP said: "The levy is a relatively simple way to tax non-domiciles without getting into the complexities of calculating their non-UK income. If implemented these proposals would still mean the UK had an attractive regime for those non-domiciled UK residents. But the key question is how the Government will react. If the Government does make changes they will likely recognise the contribution of the wealthy to the UK and the fact that many of these individuals are highly mobile."

Riches commented that if the Conservative proposals were made law then clients would likely react in two ways. "Those with a non-UK income of £62,500 or less may well consider bringing their money into the UK and pay 40% tax. Those with more than that amount would likely opt to pay the levy. An important issue would be to ensure the proposals did not lead to double tax, especially for US citizens who are taxed on a worldwide basis regardless of residence."

Keith Johnston, Director of Policy at STEP said "In order to be confident that this would raise enough tax the Conservatives key assumption appears to be that 150,000 non-domiciles have non-UK investment income of £1.5 million or more. It is very difficult to make any objective assessment of that assumption since non-UK investments are not declared."

Conservative Treasury spokesman George Osborne told BBC radio he would cut, but not abolish, inheritance tax for the majority of families. On Inheritance tax Riches said "The Conservatives have abandoned attempts to abolish IHT, but instead will reform it by increasing the thresholds and other exemptions."

Note from Sharon - what this Press Release actually said was "STEP comment on conservative plans" which is not the same thing at all and is worthy of a post in my "To Boldly Write" blog when time allows.

Lower those bills!

2007-09-14T13:56:00.000+01:00

Finally the pain is over. For years I've stared at clients' gas, electricity and 'phone bills - and my own, for that matter - amd lamented how much money is being spent. Plus the bills are usually all over the place and at least one from each category is missing!

I'm now an independent distributor for Utility Warehouse. This is a really valuable addition to Horswills services. You can get ALL your utilities on one convenient itemised monthly bill AND save money. Many households save £400 - £500 a year.

Please see our website for details.

You can also get an 0800 number for your business for only a few £s a month. Compare this with BT who not only make you jump through multiple hoops to get it but then make you have a long contract. There are no onerous contract obligations with Utility Warehouse. You can try the 0800 CallMe phone service for just a month if you want to. Customers are far more likely to ring a free phone number. This could really boost your business.

We'll be sending a letter with more details to all our clients shortly. In the meantime pease get in touch so that we can start saving you money.

Cracking Down On Buy-To-Let Landlords?

2007-09-07T13:41:00.000+01:00

There have been some alarmist newspaper articles recently claiming the Taxman is about to crack-down on thousands of buy-to-let landlords. This is not the case, at present he has bigger fish to fry chasing those with undeclared off-shore bank accounts, but that doesn’t mean that landlords are off the hook.

Some of the problems with buy-to-let landlords are...

Many don't complete their tax returns correctly, or at all. There are possibly 500,000 landlords letting residential property in the UK, but the Taxman knows only about 300,000 people who complete the land and property pages of their personal tax return to report income from a let property. If you let a property, even one that used to be your own home, you must report the rental income on your tax return. This applies whether or not you actually make a profit from the letting. The income and all tax deductible expenses have to be shown to tell the Taxman you have made a loss for the year. You can’t set that loss against your other income, unless the property is regularly let as furnished holiday accommodation, but you can carry the loss forward to off-set against future profits from a lettings business. If you don’t claim the loss you won't be able to use it in the future.

The other problem is that landlords make mistakes about what to deduct as expenses from the rents received. Valid expenses include the costs of running the property from day to day, such as a management agent's fees, repairs, advertising for tenants and insurance. Tax deductible expenses do not include the costs of acquiring the property, such as stamp duty, estate-agent's, or solicitor's fees. The interest you pay on any loans or mortgages connected with your lettings business is deductible, but not the repayment of the capital borrowed.

If you have a repayment mortgage you must be careful only to include the interest part of the monthly payments on your tax return. The lender should break down the total you pay over a year into interest and capital repayments, and show this on your annual mortgage statement. We can help you make the right claim on your tax return for all your letting expenses.

[From our July newsletter]

Longer Holidays for All

2007-09-02T02:20:00.000+01:00

Currently all workers are entitled to 4 weeks paid holiday a year, which amounts to 20 working days for those who work a 5 day week, including the eight bank holidays in the year. Many employers allow their staff to take bank holidays (or another day in lieu) in addition to their contractual leave entitlements, so their workers effectively get 28 paid days off per year. However, less generous employers will have to review their holiday arrangements following changes to be introduced this autumn.

From 1 October 2007 the statutory holiday entitlement will increase to 4.8 weeks (24 days), and from 1 April 2009 it will increase again to 5.6 weeks (28 days). So where an employer allows his workers to take 20 days plus bank holidays the change will have no effect, but workers who must currently count the bank holidays as part of their annual leave will gain extra paid holiday.

The additional holiday entitlement for each worker is calculated according to the amount of the holiday year left to run from 1 October 2007, and the number of days they normally work per week. Say your holiday year runs to 31 December, and your standard working week is 5 days. Each full-time worker will be entitled to 21 days paid holiday in 2007 and 24 days in 2008. We can help you calculate the extra holiday entitlement for part-time workers and those that join or leave part way through the year.

[From our September Newsletter]

Victory For Husband And Wife Companies

2007-08-31T02:34:00.001+01:00

The long-running tax case known as Arctic Systems has finally reached its conclusion with a decision by the House of Lords in favour of the taxpayer: Mr Jones. This means that Mr Jones will not have to pay higher rate tax on the dividends paid out of his company (Arctic Systems Ltd) to his wife. More importantly, thousands of other couples who set up their companies in a similar fashion to Mr and Mrs Jones should no longer be pursued by the Taxman for additional tax on their dividend income.

Mr Jones set up Arctic Systems in 1992 through which to offer his services as an IT contractor. He was the only director and held one of the two ordinary shares issued by the company. Mrs Jones purchased the other ordinary share from the company formation agents, and also became the company secretary.

They acted on advice from their accountant to take minimal salaries from the company, and pay out most of excess profits as dividends. As Mr and Mrs Jones held the shares equally, the dividends were paid to them equally and were mostly covered by their basic rate tax bands, meaning little higher rate tax was paid. If Mr Jones had paid himself a higher salary, or had been the only person receiving a dividend, he would have paid far more tax as much of his income would then have been taxed at the higher tax rate of 40%.

This type of arrangement has been standard tax planning for many husband and wife companies since the introduction of independent taxation for spouses in 1990. It was even recommended on the Business Link website! However, the Taxman decided to attack the arrangement, saying Mrs Jones only received her share, and the dividends paid on that share, because of Mr Jones work and the decisions he took as a director. The argument was that Mr Jones had effectively made a gift of half the earning capacity of the company to Mrs Jones, and because she is his spouse, the tax law says he automatically benefits from the gift, and thus Mr Jones should be taxed on all of the dividends.

The House of Lords actually agreed with the Taxman that the shareholdings in the company had been set up to minimise the tax paid by Mr and Mrs Jones. However, because the gift by Mr Jones had been made to his wife, and the gift was not restricted to the earning capacity of the company, but included future rights to capital on liquidation, and the voting rights associated with the ordinary share, there was a get-out clause. This get-out clause only applies to married couples and civil partnerships, and says that if you make a gift to your spouse/civil partner (which comprises more than just income), and there are no strings attached, you should not be taxed on the income arising from that gift.

Mr Jones had allowed Mrs Jones to buy half of the company (the other ordinary share) for a very small sum. This did amount to a gift, but the gift was covered by what is known as the "spouse exemption", so Mr Jones could not be taxed on the dividends arising from Mrs Jones’ share. The Taxman went away red-faced, and the taxpayer was victorious!

The Taxman is a bad loser, and after a big defeat like Arctic Systems it is quite likely the tax law will be changed. In fact the Treasury has already announced that they will be looking to change the law to prevent people splitting income between themselves in an unfair way. However, the Treasury spokesperson has also said that they do not want to disturb commercial arrangements.

What should you do now?

Don’t Panic. The House of Lords decision stands until the law is changed, and if any change is made it probably won’t come into effect until April 2008. Anyway you have little to worry about if you and your spouse/civil partner are both actively involved in running the business, in other words the ownership split of the business is a commercial arrangement.

Take Precautions. If you and your spouse/civil partner own all the shares in your limited company, examples of precautions to take to help ensure that your arrangements are water tight and commercial include...

You should both be appointed as directors of the company. This means you are both responsible for the running of the company so collectively make important decisions, such as how much dividend to pay, or which contracts to take on. Record all these decisions so you can prove to the Taxman that you are both actively involved in the key business decisions.

Make sure you and your spouse/civil partner both hold ordinary shares in the company whose rights are not restricted in any way.

Follow the correct procedure when paying dividends to ensure they can't be reclassified as loans. The directors need to check there are enough profits in the company to pay the dividend, suggest an amount to pay, then the shareholders can vote on whether to pay it out. Dividend vouchers should be prepared and given to the shareholders when the dividend is paid.

Discuss with us. If you want to bring your spouse/civil partner into the business as a shareholder, so you can divide profits between you, come and discuss the matter with us first. However we recommend you should think through the following points...

Will giving away some of the dividend income actually save tax? If your spouse/ civil partner already has enough income to cover most of their basic rate tax band, there is unlikely to be much tax saving.

Think about what may happen to the business should you divorce or separate.

[from our Horswills August Newsletter]