May 2008

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Points to Ponder

 

Welcome to our thirty ninth newsletter – produced during May 2008 and issued in June 2008,
to keep you up to date with some of the changes in Income tax, National
Insurance and VAT along with compliance regulations for businesses,
plus other oddments that have caught our eye. If you would like a copy
of any past newsletters, please call and we can either send or e-mail
them to you.

 

 

 

1. First Aid at Work

 

All businesses must have first aid cover. The extent of the cover
required depends on the number of employees and details can be found on
the Health and Safety Executive’s website at www.hse.gov.uk/firstaid/index.htm or call 0845 345 0055 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

 

 

2. Scams

 

There are more and more scams, many now coming via e-mails. If you
are suffering from these, report them to the Information Commissioner’s
Office at www.ico.gov.uk.

 

 

 

From previous newsletters:-

Several points have now emerged from the Budget – all of which allow for extra penalties!

 

1. Earlier non-on-line Self Assessment filing date. This has now officially been brought forward to 31^st October. Currently the on-line filing date has stayed at 31^st January, but this may be altered next year.

 

 

 

2. Proposal to make record keeping standards statutory -
in other words, if your records don’t meet the proposed new legal
requirements, you will have committed a criminal offence! I have
underlined that the legislation is only a proposal at the moment, but
would be expected to become law within this Parliament’s term. The
Revenue has issued guideline requirements and they are very
comprehensive.

 

 

 

3. Increased Revenue powers to obtain information. Customs and
Excise officers have always had powers of entry without a prior
appointment, now the Inland Revenue wants the same as they have
combined. Some increase in powers has been granted with this Budget but
only in cases where HMRC can convince a senior officer that if advance
warning were given, the trader would be able to conceal evidence.

 

 

 

These points come back to what we have been asking all clients to do – HELP US TO HELP YOU BY KEEPING RECORDS AND TELL US EVERYTHING.
We are not suggesting that you invest in complicated computer
programmes – just keep all your paperwork and we can complete the rest
but we can only help you comply with the new laws if you let us have all
the relevant information.

 

 

 

CIS Certificate withdrawals

 

The Revenue has started its review of gross certificates for
sub-contractors and is withdrawing them when tax payments and returns
have not been kept up to date. There is not much scope to appeal and
reapplication can only be made after a year of keeping all payments up
to date. This can cause severe financial difficulties if a
sub-contracting business loses its gross status but in turn uses
sub-contractors who are entitled to be paid gross.

 

 

 

Loss of the 10% tax band.

 

 

Capital Gains Tax

 

For those planning to use taper relief on business assets held ready
to sell on retirement, the pre-Budget report was a nasty shock. By the
time he delivered the Budget proper, he had done a partial U-turn and
introduced Entrepreneur’s relief, effectively allowing a rate of 10% on
business assets that had been in use by the business for at least a
year.

 

 

 

Corporation Tax

 

The Chancellor is increasing this to 22% over the next couple of
years, effectively making it higher than the basic rate of income tax,
which is reduced to 20%.

 

 

 

Capital Allowances

 

These are more easily understood as depreciation allowances and have
varied on the types of items bought. Computers have for some time
attracted the best allowances while cars over £12,000 have been (and
still will be) restricted. From 1^st April 2008 for companies and 6^th
April 2008 for sole traders and partnerships, up to £50,000 of capital
assets will be given 100% tax relief in the year of purchase, but
anything over that will be restricted to 20% of the reducing balance
annually afterwards.

 

 

 

VAT Registration Level

 

This has been increased to £67,000 in any rolling 12 months.

 

 

 

Income Shifting Regulations

 

Now is the time to review “family” arrangements in respect of
business shares. If you have given shares to other members of your
family to maximise tax advantages, the new legislation is aimed at
stopping this. Shares need to be held in the ratio of work carried out
for the company or on the basis of who generates how much income.

 

 

 

CIS Fines

 

As expected, HMRC have not got everything working properly with the
scheme. It appears that the Government’s computer system can’t cope with
continuing nil returns. The on-line submissions allow for returns to
show that no subcontractors are expected to be used for the next six
months. This should allow the contractor to be “excused” making returns.
The computer doesn’t know this and is happily issuing monthly fines.
Dealing with this takes time but does result in a short letter stating
that the penalty has been waived but doesn’t say sorry for the error.

 

 

 

Excessive Bank Charges

 

The delayed decision is expected soon on the legality of bank overdraft fees.

 

 

 

Offshore accounts

 

The saga continues this week as the Revenue is sending follow-up
letters to account holders who didn’t respond to the first letter. They
will impose the maximum penalties allowed under the law.

 

 

 

Property Owners Beware! (Speak to Sue)

 

Last month, HMRC sent out 500 letters to property owners who they
believe are not declaring income from lettings. As failure to declare
income is fraud, the Revenue can go back at least 20 years in making
assessments.

 

 

 

Illegal Working Fines (Speak to Sue)

 

From 29^th February 2008, new measures have come in to
force that were set out in the Immigration, Asylum and Nationality Act
2006. These measures include a fine of up to £10,000 per illegal worker
for employers who employ illegal migrant workers and a maximum two-year
prison sentence and / or an unlimited fine for employers who knowingly
employ illegal migrant workers.

 

 

 

Increase in SSP, SMP etc. (Speak to Sue)

 

From 6^th April 2008, statutory sick pay will go up to
£75.40 per week. Statutory maternity, paternity and adoption pay will
also increase to £117.18 per week.

 

 

Lower VAT Rate on renovations (Speak to Sue)

 

From 1^st January 2008, renovations and alterations to
residential properties that have been empty for at least 2 years will be
eligible for the reduced VAT rate of 5%.

 

 

Offshore account disclosures. (Speak to Sue)

 

HMRC has given notice that a further 175 banks have been targeted but
may extend their disclosure scheme with reduced penalties but only to
account holders who haven’t received a letter from their bank. If you
have an offshore account, please make sure we know about it.

 

 

Rent-a-room

 

Don’t forget this useful tax-free source of income.

 

 

Increase in the right to paid holidays.

 

With effect from 1^st October 2007, the entitlement is going to increase to 4.8 weeks or 24 days for a full-timer and then on 1^st April 2009, increases again to 5.6 weeks or 28 days for a full-timer. These days include bank holidays and will be pro-rata’d for part-timers.

 

 

 

National Minimum Wage

 

These have all increased and are due to increase again in October.
The rate for adult workers goes up to £5.73 per hour, for 18 – 21 year
olds it will be £4.77 and for 15 – 17 year olds, £3.53