Points to Ponder!

Welcome to our 73^rd. newsletter issued in April 2011, 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 or you can find them on our website. To save paper, we shall no longer be carrying forward general items from month to month.

No, not the budget, our office move! It has all now happened and we are back under one roof – or at least for most of the time. The office can accommodate 7 desks but there are 8 of us. This means that Sue will be desk-sharing and on days there is no space in the office, she will work from home. We would like to welcome Steve who has joined us to help with admin and book-keeping and he will be in 3 days a week. Please can you make a mental note that all records to be collected are now at Gilders Road and as space is extremely limited, we would be grateful if you could collect them.

We are now producing our invoices through our book-keeping programme, TASBooks, so they are a similar format to our statements. We do hope this doesn’t confuse things.

For 2012/13 the personal allowance for those under 65 will be increased to £8,105, and there will be a reduction in the basic rate limit to £34,370. This is not the £10,000 pa tax free promised by ALL parties in the run up to the election.

Furnished holiday lettings - contact us for more information.

Non-domicile taxation – contact us for more details.

Approved mileage allowance payments

From 6 April 2011, the rate of approved mileage allowance payments for cars and vans will increase from 40 pence to 45 pence for the first 10,000 miles of business travel in a tax year. HMRC guidance will also be updated to permit an allowance for passenger payments currently in place for employees at a rate of 5 pence per passenger per mile to be extended to volunteers. It’s about time this was increased.

Employer-supported childcare (Child Care Vouchers)

The level of income tax relief available to higher rate and additional rate taxpayers will be restricted so that it matches the amount available to basic rate taxpayers. This will be achieved by reducing the monetary value of the income tax exemption for higher rate and additional rate taxpayers.

For those joining employer-supported childcare (ESC) schemes on or after 6 April 2011, the income tax exemption will be limited as follows:

· basic rate taxpayers, £55 per week;

· higher rate taxpayers, £28 per week; and

· additional rate taxpayers, £22 per week.

The change will apply only to individuals who join ESC schemes on or after 6 April 2011. Those who were members of ESC schemes prior to that date will be unaffected by the change.

In response to the Office of Tax Simplification’s proposals, the government has decided to retain IR35 but improve the way it is administered. Changes will aim to provide greater pre-transaction certainty, greater clarity through publishing guidance on the types of cases HMRC believe to be outside the scope of IR35, limit reviews to high-risk cases carried out by specialist teams and establish an IR35 forum to promote more effective engagement with interested parties.

The maximum amount of Annual Investment Allowance, which enables businesses to claim full tax relief on most plant and machinery expenditure in the year it is incurred, is to be reduced from £100,000 to £25,000. The decrease in the limit will apply from 1 April 2012 for businesses within the charge to corporation tax and 6 April 2012 for businesses within the charge to income tax. Transitional rules will apply to businesses that have a chargeable period that spans the operative date of the decrease.

The rate of writing-down allowance (WDA) on the main rate pool of plant and machinery expenditure is being reduced from 20% to 18%. The rate of WDA on the special rate pool of plant and machinery expenditure will be reduced from 10% to 8%. The provisions will have effect for chargeable periods ending on or after 1 April 2012 for corporation tax, and on or after 6 April 2012 for income tax. Businesses whose chargeable period spans the date of the change will have a hybrid rate for the whole of that transitional chargeable period, calculated on a pro-rata basis.

The government has announced the creation of 21 new Enterprise Zones – but not in the South.

The small profits rate of corporation tax will be reduced from 21% to 20% for the financial year beginning 1 April 2011 – this is confirmation of what the previous Government proposed.

The rate of inheritance tax will be reduced from 40% to 36% for deaths on or after 6 April 2012 where at least 10% of a deceased’s net estate is left to charity.

The government plans to introduce a Junior ISA, which is expected to be available from autumn 2011 for UK resident children aged under 18 who do not have a Child Trust Fund account and will be tax-relieved.

The government will require online VAT registration, deregistration and notification of changes with effect from 1 August 2012. The VAT registration threshold for businesses not established in the UK will also be removed from that date. The government will also require all remaining VAT customers to file their VAT returns online and pay electronically from 1 April 2012.

With effect from Royal Assent to Finance Act 2011, zero-rating will no longer apply to printed matter which is ancillary to a differently rated service where, if the service and printed matter had been supplied by a single company, the two supplies would have been treated as a single standard-rated, reduced-rated or exempt supply. This is an anti-avoidance measure to combat the splitting of an otherwise single supply into its component elements such that one or more of those elements may be zero-rated. This may hit clubs in particular where the subscriptions are allocated to the club magazine (zero rated paper supply) and the general fund (VAT-exempt).

The scale used to charge VAT on fuel used for private motoring in business cars will be amended from the start of the first VAT period beginning on or after 1 May 2011.

The small business rate relief holiday will be extended by one year from 1 October 2011.

The UK will implement the Mutual Assistance Recovery Directive agreed by EU Finance Ministers during 2010. Under this Directive, which covers all national taxes and duties, local taxes and motor taxes, EU member states can provide each other with assistance in the recovery of tax debts and duties, which includes service of documents and exchanging information in connection with the recovery of claims. So when you retire to the Spanish sun, remember to settle your tax bills first.

HMRC will allow plumbers and people in associated trades to declare their unpaid taxes for the past five years, signalling a change in HMRC policy concerning disclosure agreements. Unlike previous amnesties – such as the Tax Health Plan (THP) and Liechtenstein Disclosure Facility (LDF) – the Plumbers Tax Safe Plan (PTSP) is not based on information unearthed about plumbers' accounts and covers just a five rather than 10-year period. HMRC does not have specific information about plumbers' accounts and as such is using data obtained from the Gas Safe register (previously known as Corgi) to check installers. HMRC has stressed that it is only a minority in the trade who do not fully declare their taxes. If workers in other trades want to come forwards, they will of course be welcomed, but the same amnesty may not apply.

If you are paid out by an insurance company against a business asset, such as a vehicle or item of plant or, for a musician, loss of an instrument, be careful how you use the pay-out as it can become liable for Capital Gains Tax or at very least, a disposal balancing charge. If you reinvest the whole of the pay-out in a replacement asset of the same type, there is a no gain no loss situation. However if for instance, you lost a very valuable item and decided you didn’t want to risk the same thing happening again so would reinvest the pay-out in property, you will be liable for CGT. For very expensive assets, there are special arrangements if the insurers pay out for repairs but you don’t use all of the money for that purpose. Basically, a claim is made to reduce the initial base cost of the asset so that extra CGT is due when it is eventually sold. This all arose when a violinist had her Stradivarius stolen on a London station.

Plans are underway for a few interesting events, some of which will be free. They will be joint “ventures” with one of the London branches and the first will be the lunch on Friday 8^th April to meet Chris Grayling, MP and Minister for the Department of Work & Pensions at Bourne Hall, Epsom. Bookings have closed for the buffet but if you want to come to ask questions, that is free. Please check with Sue for details. On Wednesday 11^th May at 8am Ford’s at Chobham will be hosting a breakfast meeting – again all free. In mid-May the FSB is planning an evening meeting focusing on how Social Media can help small businesses and the basics of how it works. At some point, the Dubai Chamber of Commerce wants to host an evening buffet and drinks to make a presentation about work and trade opportunities they can offer. This is open to anyone who has an interest in trading with them or opening a business in Dubai. Places will be limited to 50 and it is also open to other organisations. We shall keep you updated via our website or call Sue for updates.

For the third year running, HMRC is making mistakes on codes issued to new pensioners, omitting their state pension. This is resulting in demands going out to somewhere over 150,000 people. When this was discovered before, the demands were waived as so much time had passed, but HMRC says that as this has been discovered “in year”, the pensioners will have to pay up. However, they are being given three years in which to do so. We wonder if the opposite error is likely to happen to women drawing a private pension at 60 but not entitled to the state pension until a later birthday – Sue will be checking her code shortly very carefully.

Despite HMRC announcing that they would report on the outcome of the Business Records Check consultation on 31 March, the first letters are already being issued by HMRC, trying to arrange a meeting to carry out a Business Records Check (BRC). The consultation stated that the BRC programme would start in Autumn of this year with 50,000 Checks per year being carried out. However, letters dated 21 March 2011 have been sent out which clearly relate to the BRC programme.

A source at one HMRC office has admitted that there are 4-5 offices issuing the letters, including Blackburn and Plymouth, and that taxpayers from specific geographical locations are being targeted. Areas mentioned initially include Sheffield, Oxford, Swindon, Stockport and Scotland. Based on the information received, it is estimated that at least 1,500 letters could have been issued.

A big edition this month but it is a busy time – so here’s one last request – please can we have your records much, much earlier this year.