Yes, we know – it’s ages since you’ve seen a Square Circular. Doesn’t absence make the heart grow fonder? Your heart may get fonder still if we tell you that this is the last Square Circular – in its present format. More of that later.
In the meantime, there’s the usual useful mix of tax tips including a reminder of some of the points in the annual Tax Planning Tips booklet we sent out in late July.
SQUARING THE CIRCLE
First, a great big thank you to everyone who faxed back the questionnaire attached to our previous Issue. The formal feedback put together with the ongoing less formal feedback we get from you is very important in deciding how to develop the Square Circular.
What delighted us above all was your positive attitude. We get the impression that when the Square Circular is drawn out of the envelope it is actually read rather than just being discarded as often happens to such publications. Even if the Square Circular is not relevant to all the people all the time at least it is reader-friendly.
As to the future, you can expect the Square Circular to cover a variety of topics (not just tax) with a different style of presentation. As and when we want to bring specific relevant tax tips to your attention we will do so on a Square Circular bulletin basis.
TAX PLANNING TIPS FOR 2003/04
Hopefully, you had the booklet in July. If not, please do let us know. It’s a long read; ideal for an August beach holiday! The trouble is, if you read it from cover to cover you might have to read a number of things which may not be relevant to you while if you don’t you might miss some useful information.
Whilst we believe the “shading” device in our booklet highlights important points we want to focus attention further on a series of one line messages which you can take from the booklet. There should be something relevant to everyone.
1) Keep your Tax Returns up to date.
2) Don’t ignore tax credits.
3) Provision of cars and car fuel by a company may need review.
4) Make your charitable gifts in a tax efficient way.
5) Business asset taper relief on rented properties.
6) Hold over capital gains into EIS company shares
7) If you have more than one residence don’t forget an election.
8) Make/review your will.
9) Check adequacy of life assurance, pension, critical illness cover etc.
10) Pension reform.
11) Employee share ownership.
12) Husband and wife settlement legislation.
If any of these topics ring alarm bells (problems or opportunities) contact us on 0161 832 4841 for help.
FURNISHED HOLIDAY LETTINGS – AGAIN
Did you read in a Sunday newspaper a couple of months ago that the partners in an international firm of accountants who made a capital gain some time ago on the sale of their consultancy arm have been scouring the highways and byways of the West Country in search of holiday homes which they can buy and then rent out as holiday accommodation.
Apparently, they were just about at the end of the three year period allowing them to roll over their gain into some other “business” asset and, very patriotically, they all wanted to do their bit for the UK tourist industry.
Of course, Square Circular told you about the beauty of those cosy holiday cottages (and their tax breaks) ages ago! The tax advantages associated with UK furnished holiday lettings seem to just continue to withstand the ravages of time while other tax breaks come and go.
NATIONAL INSURANCE INCREASE
In our last Issue we warned you about what was then a forthcoming attraction for April 2003 – the rise in National Insurance Contributions. We invited you to call us (0161 832 4841) to discuss ways of mitigating the extra burden.
There are a few ideas about, but one of the favourites is pension contributions. If, at pay rise time, the employee opts to have part of his potential salary increase put directly into an approved pension scheme by the employer both employer and employee will escape NI contributions. True, a 30 year old employee might not appreciate his salary increase right now, but he will do in 30 year’s time.
When the give-away 100% first year allowance for a small firm’s expenditure on Information and Communications Technology equipment ended last March what did the taxman do but extend his beneficence for another year.
You might not think this is “big time” but if a sole trader basic rate taxpayer is also going to save National Insurance Contributions and receive enhanced Tax Credits the benefits of the Inland Revenue’s “special offer” become rather more significant.
AND HERE’S ONE FOR THE BIG BOYS
100% first year allowances are available for a range of environmentally-friendly equipment and you don’t have to be a small firm to qualify. It covers:
– energy saving;
– cars with low CO2 emissions;
– water saving.
Details of what qualifies as “green technology” are available on the Government website www.eca.gov.uk. It’s not all advanced technology. It can cover everyday items as long as it’s “green” and energy efficient. Perhaps you should call us – or the Government website – before your business incurs its next bout of capital expenditure.
Square Circular has mentioned these schemes on a couple of occasions with a “proceed with caution” health warning. The schemes were designed to reduce inheritance tax on the family home using a trust arrangement that utilised the spouse exemption without falling foul of the gift with reservation of benefit provisions.
If you didn’t do one of these schemes don’t worry about the technicalities because the Revenue put the block on them as from 20 June 2003. What’s more, people who think they slipped under the barrier just before it came down by setting up these schemes before June can’t yet count their chickens. The Revenue challenge to pre 20 June schemes is probably but not necessarily completely dead.
There are other schemes available using trusts which have a similar objective. At this stage, we can’t tell you how successful they will be and the message remains “proceed with caution”. If you do want to know more call Simon Topperman or your usual contact partner on 0161 832 4841.
Rising house prices have been drawing more and more people into the inheritance tax net. Rather than promoting “maybe yes maybe no schemes” we think it far more important to plan a long term inheritance tax strategy with subsequent reviews from time to time.