“From you have I been absent in the Spring” Shakespeare, in Sonnet 98, couldn’t have been referring to his copy of the Square Circular because Spring 2008 Issue 21 is now here and on our website.
The 2008 Budget and the outcome of proposals we have trailed in the last two Square Circulars are the focus this time but in addition there are some points to do with motor cars, payrolling benefits, Spanish properties and one or two matters which we hope will be of interest. If you want any further details about any of the matters we’ve mentioned in this Issue, or indeed, about any matters we haven’t mentioned please do contact us on 0161 832 4841.
The well publicised sub prime issue and ‘credit crunch’ could have a knock-on effect by way of changing the attitudes of banks and mortgage lenders who are tightening credit conditions and raising interest rates. If you are considering raising new finance or want to discuss your borrowings generally, please contact Adrian Berg or any of the partners.
THE GAINS IN SPAIN STAY MAINLY…..
Did you sell a property in Spain between May 2004 and December 2006? Did you pay the Spanish non-residents’ tax rate of 35% on any gain on disposal? Did you know you could be in for a tax refund?
A change in the law at the start of 2007 saw the Spanish standard capital gains tax for non-residents being brought into line with the rules for Spanish nationals who pay a flat rate tax of 15% on capital gains. The European Commission has ruled that Spain contravened EU legislation by charging non-residents 20% more. Hence, the refund entitlement.
Unfortunately, it’s not the kind of situation where you apply for your refund today and get it tomorrow. It could take time but you do need to register your claim to avoid falling outside the four year registration period.
If you want more details contact our tax partner, Simon Topperman, who can tell you how to go about making a claim.
PAYROLLING BENEFITS….FORTHCOMING ATTRACTION?
Who enjoys completing forms P11D? Probably, nobody. Well, they may become a relic of the past. Good news? Not necessarily …..
HMRC issued a consultation document on 13 December 2007 raising the possibility of doing away with this hated benefits in kind reporting form and instead putting benefits through the payroll. This is in the name of simplification. There is also a proposal to abolish the antiquated £8,500 per annum threshold so as to include all, yes all, employees in the benefits net.
We have our doubts as to how simple this simplification will be. True, the forms won’t actually have to be filled out, sent to HMRC and copies given to employees at the end of the year. However, the real burden lies in identifying benefits and calculating them and rather than doing this as an annual exercise it would have to be done every time the payroll is done, monthly or even weekly. Moreover, the payroll process is fairly straightforward. The P11D process is far from simple and every time the payroll is prepared, say monthly, the employer would need to review all his expenditure for the month and decide whether it gives rise to any benefit to one or more individual employees and what the National Insurance liability is on the benefit.
HMRC obviously haven’t had sufficient time to think things through in time for this year but it may happen in the future. Perhaps we’re just boring accountants who’d rather deal with familiar problems rather than unfamiliar problems but experience has taught us that “simplification” usually just means “new complications”.
We shall wait and see.
AFTERMATH OF THE BUDGET
Since the pre-Budget Report it’s been a difficult few months for tax advisers so let’s have your sympathy. The Government has put forward proposals, gone back on some of them, put forward new proposals, changed them and have allowed relatively little time for the whole process. For example, the concept of CGT Entrepreneurs‘ Relief was produced “just like that”, to quote the late Tommy Cooper, only about six weeks before the actual 2008 Budget. A dithering or a listening Government, depending on your politics.
Square Circular Issues 19 and 20 last autumn and winter highlighted four areas where significant changes were proposed. Don’t worry if you no longer have a copy of these Issues. You can access them on our website. The topics discussed were:
• inter-spouse transfer of unused Inheritance Tax nil rate bands
• income shifting
• CGT reform
• residence and domicile issues.
Having brought these matters to your attention it’s only right to bring you up-to-date on developments but we promise not to go into too much detail. The Square Circular isn’t the place for that.
First, the good news. The Ih.T proposal went through pretty much as expected.
Next, the not so good news. The income shifting proposals have been put back for a year. However, don’t think they’ll go away forever. We expect new and, hopefully, more workable proposals in due course. We reckon it was simply a case of not having enough time to introduce sensible proposals to start from April 2008 so expect new rules in April 2009.
The CGT reforms are for the most part going ahead as planned so it will be either good or bad news depending on whether you’re a winner or loser. To ease the pain for some losers, we saw a last minute introduction of entrepreneurs’ relief which should allow an effective reduced rate of 10% CGT (rather than 18%) on the first £1 million of gains on the disposal of trading entities.
Finally, as regards the residence and domicile reforms the news is not as bad as it might have been. Various concessions, notably in the area of offshore trusts where the settlor/beneficiary is not domiciled in the UK, have been made to sweeten the medicine originally proposed.
Obviously, all we’ve given you here is a thumb-nail sketch. For more details, get in touch with your usual contact partner or our tax partner, Simon Topperman.
Changes in the rules affecting cars and particularly employer provided cars (let’s call them company cars for this purpose) always provoke a certain amount of interest.
The general theme for company cars and benefits in kind is that green equals good and anything the wrong colour equals bad – and it’s not the colour of the paintwork we’re talking about. Those driving cars with CO2 emissions below 120g/km see their benefit reduced from 15% to 10%. At the other end of the scale, all other company car drivers see their tax bills increase as a result of changes to the car scale table announced in 2006.
From April 2008 the fuel benefit multiplier has increased from £14,400 to £16,900 and this will have a knock-on effect of increasing the fuel benefit charge for most drivers but not those with the CO2 emissions below 120g/km who should see a reduction. In other words the company car may be making a comeback for those who are happy to drive a Peugeot 107, Toyota Aygo, Vauxhall Corsa or the like. As regards the employer paying for private fuel for such a car it’s difficult to give any hard and fast rules because much will depend on private mileage and petrol prices. As a very rough rule of thumb if a higher rate taxpayer drives much over 8,000 private miles per year, or a basic rate taxpayer over 4,000 miles, it’s probably worthwhile doing the sums. At the other end of the scale, as with the car benefit, being taxed on private fuel paid by the employer is likely to be the expensive option.
The approved mileage rate that can be recovered as expenses for the use of the employee’s own car remains 40p for the first 10,000 miles and 25p thereafter. Rising petrol costs and changes in road fund tax next year depending on whether your car has high or low emissions will also come into the equation. The 40p and 25p figures have been with us for some time now and, whether you’re a winner or loser, one advantage of leaving them undisturbed is certainty.
HOW SAFE IS YOUR DATA?
Clients over the last few years have donated their old computer equipment to schools and charitable organisations. Whilst this is no doubt most worthy, you must be certain that all data has been properly removed.
We are all aware of a number of high profile incidents of sensitive data being lost, particularly by Government departments. It is not however purely a problem for Government. Sensitive data can, in the wrong hands, be financially damaging. There are also environmental and Data Protection issues to consider.
The safe and ethical disposal of IT and communication equipment is an increasing problem for businesses. If you require assistance in this area please call us.
Apparently a letter from a taxpayer to a tax inspector read:
“Re your request for a form P45 for new employee. You already have it, and he is not leaving here but coming, so we haven’t got it.”