“Now is the winter of our discontent
Made glorious summer by the sun of York”
All too often people quote just the first line of Shakespeare’s play, Richard III, and think it gives a miserable message. Read the second line and, well, perhaps not. Incidentally, the sun of York is a reference to King Richard, not the Yorkshire weather.
We suppose tax is a bit like that; many miserable messages but mixed with the sunshine of opportunity. Hopefully the matters mentioned in this Square Circular will get you seeking the sun rather than feeling the discontent.
If you want more details about any of the matters we’ve mentioned in this Issue, or indeed, about any of the matters we haven’t mentioned please do contact us on 0161 832 4841.
You’ve heard of the Offshore Disclosure Facility (ODF) and the New Disclosure Opportunity (NDO) and the Liechtenstein Disclosure Facility (LDF).
Next we’re getting the “Tax Health Plan” aimed at medical professionals encouraging them to own up if they’ve understated income and it doesn’t agree with information which HMRC have collated from NHS Trusts, private hospitals and clinics, etc. If you’re a medic and you want to know more about the THP, get in touch now.
It has been suggested that the THP is just the start of disclosure facilities for the professions. Perhaps next will be lawyers or surveyors or architects or – whisper it not – accountants. After ODF and NDO and LDF and THP perhaps we should offer a prize to whoever can guess which acronym HMRC will pick next.
PRE-BUDGET REPORT (PBR)
Are we glad we didn’t rush into print last November with our PBR prediction! All those predicting anything dramatic were comprehensively wrong. Unless you’re a bank or bonus earning employee of one, there seems little immediate impact. Or, perhaps the “do nothing” theme does itself have an impact. We’ll explain later in this Square Circular what we mean by that.
We don’t intend to repeat all the bits of news in the PBR. The main items of general (as opposed to specific) interest are the deferral of the increase in the small companies’ rate of tax from 21% to 22% by a year to April 2011, extra increases in National Insurance contributions from April 2011 for employers, employees and the self employed and further forestalling restrictions as regards the pensions of high earners.
If you feel you may be missing out on any of the details, please feel free to give us a call.
JUST A REMINDER
Higher tax rates and personal allowances restrictions will be introduced in April 2010. Some had predicted that the Pre-Budget Report would contain specific measures to prevent acceleration of income before 6 April 2010 to escape higher tax rates. It didn’t.
Given that Alistair Darling has indicated that the 50% rate of income tax is here to stay for the life of the next Parliament this may be your last opportunity for a good while to do whatever may be necessary to reduce the future impact of a 50% tax rate.
Apparently, this is the tax that people are most likely to detest but least likely to take action to mitigate its impact. Having paid a fair share of income tax along the road some see it as double taxation on what you have left over for yourself and have accumulated. On the other hand a tax which is paid not by you but by your heirs after your death is not seen as imminent – or, at least, you hope it isn’t imminent – and who knows what the Ih.T. rules may be by the time you reach the pearly gates.
In the Pre-Budget Report the nil rate band of Ih.T. which was due to increase to £350,000 for 2010/11 was frozen at its 2009/10 level of £325,000 which perhaps is not unreasonable if the value of the average estate has fallen over the last couple of years. However, it does send a signal that when the good times return, generosity in the field of Ih.T. will not be a priority of any future Labour government. And whilst the Tories have suggested that they might be more generous when it comes to Ih.T. we really can not see it being a priority at the start of a 5 year term of government. If the current Ih.T. regime is to be with us for another few years perhaps it would be unwise to delay planning.
The essentials of Ih.T. mitigation have been succinctly expressed as
– a tax efficient Will
– lifetime giving
– transactions which remove value from the donor’s estate
– holding tax favoured assets such as those qualifying for Business Property Relief.
In addition to the more traditional mitigation strategies designed for those with a few years to spare there are also shorter term strategies known by the unfortunate name of “deathbed planning” for those who have left matters rather late and outlines of such schemes cross our tax partner’s desk at fairly regular intervals.
A former Chancellor of the Exchequer once famously described death taxes as a tax paid by people who dislike their relatives more than they dislike the Inland Revenue. It is true that huge savings can be made from seemingly minor points such as the way insurance policies are written or the type of assets on which loans are secured. The secret of good Ih.T. planning is regular review say every few years and the potential tax savings can cover the professional costs of such a review many times over in suitable circumstances.
If your estate is worth over £325,000 (married couples, jointly over £650,000) and you’ve let your attention stray from the uncomfortable subject of Ih.T. why not contact us even if it’s only to have the comfort of knowing that you’ve taken all appropriate action for the time being.
JUST A REMINDER
Online filing of VAT returns for businesses with an annual turnover in excess of £100,000 and for all newly registered businesses starts in April. If this is something for you to worry about then worry about it now when you’re filing your last paper return rather than worrying about it when you have to file your first online return.
THE LONG AND SHORT OF IT
Did you know that you can delay payment of tax by making your accounting period longer? And did you know that you can do the same by making your accounting period shorter? How can both statements be true?
Well, as with many things in life it all depends on the circumstances. If you’re a company and you’ve enjoyed a reasonably fruitful year but that’s been followed by a miserable few months give us a call. You may be able to take action which will be to your company’s advantage if you can extend your accounting period for those extra few months.
If you’re a sole trader or partnership (traditional or LLP), your normal accounting date is early in the tax year (30th April is always popular) and profits are on a downward slide give us a call. Shortening an accounting period may help you.
JUST A REMINDER
The tax haven known as Furnished Holiday Lettings closes on 5 April 2010 when it loses its special status for many aspects of income tax and capital gains tax. If you need to take action before 5 April, don’t wait until 4 April to ask our advice. Ask us now.
RETURN OF THE COMPANY CAR?
From 2010/11 through to 2014/15 employees and directors provided with a certain type of company car will pay no tax on the benefit; nor will there be any Class 1A NI contributions on the taxable benefit. There’s just one drawback. The car has to be electric powered.
Although the range of electric cars available in the UK is growing all the time, it is difficult to see the company car tax perk making a dramatic comeback. Electric cars currently have a limited mileage range and would not be suitable for those who have to drive long distances for business purposes.
We’re not sure whether the tax perks will actually signal a comeback for the company car. The models you can get at present are hardly a status symbol car. But as a “run around” second family car which doesn’t have to cover more than 100 miles or so at a time ……. well, you never know.
JUST A REMINDER
From 6 April the trust income tax rate will increase from 40% to 50%. This might affect decisions about when it’s best to make discretionary distributions of income, how to maximise income before the tax rate increases and what kind of investments to make after April. If you’re a trustee of a trust, call us to chat about it.
MORE THAN JUST A REMINDER
31st January. We all know the significance of that date. If you’re reading this before
31 January and still haven’t attended to your personal tax return it’s time for action. And if you’re reading this after 31 January and you’ve ignored our reminders don’t shrug your shoulders in resignation. There are still important reasons why you need to sort out your tax liabilities before the end of February.
“The art of taxation is to pluck the maximum number of feathers from
the goose with the minimum amount of hissing”
(Jean Baptiste Colbert, finance minister of Louis XIV of France)