Although we’re still in the depths of winter we’ve already had the first sign of spring. A date has been set for the Budget (23 March) and we’ve already had some draft legislation for the Finance Bill published. That’s more a sign of spring than the first cuckoo!
In this Square Circular we give you an outline of some of the upcoming tax measures which we think are more relevant to you. And in case you find it boring to read about tax, we’ve included a quiz, just to cheer you up.
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.
Pareto Alexander, for a start. You may have already heard about our new financial services arm. Some have already been fortunate to meet Paul Stones. Paul provides financial planning solutions for individuals and business including tax, protection, pension and investment planning and is a valuable addition to our team. Call any of our partners if you’d like us to arrange a “no obligation” meeting for you with Paul.
SOME PIECES OF INFORMATION
You probably know by now that the Square Circular likes to concentrate on just a few topics each issue rather than just reeling off loads of information. However, with draft legislation for what will be 2011’s Bill recently published, we’ve selected from the lengthy legislation and mention below just a few of the less technical points which we think will be of greater interest:
• the corporation tax rate on profits over £1.5m will be cut each year until it gets down to 24%;
• the rate of corporation tax on profits below £300k will be cut from 21% to 20%;
• from April 2012 there will be changes to capital allowances which will see a reduction in the amount of annual investment allowance and in the rates of writing down allowance;
• from April 2011 there will be clarification of the rules relating to associated companies as they apply to the small profits rate of corporation tax;
• there are a number of anti-avoidance measures including legislation to counter “disguised remuneration”;
• there will be measures to modernise HMRC’s information powers;
• HMRC will be enabled to require a security from employers for PAYE that is seriously at risk. Non-payment of a security will be a criminal offence;
• the annual allowance for pensions tax relief will reduce from £255k to £50k and the lifetime allowance will reduce from £1.8m to £1.5m;
• there will be changes removing the effective requirement to annuitise pensions by age 75;
• for furnished holiday lettings there will be increases in the qualifying number of days requirement and restrictions in the use of losses;
• there will be a crack down on abuse of charity tax reliefs;
• PAYE real time information will be introduced from 2012.
RELEVANT LIFE POLICIES
Did you know that a company can pay life assurance premiums for a director (or employee) and get a corporation tax deduction for it without it being classed as an employee benefit in kind? You do this by using a Relevant Life Policy.
We’re probably not talking about huge savings in absolute terms but in % terms we are. For example, if a 21% tax rate company pays a £200 monthly premium for a 40% income tax paying employee the cost after tax relief would be £158. If the company were to provide a salary sufficient, after tax and NI, for the individual to pay the premiums himself the cost works out at around £302.
Don’t most of us take out life cover at some stage of our life? So, why not do it tax efficiently? If you’re interested, get in touch and we’ll tell you how to go about it.
BEAT ALL RECORDS
Did you read in the press about HMRC’s consultation document, Business Records Checks, published on 17 December? It may only be a consultation at this stage but it does look likely to happen.
Beginning in the second half of 2011 they intend to visit 50,000 small businesses, annually, to make sure that the records are up to scratch. They won’t turn up unannounced; they’ll give you at least 7 days notice that they’re coming. Businesses in the firing line will be those that have, to use the words of the Consultation Document, “features associated with poor record keeping” although there will also be some random selection. The stated purpose of the exercise is not to turn the nation’s traders into accounting and tax experts overnight. You can still leave your records for us to sort out and present in a proper set of accounts. The purpose is to make sure that those records reliably include all your income and all your expenditure.
By now, you’re probably quite impressed with HMRC’s altruistic desire to improve the accuracy of your records. However, there is a catch. For some reason the word “penalty” does crop up more than once. In fact, quite a chunk of the Consultation Document considers how the penalty structure can encourage those whose records fall below par. Nicely put.
There is also a bit that says “those businesses with tax agents may want to discuss their record keeping with their agents, and agents may want to alert clients individually to these changes”.
PIT YOUR WITS
Here’s a short quiz to test your nous in financial and fiscal matters. Answer the following questions and award yourself NIL for every (a), NIL for every (b) and 5 points for every (c). Oops, shouldn’t have told you how to score until the end.
1. Your feeling of elation at winning £68 million on the Lottery is tempered only by the subsequent realisation that you might have Inheritance Tax problems. Do you:
(a) Decide never to die.
(b) Spend as much of it as you can. That’s fun!
(c) Call us on 0161 832 4841 to ask about Inheritance Tax planning.
2. You read in a Square Circular that you can carry forward the unused part of your new £50,000 annual pension allowance as long as you were a member of a registered pension scheme in the previous tax year but then realise that you have made no previous pension provision whatsoever. Do you:
(a) Decide never to get old.
(b) Lift up your mattress to check whether your pension provision is adequate.
(c) Call us on 0161 832 4841 for a chat about pensions.
3. With 3 months still to go to the year end the FD of your company tells you that you’re on course for £1m profits. Do you:
(a) Dismiss the FD. His figures can’t be right.
(b) Give yourself a £1m bonus and pay tax (@ 50%) and N.I. on it.
(c) Call us on 0161 832 4841 to see if there is a tax efficient strategy to extract the funds.
4. A friend advises you to invest in an ISA or EIS or VCT before 5 April. Do you:
(a) Assume he’s an Esperanto enthusiast.
(b) Reach for your dictionary of abbreviations.
(c) Call us on 0161 832 4841 to find out what he’s talking about.
5. A friend (yes another, you have 2 friends) tells you that a spouse can be useful for income tax, capital gains tax and inheritance tax purposes. Do you:
(a) Advertise for a tax partner in the Encounter Dating pages of the Times.
(b) Advertise for any partner in the Metro.
(c) Call us on 0161 832 4841 about tax planning advice.
6. The date is 20 January. 11 days left to the personal tax return filing deadline and you realise that you haven’t responded to our requests for information to complete your return. Do you:
(a) Destroy your diary/calendar. It must be wrong.
(b) Start dreaming up your reasonable excuse for it being late.
(c) Call us on 0161 832 4841 in a panic hoping that we can get you sorted in time. (If you score 5 for choosing this option, knock off 3 for waiting until the last minute).
7. You read in a Square Circular that whilst you can no longer do bed and breakfasting for CGT purposes you can do bed and spousing or bed and ISAing. Do you:
(a) Book a double room in a hotel but no breakfast.
(b) Book a single room for your spouse with a breakfast.
(c) Call us on 0161 832 4841 to find out what it’s all about.
8. You read in a Square Circular that there are still benefits in kind which are tax free and that your current arrangements regarding provision of cars, cell phone and other benefits could be better organised. Do you:
(a) Ignore it. It can’t be true.
(b) Call the Benefits Agency.
(c) Call us on 0161 832 4841 for a PAYE/Benefits health check.
The maximum score you can get is 40. If you’ve scored 5 or more you’ve won one of our special prizes which is a telephone chat with one of our partners about any of these financial or tax issues. And if you’ve scored less than 5 you can still take a consolation prize which, yes, is a telephone chat with one of our partners. Please feel free to call us and tell us your score.
“Death and taxes are inevitable; at least death doesn’t get worse every year.”