Autumn – “season of mists and mellow fruitfulness”. The season of mellow fruitfulness seems an appropriate time to mention the age discrimination in employment regulations effective from 1 October 2006.
Early autumn is also a time for picking whatever blackberries are left on the bushes after summer so we’ve got something to tell you about tax on blackberries as well as one or two other tax issues you might want to consider. If you want any further details about any of the tax or financial matters we’ve mentioned in this issue, or indeed, about any matters we haven’t mentioned please do contact us.
Welcome to new members of staff, Kate Sloane and Adrian Phillips, in our audit department. Coincidentally, both are graduates of Durham University.
Welcome, as well, to Matthew Santry in our payroll department. Matthew is with us temporarily while Jenny is on maternity leave. Jenny certainly deserves some time off after giving birth on 15 September to a boy weighing 9lbs!
DON’T CALL US “WRINKLIES”
1st October 2006 – a date to remember if you feel strongly about age discrimination. That’s the date for new Regulations coming into force and if employers haven’t already done so it’s time (past the time!) to review employment documentation, practices and procedures to identify possible areas where changes may be required.
The main provisions of the Regulations are:
• prohibition of unjustified age discrimination in employment
• prohibition of harassment and victimisation on the grounds of age
• a default retirement age of 65. If your firm’s retirement age is below 65 you either
have to justify it or change it
• removal of the current upper age limit for unfair dismissal and redundancy rights
and changes in the way unfair dismissal awards and statutory redundancy pay is
• a requirement to inform employees in writing at least 6 months but not more than 12
months in advance of their intended retirement date
• removal of the age limits for SSP, SMP, SAP and SPP
• introduction of a new duty for employers to consider an employee’s request to
continue working beyond retirement age.
That last one is interesting isn’t it? You may have an employee who wants to go on and on …and on…
PICK A BLACKBERRY
You may remember that following the March 2006 Budget the tax free provision of a mobile phone was to be restricted to one per employee from 2006/07 onwards and that there was to be no exemption for mobile phones provided to a member of the employee’s family or household. We felt this almost amounted to discrimination against company directors with teenage daughters.
Now you may have thought that one of those fancy handheld machines called a ‘Blackberry’ (why are they called ‘blackberries’?) is something completely different from a simple phone. Not in HMRC’s eyes. If the company/employer provides both a phone and a blackberry it counts as two phones so watch out for that benefit in kind charge.
MEN AND MOTORS
Sorry if we’re talking too much this time about employment matters and benefits in kind but company cars are always of interest in any season. We talked about company cars before in Issues 2, 7 and 8. If you don’t treasure your hard copy of the Square Circular enough to file it and keep it for eternity you can still locate these Square Circulars on our website.
We’ve been quiet for a while now about company cars. Don’t worry – we’re not going to bore you with all the details again. A few years ago when the system changed it was news. Now it’s history. But, we thought it may be useful to remind you of a few rules of thumb when it comes to vexed questions such as whether to have a company car or not, and who should pay for petrol? However, it must first be said that rules of thumb can be misleading and full facts and calculations are the best basis on which to make any decision.
The CO2 emissions basis of the charge hasn’t changed over the years. The Chancellor gets a bit more tax out of us by juggling around with the rates. For example, from April 2008 the 15% rate for petrol (18% for diesel) cars will apply to cars with emissions of less than 140g/km as opposed to the current level of 145 although, in fairness, a new 10% benefit rate will also be introduced for cars below the level of 120. The rule of thumb is that the important point is not how many miles you travel. It’s how ‘green’ the car is that matters. If there are low CO2 emissions there is a lower benefit and at present the employer can get enhanced capital allowances on such cars. The bigger cars are a big ‘no no’ for tax purposes. Ironically, of course, they’re more expensive and that’s precisely when you need your company/employer to fork out the cost rather than having to meet it yourself.
Who should pay the cost of fuel? If you have high business mileage it might pay you to use your personally owned car and claim HMRC approved business mileage rates. If you have high private mileage it may be beneficial to have the company pay for all fuel and for you to pay tax on the fixed benefit in kind rather than paying for your private mileage yourself.
Finally, what about a company van made available for private use? The fixed benefit of £500 for a van less than four years old and £350 for an older van is good news but only until April 2007. What’s more, there is no separate charge for van fuel used for private journeys. After April 2007 the £500 becomes £3,000 and the van fuel benefit is set at £500. Of course, there are conditions and there’s more to it than just the figures but it should, at least, give you a broad indication of where we are and what’s coming.
TAX SAVINGS OF THE FIRST DEGREE!
Going back to a more seasonal topic this is the time of year when your grown up(?) kids start or go back to college or university. Possibly out of town – probably, if they had anything to do with the choice. Where are they going to live?
Thoughts of buying a ‘student house’ flash through your mind. How many other rent paying students do you need to pack in to finance it? And what kind of other students would make suitable household company for your sweet innocent child? Who’s going to vet them for suitability and ability to pay?
If you’ve got half a mind on the tax implications you’ve got a few extra questions. What about declaring the rental income? What deductions can be claimed for tax? Does rent-a-room relief come into it? What about the cost of furniture and furnishings? And then in three years time after the first degree (who knows, they may do a Masters after that) what happens to the house? It it’s sold what happens about capital gains tax (CGT)? Would it be better for both income tax and CGT purposes if I bought the house in my son’s/daughter’s name in the first place? And if I did that, what about a mortgage? Can I arrange to share ownership with my son or daughter but make sure they receive the rents instead of me? Is there any scope for using a trust?
Just a few things for you to think about. If you want to share your thoughts with your usual contact partner or with Simon Topperman, our tax partner, we can help you think through the tax issues.
Apparently a letter from female taxpayer to a tax inspector read:
“I have not been living with my husband for several years and have much pleasure in enclosing his last will and testament.”