NEWS

TAX ETC MERGER

Tax Etc and Quotient Financial Solutions have announced that they are to merge.
 

Together Quotient and Tax Etc will form a larger and far stronger practice with greater resources available to their clients.

Quotient Managing Director Roderick Phillips comments, ‘We are fortunate to have enjoyed solid organic growth increasing our annual fee income by more than 20% per annum over the last three years. However the merger with Tax Etc provides an opportunity to boost our growth plans even further. Their client base is a good fit with our own and we both share a philosophy of providing excellent client service while always looking after our most important asset - our people. Our existing clients will also benefit from the specialist tax knowledge of the Tax Etc team’.

Tax Etc Managing Director Craig Varney comments, ‘Quotient has an enviable client base, is well structured and organised and delivers outstanding service to their clients. We are delighted to be joining them and look forward to a long and successful partnership’.

The consolidated business will be run out of Quotient’s Battersea Reach offices in South West London.

2010 BUDGET HIGHLIGHTS:

Following on from Mr Darlings Budget speech yesterday, here are the main points of interest:

1. Personal allowance of £6,475 and NI to remain the same, but the personal allowance will be reduced once earnings exceed £100,000
2. A new 50% tax rate will be introduced for earnings over £150,000
3. Individual Capital gains allowance remains at 18%, and 10% for Entrepreneurs - with the lifetime cap doubled to £2 million
4. The VAT registration threshold will increase form £68,000 to £70,000 from 1 April
5. For small companies, the annual investment allowance on assets has been doubled to £100,000
6. Stamp Duty for first time buyers reduced to nil on properties costing up to £250,000 until 25/12/2012
7. ISA allowances increased to £10,200

Key Features of the 2009 Budget

With the effects of the credit crunch and deflation taking hold of the economy, there really was not much joy for the taxpayer in this year’s budget. The main issues can broadly be summarised as follows:

INDIVIDUALS:

The Good:

• ISA allowances to rise to £10,200 for the over 50’s from October, and from April next year for everyone else (maximum of 50% in cash)
• A £2,000 scrapping allowance offered for cars registered before 31 July 1999 has been introduced.
• Stamp duty to remain exempted for sales on properties of up to £175,000 until 1 January 2010
• Introduction of the dividend tax credit on dividends from non UK based companies

The Bad:

• People earning over £100,000 will lose their personal allowances from 1 April 2010, and those earning over £150,000 will be taxed at 50% on the excess.
• Tax relief on pension contributions for high earners (over £150,000 earnings – not salary) will be tapered from 40% to 20% from  6 April 2011 onwards
• Alcohol and tobacco duties up 2% with immediate effect, and fuel duty to rise by 2p per litre from September, and then 1p per year every April for 4 years
• Withdrawal of the personal allowance for non-resident commonwealth citizens from April 2010
• An extension of the HMRC search for offshore bank accounts belonging to UK residents and a new offshore disclosure facility
• Increases in  individuals NI to be phased in gradually

SMALL COMPANIES:

The Good:

• Small company Tax rate to remain at 21%
• Losses of up to £68,000 can be carried back and offset against the preceding 3 years
• VAT – the temporary rate of 15% to last until 1 January 2010
• A new 40% (up from 20%) temporary first year allowance for qualifying capital expenditure in excess of the AIA of £50,000

 The Bad:

• New Increased penalties for late filing of various Corporation Tax, VAT and PAYE  returns introduced
• Car tax increased via CO2 emissions band reduction

Q  How will the 2008 budget affect me?

A  There were some fundamental changes announced in this years’ budget, that affect both individuals and small companies. The main issues can broadly be summarised as follows:

Individuals:

• Non Domiciled taxpayers resident in the UK for 7+ years will now have to pay tax on their worldwide income and gains (>£2,000), unless they pay an annual fee of £30,000 to avoid this. Remitted income and gains will also be taxed in addition to this
• The 10% lower tax band has been removed, and the basic rate (for earnings up to £36,000) has been decreased to 20%. The tax free allowance (<65) is increased to £5,435.
• ISA limits increased to £7,200, but up to 50% can now be put into a cash ISA.
• Capital gains tax reduced to a set rate of 18%, but indexation and taper relief have been withdrawn. The annual exemption is increased to £9,600.

Small Companies:

• Tax rate increased to 21%
• Relief for sales of shares in owner business allows for taxation at 10% - up to a lifetime limit at this rate of £1,000,000.
• Annual Investment Allowance on Plant and Machinery increased to 100% for first £50,000

Q  I have heard that changes in the Pre-Budget Report will affect foreigners working in the UK. What are the implications?

A  Currently, foreigners registered as ‘non-domiciled’ in the UK pay tax in the UK on their worldwide income only on the portion thereof remitted to the UK.

The proposed changes (active form 6 April 2008) will allow this treatment for your first 7 years of residence here, but thereafter, in order to retain this method of taxation, a ‘non-domiciled’ person will have to pay an annual additional tax charge of £30,000. Otherwise, you will be subject to tax on your worldwide income.

A second change relates to the days spent in the UK for tax purposes. Previously, the day of arrival and the day of departure did not count as days spent in the UK. From 6 April 2008, these days will count as days spent in the UK.

A final nail in the ‘non-dom’ coffin is the removal of personal allowances for ‘non-domiciled’ or ‘not ordinary resident’ taxpayers if they claim any of these tax statuses.

Q  I have received a letter from my offshore bank, stating that they will be providing Inland Revenue with details of my account. Should I be concerned by this?

A  Inland Revenue recently won a major court case against one of the leading UK banks, the outcome being that all offshore financial institutions are being forced to provide details of their offshore customer’s account details to HMIT.

Account holders who have run their tax affairs correctly have nothing to fear, but those that have been less than forthcoming with the declaration of their income are being given the chance to make a disclosure now. This amnesty only relates to offshore accounts.

Those that feel that they have income to declare need to make a declaration of their intent to do so before 22nd June 2007. They will then have until 26th November 2007 to submit the details, pay the outstanding tax due, interest due, and a once off 10% penalty.

Those not doing so will be pursued by Inland Revenue, and we thus urge anyone in any doubt to contact us immediately.

Q  How will the 2007 budget affect me and my Limited Company?

A  Last week, Gordon Brown presented what is probably to be his final his budget as chancellor. Both Ltd Companies and individuals will be affected in both positive and negative ways – as highlighted below:

Positive Effects :

• The tax free personal allowances for individuals have been increased (now up to £5,225 p.a. for individuals under 65)
• The upper tax band for individuals has been increased to £43,000 and the standard rate will be reduced from 22% to 20 % (from April 08), but see 2 below.
• Inheritance tax threshold raised from £285,000 to £350,000 by 2010
• Larger companies corporation tax reduced from 30% to 28%
• Child benefits and tax credits increased
• Personal Capital Gains exemption to increase to £9,200 per annum

Negative Effects :

• Small companies tax rate will increase from 19% to 22% by 2009
• The lower rate tax band of 10% is to be done away with
• Excise duty on beer, cigarettes and wine has been increased again
• Duty on petrol is to increase by 2p per litre in October, with further increases in 2008 to come
• National Insurance bands aligned with PAYE bands
• Wear and tear annual allowances reduced from 25% to 20% from April 08

Q  I have been contracting through a composite company, but have now heard that these structures are to be closed down. Is this true?

A  In his pre-budget report in December, the chancellor, Gordon Brown, made specific reference to managed company services (Umbrella and Composite company structures) and schemes whereby profits are shifted offshore and then returned without incurring a tax charge.

It seems that a number of tests will be applied, and if these fail, the contractor as well as service provider can be held liable for the additional tax. A key determinant will be the element of control – i.e. who runs the company and specifically the bank account.

Structures that will not be caught by this new legislation are personal service companies where contractors maintain control over the company – i.e. they are directors and control the bank accounts.

On the offshore structure front, Inland Revenue will be looking closely at the revenue flows, and disallowing the double taxation relief if they believe that the scheme is avoiding UK tax. The effective date of this new legislation was 6 December 2006, but the exact terms thereof will only become clear in the budget in March.

Q  I have recently been sent a payment of Class 1A NIC’s and  Return of expenses and benefits forms for my Limited Company. What must I do with these?

A  The above 2 forms, more commonly referred to as the P11D and P11D(b) forms, relate to any amounts paid to employees (including directors) other than salary.

When completing the P35 annual PAYE return, you would have been asked whether you will be submitting these forms. If you ticked the appropriate box, the above forms would have been sent to you, and now need to be completed and returned.

Certain of these payments will attract NI payments at a rate of 12.8%, depending on what exactly they relate to. You will also need to issue the respective P11d’s to the employees involved, for inclusion in their own personal tax returns.

These forms need to be submitted by 6 July , with any NI due payable by 19 July.

Q How will the 2006 budget affect me?

A  Their were both good and not so good aspects to this budget:

Positive Effects :

• The tax free personal allowances for individuals have been increased
• Additional funds (£250) have been set aside for children born after 2002 to be paid in the Child Trust Funds on their 7th birthdays
• Inheritance Tax bands have been increased
• Stamp duty threshold raised to £125,000

Negative Effects :

• Benefits of Trust for Inheritance Tax Planning greatly reduced
• Excise duty on beer, cigarettes and wine has been increased
• Venture Capital Trust tax benefits have been reduced – thus it is vital that anyone wanting to take advantage of the current benefits does so before 6 April 2006.
• £10,000 tax free amount for small companies removed

Q  I have not received a self assessment tax return to complete, but think that I may have to, as I am a director of a Limited Company. What is the situation?

A  The self assessment tax returns are due by 31 January 2006. The people that need to submit tax returns are :

• Anyone that is sent a tax return
• All company directors
• All higher rate taxpayers (those in the 40% bracket)
• All self-employed individuals
• Anyone earning income that is not taxed at source
• Partners in a partnership
• Landlords with rental income

Unfortunately, the onus to submit a tax return rests on the individual, and Inland Revenue will not accept lack of knowledge thereof as an excuse.

Q How will the 2005 budget affect me?

A The main issues coming out of the 2005 budget are as follows:

For individuals, some tax relief will be found in the following areas:

• The raising of the stamp duty threshold on property purchases from £60,000 to £120,000
• Inheritance tax threshold raised to £285,000 this year, and £300,000 in 2006
• Tax free ISA levels maintained at £7,000 p.a. for 5 more years
• Increased pension credits for those aged over 60
• Child tax credits to rise by 13% over the next 3 years
• The tax free amount due to individuals will rise from £4,745 to £4,895 per year - increasing the amount able to be claimed as tax rebates
• Non-domiciled status of Expats left untouched
• Vat registration threshold raised to £60,000
• Duty on fuel was frozen

On the other side of the coin, the following changes were implemented:

• Duty on beer up 1p per pint
• Duty on Wine up 4p per bottle
• Duty on Cigarettes up 7p per pack

A full version of the budget can be found at http://www.hm-treasury.gov.uk/budget/

Q I am expecting my first child in the UK. I believe I am entitled to claim some benefits. If, so, what are they, and how do we apply?

A The first benefit is the Child Benefit, which is claimable for each child that you are bringing up that is under 16 years of age, or under 19 and in full time education. It is not dependent on income, and is thus available to all families, provided your rights to claim are not restricted in terms of your visa.
You are able to claim £16.50 per week for the first child, and £11.05 per week for each additional child thereafter.

To register for the benefit, you should be given the required registration forms at the hospital when the baby is born. If this does not happen, you can call the child benefit helpline on 0845 302 1444, or register online on the Inland Revenue website. It is important to do this as soon as possible after the baby is born or taken into your care, as claims cannot be backdated.

Child Tax Credits (CTC) are also claimable for families with children aged under 16, where the combined family income is less than £58,000 (or £66,000 if the child is younger than one). The amounts claimable depend on each individual circumstance, and work on a sliding scale.

The Working Tax Credit (WTC) is claimable by families on lower income, regardless of dependents, but is increased for those caring for children or disabled people. You will be required to work a minimum number of hours each week, and have a joint income of less than £55,000 per annum. The benefits also work on a sliding scale.

To register for the CTC and WTC, either visit the Inland Revenue website, or call the helpline on 0845 300 3900.

Q I earn rental income from my flat in South Africa. Is this taxable in the UK?

A There are a number of factors that will affect this, however, the over-riding determinant being your domicile status in the UK. If you are classified as non-domiciled in the UK (as most Commonwealth citizens are on a temporary or semi-permanent basis are), you will be taxed in the UK on a remittance basis.

Basically, this means that if you were to bring any of the rental income into the UK, it would be taxable in the UK (although you may qualify for some relief under the double taxation agreement). It would most likely first be taxed in the country of origin.

If you left the income outside of the UK, it would not incur any UK taxation. This relates to other types of income too, such as dividends and interest from non-UK organisations.

Q I have been working in the UK in a permanent position for a year and a half now, am I able to reclaim any tax?

Answer : When working in the UK, irrespective of whether you are working on a full or part-time basis, you will be able to reclaim tax for one of the following reasons:

• Firstly, if you worked for less than 12 months in any one tax year (April-March).
• Secondly, if you were initially put onto an emergency tax rate at the outset of your employment (identified by the letters BR, M1, MTN1, W1, X in your tax code)
• Thirdly, if you earned less than the tax-free allowance available in that year (currently £4895).