The March Budget introduced a number of measures intended to continue the policy of stimulating the economy by keeping public spending substantially above public revenue.  The new Government takes the view that this policy is unsustainable and that the tax burden must rise in addition to expenditure being cut.  The June Emergency Budget addresses the taxation side of this equation, although the Tax Credit proposals can be seen as part of the plans to reduce expenditure.

As widely anticipated, the standard rate of VAT is set to rise from 17.5% to 20%, but not until 4 January 2011.  There will be corresponding changes to the Flat Rate Scheme percentages, and legislation is proposed to prevent larger businesses charging the existing rate by invoicing early.  The 5% reduced rate remains unchanged, and there are no alterations to the definitions of exempt and zero-rated supplies.

The basic personal allowance for Income Tax will rise to £7,475 for the year, or £143.75 a week, from next April.  This is a rise of £1,000 over the figure for the current year.  It has been publicised as an increase for the under-65s.  The position for the over 65s is unclear, as the enhanced income-related allowances available to them have not yet been announced, but it is likely that they will benefit from the increase if their income stops them from qualifying for the enhanced allowances.

There will at the same time be a reduction in the threshold for 40% tax, which will result in those on incomes above about £45,000 will not benefit from the allowance increase.  The precise threshold figure will be announced later.  The upper earnings limit for National Insurance will also be reduced, to avoid a situation where part of a taxpayer’s earnings is taxed at 40% plus standard National Insurance.

The special treatment of furnished holiday lettings is to continue for the time being, but there is to be consultation on future changes.  There is also to be a review of the treatment of ‘non-doms,’ who seem at present to receive more favourable treatment in the UK than in most other countries.

The rates of Class 1 National Insurance for employees and employers and Class 4 National Insurance for the self-employed will, as proposed in the March Budget, increase next April by 1% (from 11%, 12.8% and 8% to 12%, 13.8% and 9% respectively).  The threshold for employer’s contributions will, however, rise from the current level of £110 per week to £131 per week, subject to a further increase for inflation.

It was generally expected that there would be an increase in the rate of Capital Gains Tax.  The change that has been brought in is not as bad as many commentators foretold, but it does apply to all gains arising after 22 June 2010.  Capital Gains attract an ‘annual exemption’ of, currently, £10,100.  The rates charged on gains in excess of this will be depend on income.  If the taxable income is below the 40% threshold, gains up to the unused basic rate band will be taxed at 18%.  Any remaining gains, and all taxable gains if the income reaches the 40% threshold, will be taxed at 28%.  The exception will be gains on business assets, which will be taxed at 10%, subject to a lifetime ceiling of £5 million of gains.

Because the Capital Gains Tax changes are being introduced part way through the tax year, there are complications for people who realised taxable gains between 6 April and 22 June this year and realise further taxable gains during the rest of the tax year.  This newsletter cannot detail these complexities.

The main rate of Corporation Tax was to be 28% from 1 April 2011, but will now be 27%.  The small profits rate, chargeable on the vast majority of companies, will also reduce from 21% to 20%.  These changes do not affect the current tax year.

There is to be a National Insurance ‘holiday’ for new businesses setting up in regions outside London, the South East and Eastern England.  This will only apply to business start-ups after 22 June 2010 and will be a maximum of £5,000 for each of the first 10 employees.  The target commencement date is 6 September with a duration of three years, but the necessary arrangements have yet to be made and the start may be delayed.

There are a number of proposals for tax credits, which are aimed at reducing the cost and focussing the benefit on the more needy.  The ‘baby element’ is to be abolished from 6 April 2011, and the ‘over-50 element’ from 6 April 2012, whilst the proposed addition for children aged 1 and 2 will not now be paid.  Annual uprating will be by reference to the Consumer Price Index rather than the Retail Price Index in future.  The child element will be increased by £150 a year over the rate of inflation from 6 April 2011 and by £60 a year over the rate of inflation from 6 April 2012.  On the other hand, the universal Child Benefit will be frozen at its present level until April 2014.

For households with incomes over £40,000, the rate of withdrawal of tax credits will rise from 39% to 41% from 6 April 2011.  This means that for every £1 of income above that point the household will lose 41p in tax credits, rather than the present 39p.  The lower 6.67% rate of withdrawal for the family element of tax credits and the threshold of £50,000 for that withdrawal will disappear, and the 41% rate will apply to that element as well.

From 6 April 2012 the backdating period for tax credit claims will reduce from three months to one month.  The income increase ‘disregard’ will fall from its present level of £25,000 to £10,000 in April 2011 and £5,000 in April 2013.  In April 2012 an income reduction ‘disregard’ will be introduced.  These changes will make it more likely that claimants will be faced with overpayments after the end of the tax year.

Finally, it is confirmed that the over 60s will qualify for Working Tax Credit from April 2011 if they work more than 16 hours per week.

Note: It must be remembered that these proposals are subject to amendment during the passage of the Finance Bill.

]]> http://pmaaccountants.co.uk/2010/06/emergency-budget-2010-update/feed/ 0 http://pmaaccountants.co.uk/2010/03/company-directors-protect-your-home-address/ http://pmaaccountants.co.uk/2010/03/company-directors-protect-your-home-address/#comments Thu, 04 Mar 2010 23:16:03 +0000 PMA http://pmaaccountants.co.uk/?p=169 1^st October 2009 saw a number of major changes within the Companies Act. One such change was the introduction of a Service Address for Directors.

Effectively, for every directorship held, a Director must provide Companies House with details of their usual residential address, as well as details for their, recently introduced, ‘service address’.

If a Director doesn’t supply a ‘service address’ then the director’s residential address automatically defaults to become the address on public record.  So in essence – don’t supply a ‘service address’ and your home address becomes publically accessible by absolutely anyone.

Remember – anyone can access the public records at Companies House – so if an alternative Service Address isn’t provided – the residential address is on show.

A Director can choose any address as their service address – it can be a home address or perhaps the registered office of the company – or an alternative address.  However, it must be an address where documents can be delivered and an acknowledgement or receipt provided if required.  It cannot be a PO Box or a DX number.

As mentioned earlier, this new legislation only came into effect on the 1^st October 2009 – and so many company directors may not yet be aware of it – but it’s a reality that’s already in place.  There are services available – and a few company registration agents are now offering services to their customers to assist them with the process of protecting their home address.  Some services are costing hundreds of pounds – so our advice is to shop around to ensure you find a cost effective way to protect your address.

• the personal tax allowance and the threshold at which 40% tax is charged will remain unchanged for 2010/11.
• the increase in the small companies’ rate of corporation tax to 22% will be deferred for another year until 1 April 2011.
• NIC rates will rise by a further 0.5% from April 2011 for employers, employees, and the self-employed.
• the basic state pension will be increased by 2.5% in April 2010. Certain other benefits and tax credits will rise by 1.5%.
• there will be a temporary bank payroll tax of 50% where banks, building societies and certain other financial business provide a bonus of over £25,000 to an employee. This will apply from 9 December 2009. On 18th December, HMRC issued a statement restricting the extent of the tax “to ensure that the definition of ‘bank’ and ‘banking group’ applies as originally intended’.
• draft rules for limiting higher rate pension contributions tax relief from April 2011 have been published. There are several important changes, including a cut in the income threshold to £130,000.
• the rules that currently limit pension contributions tax relief (‘anti-forestalling’) have been changed with immediate effect; the revisions include a new income threshold of £130,000.
• taxpayers who open offshore bank accounts in certain jurisdictions will be required to report to HMRC. Various anti-avoidance measures have been implemented with immediate effect.

Don’t panic! While there are some anti-avoidance rules (download guidance notes), the general principles affecting the switch back to 17.5% standard rate VAT are pretty straightforward.

Tax point. VAT is worked out at the rate applying when a tax point (TP) occurs. The basic TP is the time when you actually supply goods or services. So, if you deliver a product or carry out a service prior to January 1 2010, then 15% VAT applies. On or after that date it’s 17.5%.

Tip. Improve your cash flow by encouraging customers to pay early for post-January 1 purchases. The incentive for them is that by doing so they’ll override the basic TP and can pay 15% rather than 17.5% VAT. To make this ploy work, you must invoice them, or they must pay for the goods or services, by December 31 2009, even if the supply is made later.

Overlapping. If the supply you make starts in December but ends in January, for example a builder carrying out a job that takes several weeks, then the goods and services provided up to December 31 2009 can be charged at 15% and thereafter at 17.5%.

Tip. If you’re sending a bill after December 31 2009 that relates to supplies liable to both 15% and 17.5% VAT, you must show each element separately on your invoice.

Continuous services. A similar rule applies for continuous services, e.g. bookkeeping. VAT is due at the rate applying when you raise an invoice or get paid, whichever is the earlier.

Tip. If your billing routine means that you issue an invoice, say, quarterly, for example on January 31 2010, covering November, December, January, you can charge 15% VAT on the value of your supplies up to December 31 2009 and 17.5% on those made later.

1. VAT rate
On 1 January 2010 the standard rate of VAT reverts to 17.5%

2. VAT registered businesses
The VAT rules for businesses who:

• Supply services to or receive services from overseas businesses
• Supply goods to other EC countries
• Reclaim VAT incurred in another EC Country

also change and where, how and when VAT is accounted for, completion of EC Sales Lists and reclaiming VAT incurred in another EC country are all affected.

More information can be found on the HMRC website here.

3. VAT filing and payment arrangements
Under Government proposals, from 1st April 2010 the way some businesses file their VAT returns and pay any VAT due will also change:

• all VAT registered businesses with a turnover of £100,000 or more; and
• all businesses newly registering for VAT, whatever their turnover

must file their VAT returns online and pay any VAT due electronically.

Here is one version of the emails being sent out by scammers:

Copy of email received by client

HMRC’s dedicated scam website details a number of false addresses and examples of fake emails and forms which the taxpayer needs to watch out for.

If you are thinking of registering for self employment and do not have a National Insurance number, you should telephone the Department for Work and Pensions on 0845 600 0643 to arrange to attend an Evidence of Identity interview at a Jobcentre Plus or Social Security office.

If you would like assistance registering for Self Assessment, feel free to contact us on 0844 357 3646.

• Companies only need to make their records available for public inspection in one place, rather than multiple locations.
• Companies will have to provide a ‘service address’ for each of its directors – meaning that directors will no longer be required to provide a personal address if they do not wish it to appear on the public record.
• Most of the forms used to communicate changes to Companies House will change.
• All companies will have to include their name in all forms of business documentation, including electronic documents. There is no change to the requirements to provide other information in business letters, order forms and websites.
• To reduce the possibility of misleading the public, there are increased restrictions on rules governing company and business names.
• Public companies will now need to file their corporate governance statement at Companies House (unless it is already included in the Director’s report).

For more information, click here to visit the Companies House website.