George Osborne, chancellor for the coalition government, delivered his "austerity" budget to the House of Commons yesterday. His initial statement being that "something had to be done" to deal with what is still the biggest budget deficit in history.

A subject-by-subject summary of the significant measures is as follows:

To reduce overall spending under the objective of "controlling the cost of welfare" A general freezing of public sector pay was announced, alongside

• Cuts in benefits (including elements of the Working Families Tax Credits)
• Child Benefit frozen for three years.

Conversely, however, Council Tax will also be frozen for one year from April 2011.

BUSINESS TAX

The rate of Corporation Tax for small businesses (i.e. those with profits of less than £300,000) will be reduced to 20% from 1 April 2011.

The rate of Capital Allowances however has been reduced to 18% (from 20%) on most plant and machinery and the Annual Investment allowance, which previously allowed for up to £100,000 of expenditure on Plant etc to be written off completely in the year of acquisition, was capped at £25,000.

Overall therefore it will very much depend upon the type of business you own, as to whether you will actually feel the reduction in the rate of Corporation Tax, without a greater offset caused by the reduction in allowances.

There is some further reduction in Employer National Insurance contributions, given by an increase in the starting point for these contributions. From 6 April 2011 Employer NI will not be paid on the first £131 per week.

Also in respect of Employer NI, new companies outside London could be exempt Employer NI on the first 10 employees for three years under a new scheme to help create jobs.

For companies seeking additional lending the EFG loan scheme (formerly the "Small Firms Loan Guarantee Scheme") is to be extended. Comments will be published later in the summer as to how this will become apparent.

Much was said pre-budget about second properties and holiday homes. The budget yesterday re-instated the tax treatments for "Furnished Holiday Lettings"

If you have one of these properties, then please contact us for advice on how this affects you specifically.

VAT

The pre-budget comments proved to be well founded and VAT was indeed raised to 20%

This could be bad news for any small businesses selling directly to consumers. As from 4th January 2011 these businesses will see their prices increases and may suffer as a result of competition from smaller / unregistered traders.

Fortunately the chancellor committed not to extend the scope of VAT onto children’s clothing, food, newspapers and books etc.

INCOME TAX

The personal allowance for all individuals has been raised to £7,475 from next April. Basic rate taxpayers will be around £170 better off for the year. However, this will be withheld from higher rate taxpayers.

Company directors, receiving small salaries and larger dividend payments will actually benefit from this too...

A small (potential) concession to higher rate taxpayers was that the procedure for obtaining higher rate tax relief on pension contributions would be reviewed.

CAPITAL GAINS TAX

Once again the speculation about a hike in the rate of CGT was well founded and the main rate increased to 28% (for higher rate taxpayers)

Basic rate taxpayers will continue to have their gains taxed at 18%

Entrepreneurs selling their own trading companies after a number of years’ ownership will continue to have such gains taxed at 10% and the lifetime limit of gains taxed in this way has been increased to £5million.

It is worth pointing out here that given the way these gains will be taxed, a higher rate taxpayer is probably an individual with income above £37,000.

And finally,

In order that we can all drown our sorrows, following England’s exit from the World Cup by teatime today, duty on Beer, Wine and Sprits are also frozen. The proposed increase in duty on Cider has also been withdrawn.

Fuel duty also remains the same.

The increase in VAT will of course make these products more expensive anyway.

Please note that the above summary has been prepared quickly and for general information only. It is not a substitute for specific advice and no liability is accepted for persons acting on, or refraining from acting as a result of anything contained herein.

If you require specific advice about your personal circumstances please do not hesitate to contact me

Clive Bowyer FCCA MAAT
Chartered Certified Accountant
1st floor Court Building
Alexandra Park
Prescot Rd
ST HELENS
WA10 3TP

t. 01744 737357
e. clive@clivebowyer.co.uk

 

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There is much speculation regarding possible changes to Capital Gains Tax in the Budget to be announced on 22 June, with the Liberal Democrats apparently pressing for an increase in the tax rate from 18% to 40% or even 50%.

Whilst we do not have access to a crystal ball, or George Osbornes Red Box, we do have ways of reducing your potential CGT bill. But you have to act fast.

Please contact me to discuss.

 

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Introduction

Chancellor Alistair Darling characterised this Budget as "a Budget for recovery"; at its heart, a package to invest in small and medium-sized businesses and jobs.

Despite the unprecedented economic circumstances, he claimed that “the right choices had been made” (so far – ed.) – going on to recount government action in relation to Northern Rock, and the other high street banks. He also proudly announced that the bankers’ bonus tax has raised £2bn in 2009/10


Main features / highlights

For Business

The Chancellor confirmed no increase in Income tax, National Insurance or VAT other than those already announced. You can see our earlier web postings highlighting the rates and thresholds involved.

The annual investment allowance is doubled to £100,000 which allows immediate tax relief in respect of the purchase of plant and machinery etc for use in the business.

Business rates are to be cut for a year from October, meaning a tax reduction for 500,000 small firms in England.

The increase in fuel duty which was always planned has been “staged” to take place over the next year.

RBS and Lloyds who make up 50% of the banking market, are tasked to provide up to £94bn. Furthermore, a credit adjudication service will be established to review credit applications from SME companies where the company feels it has been unfairly denied credit.

The government is particularly proud of the “Time to Pay Scheme”, where businesses can negotiate with HM Revenue in respect of their tax liabilities. The scheme is to be continued throughout the next parliament.

For individuals

Entrepreneurs Relief is also doubled in respect of Capital Gains. Mostly affecting those selling shares in their own companies, this will reduce the amount of Capital Gains tax paid on gains of up to £2m in such circumstances, to an effective 10%

No change to the main rate of Capital Gains tax, payable on the sales of investments and the like is to be held at 18%

He also announced that Inheritance Tax thresholds would be frozen for the next four years.

Those buying properties can benefit immediately from the increase in the threshold for stamp duty. First-time home buyers will pay no stamp duty on properties worth up to £250,000. That will apply this year and next.

For families, those with one and two-year-olds will get an extra £4 a week in child tax credits, regardless of whether the recipients are single parents, cohabiting or married.

For savers, the ISA limit will be raised from £7,200 to £10,200 and will increase each year after that in line with inflation. You may recall that this was announced in the November statement but is now confirmed.

As always, those of you who like a drink are going to pay more. Alcohol duty will rise and that on cider specifically will go up by 10% from midnight Wednesday 24th March 2010. Smokers will also pay more as tobacco duty will increase by 1% immediately, then 2% in subsequent years.

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Please note that the above review has been prepared quickly and for general information only. It is no substitute for specific advice, and no liability is accepted for persons acting, or refraining from acting as a result of anything contained herein.

If you have any queries upon any item above, or any other matter, please do not hesitate to contact us.

Clive Bowyer FCCA MAAT
BOWYERS LTD
Chartered Certified Accountants &
Registered Auditor.

1st floor, Court Building, Alexandra Park,
Prescot Rd, ST HELENS. WA10 3TP

Tel. 01744 737357

Please feel free to pass this to your friends, colleagues and associates.

 

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Delaying payments of PAYE and National Insurance may become painfully expensive for employers, as harsher penalties are set to come into effect on 6 April. Following changes set out in Finance Act 2009, firms could find themselves suffering annual fines of up to 14% of their PAYE, construction industry scheme, NI contributions and student loan repayments.

However, HMRC is expected to a take risk-based approach for penalties, meaning that, while all late-paid PAYE is potentially within the new regime, not every overdue payment will trigger a penalty – and an employer might be able to arrange a time to pay should the business experience genuine liabilities.

 

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Most of you know that I love the football, but I'm not about to bemoan the inability of my team Liverpool FC, or even to criticise "Rafa the Gaffer". Nor will I mention my son's junior team who are trying to find consistency in their results, assuming they get to play in the first place with the weather as it has been.

Do you know what Portsmouth FC, Southend FC, AFC Bournemouth , Cardiff City and (the late) Chester City FC have in common? The football fans among you will realise these clubs play in various divisions of the football league...

The answer is that they have all been served with winding up orders by HM Revenue and Customs for unpaid PAYE and National Insurance contributions, deducted from player salaries but not actually paid over to the Collector of Taxes. Such deductions should be paid over to HM Revenue by the 19th of the month following deduction.

The winding up order means that if the company does not pay the outstanding debt within the time granted by the court, they will face compulsory liquidation (winding up). In simple terms the company's assets will be sold and applied as fairly as possible in the payment of all of the company's creditors. This may mean that some creditors (including HM Revenue) will receive only a proportion of the money actually owed to them. In any event the company ceases to operate and eventually ceases to exist.

This is an interesting way of making the point that HM Revenue now deal with such debts quite harshly, taking the attitude that such money "does not belong to the company, and is therefore not yours to withhold !"

You should expect some resistance therefore if trying to make an arrangement to pay PAYE debts over a period. All PAYE deductions for 2010 must be paid to HM Revenue by 19th April this year.

As with all matters, if you need any assistance - please let me know.

 

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Accountants all over the UK can breathe a sigh of relief and pick up their skis.

I am pleased to be able to report that all our client's tax returns were filed well in advance of the filing deadline 31st January 2010; just as well since the HM Revenue system crashed on the morning of the 29th!

It's how we like to do things, to pick up our pencils early and complete tax returns and calculate liabilities early so that everyone knows what is payable and when. It is a little like painting the Forth Bridge however, it all starts again straightaway as we start our pre-year end planning meetings for 2010.

 

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The “Pre-Budget” Report was given on Wednesday this week.

Amid the doom and gloom, there were three main items of significance to most of our clients:

1. VAT is set to return to 17.5% on 1st January. So if you are heading out on New Year's Eve make the most of your drinks before the midnight price increase!

2. As from 6 April 2011 Employee's, Employer's and Self Employed National Insurance Contributions are set to rise by 0.5%

3. The Business Payment Support Service is set to continue for "as long as needed"; so, if you are experiencing any difficulty in making any tax payments do call the helpline. Most who have tried this agree it has been relatively straightforward to agree a suitable payment plan.


There will of course be a general election before the next budget, but it is unlikely that any major tax changes will take place should there be a change of government!

As always, please contact us for specific advice on any business proposal or for a general update on your own circumstances.

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The practice is growing, thanks to our clients and their gratious referrals, so more hands to the pumps are needed!

Although I am late in posting this up here, I am delighted to introduce to all our clients, friends, and website visitors Karen Bennett-Jones who joined the firm in April 2009. Karen has been an accountant at senior levels for many years, working both in Industry and Private Practice. She has also been a good friend of mine for about 20 years !!

Her time in industry means that she has "hands on" experience of Cashflow management and Credit Control; you can be sure that her advice will be based on time spent on "the client side" of the desk!

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The Chancellor delivered one of the most anticipated budgets for years, for 2009 this year on Wednesday 22nd April.  To the shock and horror of many fellow MP’s record levels of government borrowing were announced for the next three years.

The Chancellor plans to borrow around £700bn over the next four years; borrowing figures well beyond anything said before.

On a smaller scale the significant changes for businesses and individuals are as follows:

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TAX INCREASES

• There will be no increases in basic tax rate this year. However the new 45% higher rate of tax, announced in the November “pre-budget”, is to increase to 50% and be brought forward by one year from April 2010, for those earning over £100,000.

• Personal (Tax free) Allowances will also be removed from those earning over £100,000 from April 2010.

• From April 2011 tax relief on pension contributions is to be cut for those earning over £150,000

• A moderate boost for savers was announced, however.  The Individual Savings Account (ISA) allowance is increased to £10,200 this year for those over 50 and for others next year.

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Changes from April 2010

• The amount of basic personal allowance has not been set, but from 6 April 2010 the basic allowance will be subject to income limits of £100,000 and £140,000.

• Where an individual’s income is above the income limit of £100,000 the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.

• Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance.

Basic rate tax payers will be unaffected. However, individuals with income greater than £150,000 could receive no personal allowances at all.

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TAX ALLOWANCES

• The ability to claim relief for business losses against profits of the three previous years continues to be available for the next two years.

• Capital Allowances for plant, machinery and other equipment has been doubled to 40% with immediate effect from 2009/10. 

• This means that the tax claims available for your plant and machinery etc bought in previous years have increased.  This is in addition to the Annual Investment Allowance available for the first £50,000 of expenditure on such items.

• Minor increases in Tax Credits and Child Benefit were announced but were already available to those already in receipt of the benefit.

• The reduced rate of VAT (15%) was confirmed until December.

• The Stamp duty exemption / holiday for properties valued up to £175,000 has been extended until the end of the year.

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OTHER ITEMS

• A £2,000 allowance for scrapping cars over 10 years old will be available until March 2010

• Alcohol & tobacco duty will go up by 2% from midnight and 6pm tonight respectively.

• The Fuel duty increase of 2p per litre previously deferred will now apply from 1st September.

 

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PLEASE NOTE:
This document has been prepared quickly, and for general information to most clients.  It is not specific advice for your specific circumstances as no liability is accepted for any person taking action, or refraining from taking action, based upon its contents.

Therefore, if you have questions on these or any other matters please do not hesitate to contact me; I am always available to discuss and answer your questions.

 

Clive Bowyer FCCA MAAT
Chartered Certified Accountant

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Yesterday the Chancellor delivered his Pre-Budget report. Historically this has simply been a report on public spending and borrowing, however, in recent times it has become a “mini-budget” where tax changes may actually be announced.

Many of the changes announced will only take place from 2010/2011. Whilst trying to remain politically neutral, it is worth pointing out that this will be after the next election! This time, in particular, under pressure from the media to respond to the continuing economic situation, several announcements were made which will impact on day to day business.

So in order of impact:

VAT

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Temporary Reduction in Standard Rate

From 1 December 2008, the standard-rate of VAT will be temporarily reduced to 15% until 31 December 2009 (N.B. zero-rated and 5% reduced-rated supplies are unaffected). On 1 January 2010, the standard-rate will revert to 17.5% again.

Where payment has been received or invoices issued at 17.5% prior to 1 December 2008, but goods are not provided until after that date, suppliers may choose to issue a credit adjusting the VAT to 15%. The usual time limit for issuing such credit notes is 15 days, but this will be extended by secondary legislation to 45 days.

The reduction will directly affect individuals and businesses which are unable to recover the VAT that they incur. Assuming the rate cut is actually passed on, this will benefit individual consumers who will see the prices of standard-rated goods and services fall.

Any businesses or organisations in the exempt and non-business sectors (e.g. financial service providers, insurers, care homes, welfare providers, nurseries, and charities) will also see a reduction in costs, as the amount of irrecoverable VAT they suffer on standard-rated goods and services decreases. However, in administrative terms, all businesses will be affected, as any change in VAT rate creates numerous accounting and systems issues.

Some retail businesses, who will be under pressure to pass the rate cut on, will suffer significant administrative costs implementing price changes across product lines in less than a week. The suggestion in some quarters is that a lot of smaller retailers simply won't bother to change their prices, and will pocket the small difference for themselves as an offset against falling profits.

And as he gives so shall he take away! The duty on alcoholic drinks will be increased by 8% with effect from Monday 1 December 2008, duty on tobacco products will be increased by 4% with effect from 6pm on Monday 24 November 2008 and the fuel duty rates for 2008 introduced in the Finance Act 2008 will be reinstated with effect from 1 December 2008

INCOME TAX

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Changes from April 2010

• The amount of basic personal allowance has not been set, but from 6 April 2010 the basic allowance will be subject to income limits of £100,000 and £140,000.

• Where an individual’s income is above the income limit of £100,000 the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.

• Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance.

Basic rate tax payers will be unaffected. However, individuals with income greater than £150,000 could receive no personal allowances at all.

 

Changes from April 2011

• From 6 April 2011 taxable income above £150,000 will be liable to income tax at a new rate 45 per cent. Any dividend income falling in this bracket will also see a 5% increase in the tax charged thereon.

 

NATIONAL INSURANCE

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Changes from April 2011

• The main rate will be increased by 0.5 per cent to 11.5 per cent. The employer rate of NIC will be increased by 0.5 per cent to 13.3 per cent.
• The “top” / additional rate of contributions will be increased by 0.5 per cent to 1.5 per cent.

 

CORPORATION TAX

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• The planned increase in the Small Company Rate from 21% to 22% from 1 April 2009 has been deferred until 1 April 2010.
• Yesterday’s statement also confirmed the introduction of the “Business Payment Support Service” by HM Revenue and Customs. Their press release proudly states:

From 24 November 2008, we have introduced a new, dedicated Business Support Service designed to meet the needs of businesses affected by the current economic conditions.
If you’re worried about being able to meet tax, National Insurance or other payments owed to HM Revenue & Customs, or you anticipate that payments coming due will cause you problems, you can get in touch with us to discuss payment options to help you deal with temporary cash flow difficulties.

Staff will review your circumstances and discuss temporary options tailored to your business needs, such as arranging for you to make payments over a longer period. We will not charge additional late payment surcharges on payments included in the arrangement, although interest will continue to be payable on those taxes where it applies.

Unfortunately neither the press release nor HMRC website gives any further guidance as to what period of time your payments can be deferred over. Perhaps the only comment to make is to follow the guidance and if you are genuinely experiencing difficulties in making payment when due, contact this new department and see if their options are of benefit to you.

 

And finally…

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Don’t cancel the Christmas party!

Remember that the tax allowable, annual entertainment allowance in respect of staff and company directors remains at £150 per head. If you have not already spent this amount on the staff so far this year, why not treat them to a Christmas Party on the taxman … or at least a round of drinks!

 

Please remember that this statement has been put together quickly and for general information purposes only. It is no substitute for specific advice. No liability is accepted for persons acting, or refraining from acting as a result of anything stated herein.

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