It’s that time of year again – inundated with accounts / tax returns and the summer (!!) holidays a dim
and distant memory.
This newsletter contains some topical features which are proving to be of some interest to clients and
if you need further information do let us know.
Our “Ask the Expert” option has received a very positive response and if you haven’t yet registered,
details are on page 6.
50% tax - practical ideas to mitigate the effect ........................................................... 3
Ask the Expert ............................................................................................................ 6
Salary Sacrifice for Dividends .................................................................................... 7
Taxation News ........................................................................................................... 8
2009/10 Tax Tips ....................................................................................................... 9
EMI ........................................................................................................................... 10
VAT .......................................................................................................................... 12
Contact ..................................................................................................................... 13
50% tax - practical ideas to
mitigate the effect
As has been widely reported, the Chancellor Legislation has been introduced to prevent
sprang a number of surprises in this year’s those potentially affected from seeking to
Budget. Not only has he brought forward forestall this change by increasing their
proposals which were to take place in 2011, he pension savings in excess of their normal
has also made changes to his original regular pattern, prior to that restriction taking
announcements. effect. Broadly, these forestalling measures
will apply to individuals with incomes of
The personal allowance restriction £150,000 or more who, from 22 April 2009,
From 6 April 2010, the personal allowance will
be subject to an income limit of £100,000. An their normal pattern of regular pension
individual’s personal allowance will be reduced contributions, or
by £1 for every £2 of adjusted net income
above the income limit. The personal the normal way in which their pension
allowance will be reduced to nil from this benefits are accrued, and,
income limit instead of the proposed two stage
reduction announced in 2008. their total pension contributions or benefits
accrued exceed generally £20,000 a year.
Adjusted net income for these purposes is A higher limit of up to £30,000 may be
broadly all income after adjustment for pension substituted for £20,000 in specific
payments, charitable giving and relief for circumstances.
However, the rules are complex and the detail
The even higher higher rate is outside the scope of this factsheet but care
should be taken when making pension
Instead of introducing a 45% top rate of tax in contributions if income breaches the £150,000
2011, a new rate of 50% income tax will be limit in any of the three periods 2007/08,
introduced from 6 April 2010. This will apply to 2008/09 or 2009/10.
taxable income above £150,000.
Keeping below these levels
Dividend income is currently taxed at 10%
where it falls within the basic rate band and The obvious answer to avoiding these rules is
32.5% where liable at the higher rate of tax. A to keep income below the £100,000 / £150,000
new rate of 42.5% will be introduced for limits respectively. The question is how can
dividends which fall into the income band this be achieved efficiently?
Incorporation of sole trader and
In a band of income falling between £100,000 partnership businesses
and £112,950 in 2010/11 the removal of the
personal allowance will result in a marginal Limited companies allow flexibility in how and
rate of income tax of 60%. when income is taken from the company and
taxed on the owner. Many owner-managers of
Pension changes small companies will be able to forgo income if
they wish to avoid the onerous tax
In addition, the government has announced its consequences for those with higher incomes.
intention to restrict tax relief on pension
savings with effect from 6 April 2011 for people Incorporation may also give an opportunity to
with taxable income of £150,000 or more. The realise a capital gain on incorporation and a
relief will be tapered down until it is 20%. capital gain when the company is wound up.
Capital is king, for the time being at least, as
the rate of capital gains tax is a flat rate of 18%
which will undoubtedly rise sooner rather than
Obviously, HM Revenue & Customs (“HMRC”) cars qualify for 100% capital allowances in the
will be subjecting capital gains to increasing year purchased.
scrutiny, as the rates of income and capital
gains are currently so different. Borrowing should be examined to see if
available tax relief can be maximised. Those
If businesses wish to accumulate rather than with a capital account also paying interest on a
pay out their profits, then it may well be residential mortgage should consider
beneficial to incorporate so that any profits are restructuring their finances so that tax relief is
only subject to the much lower corporation tax obtained on the interest. There are also ways
rates. Those accumulated profits can then be to refinance let property loans which can
taken as a capital distribution from the increase the tax deduction for the interest paid.
company at ‘retirement’.
How can the 50% and marginal 60% rates
It might also be possible to set up a company be mitigated in the future?
to conduct a one-off project, after which the
company is then liquidated, again giving a A further consideration could be to admit a
capital gain to the shareholders. company as a partner. The company will be
taxed at the lower rates of corporation tax and
However, the tax tail should never wag the remaining monies could then be accumulated
commercial dog. Please do get in touch with to meet future costs or extracted as capital in
us if you feel that incorporation might be an the future.
option for your business.
Once again, much care needs to be taken
How can the 50% rate be deferred for the when creating such a structure. HMRC will
self employed? undoubtedly attack as being artificial the
inclusion of a corporate partner in a
Those running their businesses as sole traders partnership where the shareholders of the
or partnerships may want to think about company are the same, or largely the same
changing their accounting dates. If profits are persons as are involved in the partnership as
rising, a change of accounting date from say partners, particularly where the company
31 March 2010 to 30 April 2010 may result in receives a significant share of the profits.
lower profits being taxed in 2010/11 at 50%. There will need to be a sound commercial
No commercial reason usually needs to be reason for such a structure, and one example
given to HMRC for such a change. might be the incorporation of part of the
business because of the need to achieve
Another possibility is to delay business or limited liability on work carrying higher risk or if
personal tax relievable expenditure in order to forming an LLP, the use of a company as the
obtain relief at 50% instead of 40%, on for required second member.
example refurbishment or renewal plans,
charitable donations etc. Other important factors to be considered in this
type of structure include the fact that loss relief
It may also be possible to disclaim capital for corporate partners can be restricted and
allowances in a year attracting 40% relief in that no Annual Investment Allowance or First
order to claim against income taxed at 50% Year Allowances will be available to a
thereby achieving tax relief at the higher level. partnership containing a corporate partner.
It is important to bear in mind the impact of the
Annual Investment Allowance. This should be A better solution might be to create a service
utilised each year and if possible expenditure company employing and supplying staff, office
spread across tax years to maximise or other services to the partnership at an
utilisation. appropriate mark up. Such profits as are
generated in the company can be retained or
It should also be noted that there are a range extracted as capital in the future.
of assets on which 100% relief is available –
for example water efficient toilets and taps, Partners may well wish to change profit
and efficient energy intensive machinery such sharing ratios in order to avoid individual
as air conditioning. The assets qualifying for partner profits falling in the 60% marginal rate
relief must be on HMRCs approved list. The band although there may be other tax
purchase of new cars with emission levels implications to consider, for example Stamp
below 110g/km should be considered. These Duty Land Tax.
Similarly sole traders and partners may well Tax and NIC under the benefit rules will also
wish to consider the payment of pension be due to the extent that no interest (or interest
contributions in order that income in this band below the official rate of 4.75%) is paid but
falls below £100,000, thereby clawing back the loans to owner-managers may still prove to be
personal allowance otherwise lost, thus a more attractive option than an outright
achieving a higher rate of tax relief on the dividend payment taxed at the new 42.5%
pension payment. rate. Such a loan will of course need to be
repaid to the company at some point, although
How can the 50% rate be deferred for a write off of the loan or the voting of
company owner managers? remuneration or dividend to cover it could be
considered in the future should tax rates fall
One option is to accelerate the date of again.
bonuses / dividends to pre 6 April 2010. Once
again, this may avoid the increased rates of It is important to ensure that the loan is
tax but will accelerate the date the tax itself properly documented to avoid problems with
has to be paid. HMRC attempting to class the loan as PAYE
It may be felt that the company’s cash flow
cannot support large payments prior to 6 April What about dividends?
2010 but this may well not be the case. All or
most of the money extracted can be lent back Over many years, the attraction of a company
to the company by crediting the shareholder’s for many owner managers has been the
or director’s loan account. Interest could then possibility of avoiding large chunks of NIC by
be paid on the loan if desired. paying dividends. So what is the effect of the
new rules on the remuneration / dividend
This is an efficient method of cash extraction position in light of the above changes and a
as it avoids any National Insurance possible increase in the rate of corporation tax
Contributions (NIC) cost. to 22% from 1 April 2010?
If any employees are holding share options If the company pays a higher rate of
that will create an income tax charge on corporation tax such as the full rate of 28%,
exercise, they may wish to consider exercising additional tax relief will reduce the cost of the
them prior to 6 April 2010. bonus. The extra relief however is still
insufficient to make the bonus cheaper than
Extraction of profits from companies by the cost of a dividend. Similarly, where a
owner managers in the future company has profits charged at the marginal
rate of 29.5% (assuming the main rate does
For many years, companies have provided rise to 22%), because its profits exceed
flexibility for owner managers in how profits £300,000 but have not yet reached £1.5
are extracted. million, the bonus cost is still fractionally more
costly than the cost of a dividend. However, for
Certain benefits are not taxable or liable to a company paying tax at the small companies’
NIC, such as childcare vouchers, and the rate, extraction by way of a dividend is the
costs are usually tax deductible to the most tax efficient method.
company. Employer pension contributions are
also usually tax and NIC efficient. So even if a company gets a higher tax saving
on the bonus, because it pays a higher
These forms of planning continue. corporation tax rate, using current rates, a
bonus remains more costly than a dividend.
Post 6 April 2010, some might consider
making use of loans rather than dividends.
Where a loan is made to a shareholder in a
smaller company, there is usually tax due from
the company, which is 25% of the amount of
the loan / overdrawn current account. This tax
is repayable when the loan is repaid.
Income splitting still works How we can help
Following HMRC’s defeat in the Arctic There are lots of things to think about in
Systems case, many owner-managed relation to these changes in the tax system. As
companies continue to pay dividends to the always, we are here to help. Please do get in
owner-manager’s spouse. However, HMRC touch as soon as possible to discuss your
announced that such arrangements were in options.
their view unacceptable and that they were
going to introduce legislation to counter this so We will be more than happy to provide you
called income shifting. Currently, the with assistance or any additional information
government seem to have put these income you may require.
shifting rules on the back-burner which may
allow a further element of planning by paying
income to non working family members. Ask the Expert
If spouses or civil partners are paying income
Most of you will be aware that in July we
tax at different rates, then tax can be saved by
moving income producing investments to the launched Ask the Expert – a members club
lower earning spouse. There will be no capital where in return for a modest annual
gains tax consequences of such transfers as membership fee, we provide free telephone
long as the parties involved have not advice which is unlimited(!!) provided that
separated. HMRC will assume that income is individual calls do not take more than 15
split equally between the parties if assets are minutes.
owned jointly unless they are advised
otherwise. This is an option only – it does not affect the
time honoured way in which we have provided
For information of users: This material is consultancy, but users have already remarked
published for the information of clients. It upon its value in being able to obtain advice or
provides only an overview of the regulations in a second opinion without them receiving an
force at the date of publication, and no action invoice which may not be easy to pass on to
should be taken without consulting the detailed the client.
legislation or seeking professional advice.
Therefore no responsibility for loss occasioned The cost of a full year’s membership is:
by any person acting or refraining from action
as a result of the material can be accepted by Sole trader - £200 + VAT
the authors or the firm.
2-4 partners - £400 + VAT
5-9 partners - £750 + VAT
Enter the Dragon
10+ partners - £1,000 + VAT
The Enterprise Investment (EIS) and Venture
Capital Trust (VCT) schemes enable This may be of some interest now that the
investments to be made in companies with main tax return season is under way. If you
long term capital gains tax benefits, although would like more information please give us a
such investments are by their very nature call.
higher risk, we do have access to a range of
low risk investments in certain EIS companies.
In addition, an individual’s income tax bill is
reduced by a percentage of the investment –
20% for EIS and 30% for VCTs. Dividends
from a VCT are also free of income tax.
Tax free income
The maximisation of tax free savings using
Individual Savings Accounts (ISAs) should
also be considered. The maximum limit is
being increased to £10,200 with effect from 6
October 2009 for the over 50s and from 6 April
2010 for everyone else.
Salary Sacrifice for Dividends
With the recession now biting, many clients process or by the ownership of valuable
thoughts turn to saving money (and improving property, rather than by an individual.
cashflow) wherever possible. One common
way to do this in small companies, where the Therefore when implementing a salary
directors and shareholders are the same reduction, bear in mind that for maximum
people, is by swapping salary for dividends. By protection it should not go below a defendable
reducing salaries and increasing dividends a market value salary.
tax and cashflow saving can be made.
However, HMRC are understandably unhappy Alphabet shares
when their tax take is reduced and may well
examine the circumstances carefully – as Mr HMRC do not like alphabet shares. These
and Mrs Jones will testify. should be used with extreme caution. If these
are to be used then try to ensure a relationship
So what are the risks? between the capital value and the yield.
There are three main tax based risks and the Tax risk 2 – The settlements legislation
administrative risk. The risks and their severity
are dependent on the facts of each situation While the Arctic systems case may have
provided some protection for husband and wife
Tax risk 1 – Salary sacrifice companies with the delay in the introduction of
the income shifting proposals adding to this,
HMRC may well contend that any reduction in HMRC may still attack arrangements with or
salary, matched by an increase in dividends is, without new legislation in the future.
in reality, a salary sacrifice scheme and seek
to tax the dividends as if they were salary, with
the same NIC and PAYE consequences. There are however ways to protect the position
– for example by extensively documenting the
However, they recently lost this argument in a non-working spouses role. In addition,
First Tier Tribunal case (PA Holdings v Anor) - particular attention should be paid to the way
but only in respect of the PAYE angle. NIC that the company share capital is set up –
was still found to be payable. either by ensuring that this falls within the
spouse exemption in the settlements
And this is where the administrative risk comes legislation or by ensuring that the capital
in – this was only the case because the subscribed supports the return on the
dividend payments were properly dividends. If investment. Shares with limited rights should
they are not, then this case provides no also be avoided – as HMRC can argue that
protection and income tax could be due as well these are a mere right to income.
as the NIC. In any case the addition of the NIC
bill alone will probably negate any benefit of Tax risk 3 – Post Acquisition Benefits
the tax planning exercise.
This can be thought of as the long stop
Market salaries provision for HMRC. If neither of the above
attacks would work, this one surely will. These
But what if salary is reduced to a market level? rules give carte blanche to HMRC to assess
any post acquisition benefit from holding
What is a market salary is open to debate, shares as employment income, with no tax
particularly in these testing economic times. It credit offset or corporation tax deduction.
is reasonable that any return over and above a
market salary is taken as a dividend. This is HMRC have said that they will not “normally”
particularly true where the profit is created by a apply these rules to family businesses. We
suspect that HMRC are confident that they can
defeat arrangements as either salary sacrifice
or under the settlements legislation and so Conclusion
have not needed to use these rules up to now.
Following their recent defeat in PA Holdings it It is possible to maximise the tax benefits of a
is probable that they will start exploring the use salary reduction and an increase in dividends,
of these rules. however this must be done with care and all
relevant factors considered. As long as
Administrative risks protective steps are taken the position can be
defended from a HMRC attack to a large
Dividends extent. We would always advise that you take
detailed, specific, advice on a case by case
Most tax schemes fail not because the basis to maximise the chances of success.
technical argument is unsound, but because
the paperwork is deficient in some way. This is
particularly worth bearing in mind when
dealing with dividends. For a dividend to be Taxation News
legal and fully effective for company law and
tax law purposes, legislation need to be Offshore Accounts: the New Disclosure
complied with and the paper trail correctly Opportunity
On 28 July, HMRC issued details of the long
Dividend waivers promised "New Disclosure Opportunity" (NDO)
for UK taxpayers who may have unpaid tax
liabilities linked with offshore bank accounts or
Many attempts to save tax by altering the
other offshore assets.
salary/dividend mix rely on the use of dividend
waivers. These must be used with caution. As Key features
with dividends, for these to be effective the
rules need to be followed and the paperwork Provided a full and accurate disclosure is
correctly completed. HMRC are very interested made under the scheme, the penalty will
in dividend waivers. It must be borne in mind be capped at 10% of the unpaid tax.
that it is not normal to waive a dividend and
the reasons for so doing must be carefully Taxpayers making a disclosure under this
considered and documented. There are few initiative, who failed to use the Offshore
reasons that HMRC will consider to be valid. Disclosure Facility in 2007 (despite
being 'encouraged' to by HMRC) will be
subject to a minimum 20% penalty.
Retained profits must exist to cover the whole
of the dividend before any waivers are
If the total tax due is under £1,000 the
executed. If not the dividend will not be legally penalty will be 0%.
a dividend. And if it is not a dividend, HMRC
will argue that it is remuneration. Taxpayers who do not avail themselves of
this NDO and who subsequently are found
Legal entitlements to remuneration to have disclosable income or gains will be
subject to higher rates of penalty and an
In the excitement of saving tax and improving increased risk of criminal prosecution.
cashflow another thing that can easily be
overlooked are employment or service Disclosures can be made online or on
contracts that the directors’ have with the paper forms.
company. These may specify a level of
Detailed step-by-step instructions will be
remuneration that they are legally entitled to. It
available on-line from 1 September 2009.
is then very difficult to argue with HMRC that
the new total income that they are receiving
from the company, which is very similar to the
level of remuneration that they are
contractually entitled to as remuneration, is not
For paper-based disclosures; a formal transferring income bearing assets to them
Notification of Intent to Disclose can be to save higher rate tax.
sent to HMRC between 1 September 2009
and 30 November 2009. Company Vans – To avoid a £3,000
taxable benefit and a £500 fuel benefit
Paper-based disclosures that have been make sure that you only use the van for
notified can be sent to HMRC between 1 “incidental private use” (please contact us
September 2009 and 31 January 2010. for further details of incidental private use).
For online disclosures; a formal
Spread your tax payments – Don’t struggle
Notification of Intent to Disclose can be
in silence. At the present time the
sent to HMRC between 1 October 2009
Revenue are willing to spread your tax bill
and 30 November 2009.
over a period of between 3 to 12 months
Online disclosures that have been notified rather than paying it in one lump sum
can be sent to HMRC between 1 October (however interest at 2.5% on the
2009 and 12 March 2010, an online outstanding amount will be chargeable).
disclosure can be made even if the original
Notification was paper-based. Please contact us if you feel this may be of
use to you.
HMRC has hinted that it will take a dim view if
it is apparent that accountants were aware of Child Tax Credit/Working Tax Credit – A
the need for a client to make a disclosure and single person with income of up to
none is actually made. £12,925 will still qualify for Working Tax
Credits whereas a couple with one child
Undisclosed UK or offshore profits of a and a joint income of up to £50,000 will
business which were invested in offshore still qualify for the full “Family Element” of
accounts come within the NDO. Child Tax Credit.
We have a specialist unit from the previous Employed Use of Home as Office – To
NDO which can assist you in this matter
avoid a potential employment benefit / or
should you so require.
disallowance by HMRC, could the
company you work for rent a room in your
home for you to work from? You can then
2009/10 Tax Tips offset any expenditure (mortgage interest,
utilities, council tax) against the rental
Personal Tax Issues income. This tax planning will reduce the
company’s profits and not increase your
Rent out a spare room in your home – any personal tax bill. Please note that to avoid
rental income up to £4,250 (or £2,125 losing Capital Gains Tax Relief on the sale
each if the property is let jointly) is tax free! of the property you must be able to show
that the room is still available for private
From 1 April 2009 a new system of use for at least an hour a day (non
penalties for incorrect tax returns is being exclusive use). You may also need to
introduced. Generally this means state in your contract of employment that
penalties will be higher but if you take you are required to work from home.
“reasonable care” penalties can be Please contact us for further information.
reduced to nil. Therefore make sure you
provide us with full information of all Business Tax Issues
sources of income/expenditure, and if in
doubt as to whether something is taxable Year end tax planning – put aside some
or not please seek our advice. time each year to review your affairs so
that action can be taken before the end of
Take advantage of your wife/husband/civil the tax year. For example if you own your
partner’s allowances/basic rate band, by own company can you pay further
dividends to utilise your basic rate band or Beware letting out part of or the whole of
if you are self employed is it worth business premises that would qualify
purchasing new machinery before your normally for Entrepreneurs Relief as this
accounts year end to reduce taxable will reduce the amount of Entrepreneurs’
profits? Relief to which you are entitled and can
therefore increase the amount liable to
Change to a more economical car - the Capital Gain Tax.
lower the CO2 emissions the lower your
company car tax bill. For Transfer assets between Husband / Wife /
companies/partnerships and the self Civil Partner to utilise their Annual Capital
employed, capital allowances are available Gains Tax Exemption before an asset is
on 100% of the cost of cars with CO2 sold.
emissions of under 110 g/km, whereas
any car with emissions over 160 g/km will With the current economic climate your
only get a capital allowance deduction of assets may be worth considerably less
10% of the cost in the first year (20% for than they once were and therefore now
cars with emissions between 111 g/km might be the perfect time to reduce your
and 160 g/km). This applies to all cars (not Inheritance Tax liability by gifting some of
vans) purchased after 6 April 2009. your assets. Please contact us if you
would be interested in a review of your
Self employed/partnership Use of Home Inheritance Tax position.
as Office –are you claiming enough? By
sending us actual bills (mortgage interest, Residency Issues
utilities, council tax) and details of the
percentage (and amount of time) the office If you are non UK domiciled and have
is used per week we may be able to justify been resident in the UK for seven years
a higher claim, which will reduce your out of the last nine years you will now be
taxable profits. Please note that to avoid liable to UK tax on an arising basis on your
losing Capital Gains Tax Relief on the sale worldwide income from 5 April 2008 (not
of the property you must be able to show just your UK income) or you can pay
that the room is still available for private £30,000 a year for you to remain only
use for at least an hour a day (non taxable on your Worldwide income that is
exclusive use). remitted to the UK.
Has your business made a loss? Any loss From 6 April 2008 there has been a
incurred in your accounts for the year change in the way that the number of days
ending in the year to 31 October 2009 can present in the UK are counted. The
be carried back for up to three years. This previous rules ignored the day of arrival
would reduce your profits in the earlier and departure in calculating the number of
years (and therefore your tax bill). days present in the UK. However, under
Therefore it is more important than ever the new rules, a day of presence is any
that you get your books and records to us day an individual is in the UK at midnight.
as soon as possible after your year-end so There are also other factors (apart from
you can gain the tax relief as soon as the number of days in the UK) the
possible. Revenue may use in deciding your
residence status. Please contact us
Capital Gains/Inheritance Tax Issues should you require further information.
Capital Losses – Any capital losses made
can be carried forward to offset against
any future gains. Therefore it is important
that you keep us informed of all disposals
made or that you plan to make so Capital Due to the economic downturn it may not be
Gains Tax can be minimised. Please note possible to attract, retain and reward highly
that losses will be restricted on disposals valued staff via conventional cash rewards.
made to connected persons. Often a remuneration ‘package’ to include
cash and other benefits (health insurance, gym
membership, etc) is required and this might A company can obtain ‘advance
also include the potential for equity assurance’ that it qualifies for EMI.
Provided conditions are met, a corporation
The Enterprise Management Incentive (“EMI”) tax deduction should be available to the
is a tax privileged share option scheme employing company in the period in which
specifically designed for trading companies
the employee realises a gain.
with growth potential and is intended to help
such companies recruit and retain employees. Potential Pitfalls
The scheme provides individuals with
significant tax benefits and are much more EMI provides generous tax and NIC reliefs for
flexible than other tax favoured share qualifying options. However, there are a
schemes. number of disqualifying events which will
trigger a time limit for action to protect these
tax benefits. Disqualifying events include the
company ceasing to meet the trading activities
EMI can be used by companies which test, the employee ceasing to be an eligible
have gross assets of £30million or less employee or a non-commercial alteration to
and are independent. The company must the share capital of the company that
carry on a qualifying trade and there are increases the value of shares under option.
detailed provisions in this regard.
Examples of trades which do not qualify If there is a disqualifying event the option will
include leasing, farming, financial activities have to be exercised within 40 days of that
and property development. The trading event to ensure full income tax and NIC
activities of the company must be carried benefits are maintained. It is essential that
on wholly or mainly in the UK. companies and option holders keep EMI
arrangements under review.
There is a limit of 250 on the number of
employees that can participate. Market for the Shares
All employees who work for 25 hours a One other issue concerns a market for the
week or, if less, at least 75 per cent of shares. Often employees only exercise their
their working time are eligible to be options at or around the time there is an ‘exit
granted EMI options. Employees who event’ such as a takeover of the company but
have a ‘material interest’ of more than 30 what happens if such an event is not on the
per cent of the share capital before the horizon? In this case the employing company
options are granted are excluded from might consider the set-up of an employee
participation. benefit trust (“EBT”) to act as an internal
market for the shares. Employees wishing to
Each participant can be granted options cash-in on the growth in value of the shares
over shares worth, at the date of grant, up might exercise and sell the shares received to
to £120,000. the EBT. The trustees of the EBT will hold
these shares and use them to satisfy the grant
Options must be granted over ordinary of fresh EMI options to eligible employees in
shares that are fully paid and not the future or simply retain the shares and use
redeemable. The shares can, however, dividends received to reward employees with
be subject to restrictions. bonuses, benefits in kind and other incentives.
The set-up and costs of running of an EBT
There will be income tax and NIC reliefs need not be onerous and should be viewed as
on grant and exercise of the options. If the a sensible mechanism via which to reward key
option is granted at a discount there will be employees.
income tax and NIC payable at exercise
on the amount of the original discount.
Andrew Squires has considerable experience 2010 and an invoice is issued on or after 1
in advising on/setting up EMI schemes and January 2010 but within 14 days, the
anyone requiring more information should normal tax point is the date of issue of the
contact him on 01626 206206. invoice. However special rules for the
change of rate allow for the time of supply
to be treated as the date upon which the
VAT goods or services were actually supplied
(the basic tax point).
Changes to Cross Border Transactions
For continuous supplies of services such
With effect from 1 January 2010 changes are as most accountancy services, work
being introduced which could affect carried out prior to 1 January 2010 can be
businesses which deal with customers or taxed at the 15% rate even if an invoice is
suppliers in other EC countries. issued on or after 1 January 2010.
Changes to the Place of Supply rules for Anti-forestalling legislation has been
services – New rules are being introduced introduced which will apply where a
to ensure that as far as possible VAT is supplier receives payment or issues a VAT
accounted for in the country in which the invoice prior to 1 January 2010 and one of
services are consumed. As at the the following applies:
moment, there will still be exceptions from
the basic rule. The changes will mean that o Supplier and customer are
more clients will have to account for VAT connected
in the UK using the reverse charge o Supplier funds the purchase
procedure. o Payment not due on invoice for at
least 6 months
Changes to the time of supply rules. o Pre-payment made in excess of
£100,000 which is not commercial
EC Sales Lists – From 1 January 2010, practice
EC Sales lists will be required to be
completed by the supplier for services On line VAT Returns
where the customer should account for
VAT in his country using the reverse From 1 April 2010, VAT returns will have to be
charge. In addition, monthly EC Sales filed online for all new VAT registrations and
Lists will be required for goods where the for all existing VAT registered businesses with
value of goods sold in a quarter exceeds a turnover above £100,000. HMRC have
£70,000. The current 42 day time limit for advised that they will write to all affected
submission will be reduced to 14 days traders.
(paper) or 21 days (electronic returns).
Accountants can submit VAT returns on behalf
of clients as long as the client has already set
VAT Refund procedure for VAT incurred in
up a Government Gateway account.
other member states – A new electronic
procedure is being introduced to replace
Taxpayers submitting VAT returns online will
the current paper system.
also have to make their payment of VAT
electronically. They will be entitled to an extra
Increase in VAT rate to 17.5%
7 calendar days within which to submit their
HMRC has issued guidance relating to the VAT return and make payment. If payment of
increase in the VAT rate to 17.5% which will VAT is made by direct debit, an additional 3
be effective from 1 January 2010. working days is allowed before payment is
VAT will be chargeable according to the
normal tax point rules. Where goods or
services are supplied prior to 1 January
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