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					Happy New Year. The festive holidays seem far behind now and long
forgotten amidst the madness that is January – and I don’t mean the sales.

This year, the normal 31st January problems and compounded by the
threatened industrial action by HMRC.

Naturally, we are all being urged to get the returns in before then but
HMRC have conceded that if, a customer (or agent) finds it impossible to
deliver a return on 31 January as a direct result of industrial action, and
the return is then filed on 1 February, they will treat it as filed on 31

However, let’s forget about tax returns for a minute and since Burn’s
Nights are this month’s event, we’ll have a poetic theme.

Read on……
1. Entrepreneurs’ Relief

1. Simplified SMEs

1. Have you checked your fuel?
2. VAT on Residential Property

1. Vital Statistics
2. Money Made Clear
3. Scottish Charity Test
      1. Entrepreneurs’ Relief
        Do you remember the pre Budget report? Do you remember the
        Chancellor abolished taper relief and created a much simpler
      system of capital gains tax with one rate for all?

Well, lots of people didn’t like that idea. We don’t want one rate for all,
they cried, we’re a special case.

Well it appears the Chancellor has listened to this as has announced a
new rate for these special cases – he calls it entrepreneurs’ relief.

If you qualify, the capital gains tax on your disposals will be 10% instead
of the 18% everyone else will have to pay .

Let us all rejoice. A tax cut. Well no, not really, it is just going back to
the rate is was for this group but it seems like good news.

Is it just me or do you often feel we are living in Orwell’s 1984?

So, who gets this new relief ?

Capital gains made in the disposal or part disposal of a business

Capital gains made in the disposal of assets following the cessation of a

There are of course conditions and an upper limit of £1 million

This is a lifetime limit so you have to keep a note of claims made under
entrepreneur relief in case you make another large gain at a later date.

This “new” relief is a bit like retirement relief but simpler – you don’t
have to have owned the business for any specific time and there are no
age restrictions
So, what are the conditions?

   It is for individuals ( or partners) running a business
   You don’t get it for a property letting business ( unless furnished)
   If business ceases, you have 3 years to sell the assets
   You can get it for disposing of shares in a trading company

This relief is due to come in on 6th April 2008.

1.Simplified SMEs
 More often than not, measures coming from the EU seem to lead to
 more red tape, paperwork, procedures and general bureaucracy which
 we could all do without.

 However, the latest EU proposal does seem to actually reduce the
 burden of administration from some businesses.

 Among the proposal are

 The Micro Entity

 While many business owners might take umbridge at being called a
 micro entity, they might be willing to accept the title if it meant
 exemption from all EC Directives on accounting. This could lead to
 much simpler accounts, possibly being exempt from all disclosure
 notes and the prescribed format for accounts.

 Micro entities would be those with turnover below £700,000,
 balance sheet total below £350,000 and having less than 10

 Deferred Tax
The proposals seek to exempt SMEs from having to provide deferred
tax. I suspect not too many of them do this anyway.

Audit Exemption

Under current rules, where a group exceeds the audit threshold, all
group companies have to be audited no matter how small.

Under the proposed rules, provided the parent produced consolidated
accounts, the subsidiaries would only need to be audited via the
parent. This would be based on the group perspective and therefore
group materiality.

Period of Review

At present, when determining the size of the company for disclosure
purposes, you must look at the current and prior period. Therefore, a
company which meets the small co criteria in year 1 but breaches them
in year 2 will still be treated as small in year 2. However if it breaches
them again in year 3 then it will be treated as medium sized ( or large)
in year 3. Are you following this.

Under the proposals, the company would not be treated as medium
sized unless it had failed to meet the “small” criteria in years 2,3,4,5
and 6. On the other hand, if it was medium sized in year 1 but met the
“small” criteria in year 2 them it would be classed as “small” in year

Put simply, the proposals make it better for the smaller company.

Source: Small Practitioner December 2007
1. Have you checked your fuel?

Next time you go to the petrol station, have a look and see if they sell

Sorry ? What’s that?

Well, it seems to be vehicle fuel that is less bad for the environment.

Some new cars run on this and if you have one of these as a company car
and your employer provides private fuel then you’ll get a bit of a

Company cars running on bioethanol or E85 ~(which is something
similar) will get a 2% reduction on the private fuel charge.

Furthermore, anyone buying a new company car should bear in mind that
those emitting 120g/km of C02 will suffer only a 10% benefit in kind if
available for private use.

Source: CA Magazine January 2008

2.VAT on Residential Property
Since 1 January 2008, renovations and alterations to residential properties
which have been empty for at least 2 years will be eligible for 5% VAT.

Prior to this date, such properties had to have been empty for 3 years to
qualify for the reduced rate of VAT.
1.Vital Statistics
Inflation and interest rates are always in the news. The Bank of England
have not touched the interest rates this month. I still haven’t received a
letter advising me of the reduction in my mortgage rate yet despite the
rate being cut in December!!

The consumer price index (CPI) is the one the government monitor for
and is the most commonly reported figure of “inflation”. It is similar to
the Retail Price Index except that it excludes mortgage costs.

For those who don’t want to read any further, here are the current figures:

CPI December 07                         106.2     2.1%
RPI December 07                         210.9     4.0%
Interest rate                           5. 5% at 10/1/08

Now for the detail.

Firstly the retail price index. Although this is not the inflation figure you
see in the papers, it is the accountants favourite and as such gets top

Retail Price Index
 DATE                                 INDEX                INFLATION
December 2007                         210.9                4.0%
November 2007                         209.7                4.3%
October 2007                          208.9                4.2%
September 2007                        208.0                3.9%
August 2007                           207.3                4.1%
July 2007                             206.1                3.8%
June 2007                             207.3                4.4%
May 2007                              206.2                4.3%
April 2007                            205.4                4.5%
March 2007                            204.4                4.8%
February 2007                         203.1                4.6%
January 2007                          201.6                4.2%
December 2006                         202                  4.4%

Inflation is the percentage change in the retail price index compared with the same
month one year previously.

The next one is monitored by the Government who have set a target of 2% but an
upper limit of 3%. When it goes over this, the Bank of England and the Treasury have
Consumer Prices Index

 DATE                                 INDEX               INFLATION
December 2007                         106.2               2.1%
November 2007                         105.4               2.1%
October 2007                          105.3               2.1%
September 2007                        104.8               1.8%
August 2007                           104.7               1.8%
July 2007                             104.4               1.9%
June 2007                             105.0               2.4%
May 2007                              104.8               2.5%
April 2007                            104.5               2.8%
March 2007                            104.2               3.1%
February 2007                         103.7               2.8%
January 2007                          103.2               2.7%
December 2006                         104.0               3.0%

It is the measure adopted by the Government for its UK inflation target. The Bank of
England's Monetary Policy Committee is required to achieve a target of 2 per cent,
subject to a margin of one percentage point on either side.

Clearing Bank Base Rate

6/12/07 -                             5.5%
5/7/07 – 5/12/07                      5.75%
10/5/07 – 4/7/07                      5.5%
11/1/07 – 9/5/07                       5.25%
9/11/06 – 10/1/07                      5%
3/8/06 – 8/11/06                       4.75%
5/8/05 – 2/8/06                        4.50%
5/8/04 – 4/8/05                        4.75%,
10/6/04                                4.50%,
6/5/04                                 4.25%,
5/2/04                                 4%

Source: Latest Economic Indicators –
       Bank of

3.Money Made Clear
In this month of debt, the FSA have issued a guide on how we can make more of our

At the start of a New Year, it is a good time to look at your finances and budget
sensibly for the year ahead.

The FSA have created an online budget calculator which is quite helpful in helping
you identify areas where you could, if need be, cut back on your spending.

The web site also has a financial health check to help identify your financial needs.

The guide is written is plain English and is a good starting point for anyone who is
serious about sorting out their finances.


4. Scottish Charity Test
The Scottish charity regulator (OSCR) are carrying out a rolling review of all Scottish
charities to identify whether they meet the new charity test.

As part of this process, they have issued draft guidance which outlines this new test
and how identify if a charity meets it.

So, what is the test?
Well, it’s a 2- parter

1. its purpose meets at least one of the laid down charitable purposes


2. it provides public benefit

The first one is quite wide and covers such things as
 relief of poverty
 advancement of health
 saving of lives
 advancement of public participation in sport
 advancement of citizenship
 promotion of equality
 any other purpose analogous to one of the laid down purposes

The last one covers such things as providing assistance to find employment would be
analogous to the relief of poverty.

So, basically, there are lots of charitable purposes and you should be able to find one
that fits.

The second part of the test is the tough one however.

OSCR expect charities to be able to identify and describe the public benefit provided
and OSCR will weigh up that perceived benefit with any private benefit or any
disbenefit ( is there really such a word!!) while taking account of any conditions
applying to that benefit and considering whether these are unduly restrictive.

No, I didn’t understand that either!!!

Benefits can be tangible and therefore measured eg relief of poverty

Benefits can be intangible and difficult to measure eg promoting appreciation of
historic buildings

Benefits can be direct ie charity activities for a specific group directly help that group
eg hospice providing palliative care for its patients

Benefits can be indirect eg professional body setting standards for medical care will
indirectly raise standards in other medical areas by raising expectations

There must be a clear link between the charitable purpose and the public benefit.

The term public is not actually defined but must be a wide enough group to be
considered a section of the public. This will be measured against any restrictive
conditions and any private benefit.
Private benefit is the benefit obtained by members rather than the general public. It
doesn’t mean that members shouldn’t get benefits but that these must be incidental to
the purpose of the charity

Restrictive conditions cover such matters as restrictions on the number of possible
beneficiaries. It is acceptable to specify restrictions eg geographical location, ethnic
group etc but these must not be unduly restrictive. A restrictive condition may be a fee
level – again the key element is whether it is so high as to unduly restrict a high
proportion of the public.

There are also rules about the distribution of property which are really rather obvious
but only once they’ve been pointed out. If the constitution requires the charity to
distribute profits to trustees or where a building would be returned to its donor in the
event of the charity ceasing then the organisation will not be granted charitable status.

Also, it must be independent of the Government – specifically Ministers of the Crown
and have no party political purpose. It’s worth double checking the constitution.


If you would like to discuss any of the above issues please contact us on 01797
223127 or email

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