2008 Budget Report
Following the Chancellors 2008 Budget on 12th March, we have complied a Report to guide you through the key points.
To download a copy of the 2008 Financial Bulletin please follow the link below
http://theburtwistlepartnership.co.uk/images/2008_Financial_bulletin.pdf
Potential Child Benefit Fraud
Every family with children in the country is at risk of identity fraud, after the Government admitted this week that it had lost 25m personal records.
Below are some tips to help protect yourself form identity fraud:
Check your bank statements and change your password.
Never give your personal identification number (PIN) to anyone else.
Shred documents that contain personal details before throwing them away.
Always inform your bank, insurers and other financial institutions of your new address when you move house.
Protect yourself online, by installing and updating appropriate firewall and anti-virus software.
Identify the warning signs of fraud as early as possible.
Request a copy of your personal credit file from credit reference agencies such as Equifax, Experian and Callcredit.
Sign up for a service that will monitor your credit report, and notify you if someone applies for credit in your name.
Consider insurance to help deal with identity theft.
Seek compensation if you are a victim of fraud.
Protecting Yourself from Inflation
Remortgage
Homeowners coming to the end of two-year fixed-rate mortgage offers between now and December 31, are expected to suffer a £500m payment shock due to a raft of interest rate rises in the last 18 months.
By switching to a new base-rate tracker deal, which will fall if the Bank cuts rates next year as expected, you could cut your mortgage repayments by hundreds of pounds a month.
Slash your fuel bills
The Website www.petrolprices.com allows you to find the cheapest fuel within 10 miles of your postcode.
Clever with a Credit Card
Take out a credit card with a 0% introductory deal, withdraw the cash and put it into a high interest savings account.
When the 0% period is coming to an end pay off the debt with the savings.
If you had £20,000 of credit card debts at 0% and put your cash in an account at 6%, you would be able to earn £1,200 in a year.
VAT Major changes of calculating fuel scale charge
HM Revenue and Customs have announced in Brief 13/07 some radical changes to the VAT fuel scale charge, which come into play on 1st May 2007. Businesses must use a new scale from the start of their first accounting period beginning on or after this date.
The existing VAT fuel scale charge, based on the engine size and fuel type of a car, will be replaced by a fuel scale charge based solely on the CO2 rating of a car. A new table, which mirrors that used for car benefits in direct tax, will have 21 bands with 5g/km increments.
A new scale charge table will be available in full the 2007 budget on 21st March as an amendment to Notice 700/64 Motoring Expenses and will provide business with the actual scale charge for a car within a particular band. Apart from the change to a CO2 basis, the system will operate in exactly the same way as the existing VAT fuel scale charge.
The new system will determine the fuel scale charge by CO2 rating alone and there will be no adjustments for fuel type. The exception will be for vehicles too old to have an official CO2 rating; these businesses will be assigned a set band in the new system based on engine capacity alone.
We have a useful link to VCA Car Data that will enable you to discover the CO2 rating of your motor vehicles. - See our links page.
Change to National Minimum Wage
As previously reported by The Burtwistle Partnership, new rules came into effect on the 1st October in respect of the National Minimum Wage.
The adult rate (aged 22 and over) increases to £5.52 per hour.
Development rate (aged 18-21) increases to £4.60 per hour.
Development rate (aged 16-17) increases to £3.40 per hour.
Rate for accommodation offset increases to £30.10 per week.
Employ migrant workers? Are your staff legal
Businesses that employ staff from outside the UK should make certain checks on the right of their employees to work here.
To help ensure all employees create a business environment where everyone is working legally and no one is discriminated against, businesses can find out their legal requirements at www.employingmigrantworkers.org.uk.
Changes to staff's rights on holidays
Worker's are entitled to holiday from their first day of employment.
As of the 1st of October, The Working Time (Amendment) Regulstions 2007 will apply and minimum statutory holiday entitlement rises from four weeks (20 days for those working a five day week) to 24 days.
From 1st April 2009, all full-time and part-time workers will be entitled to 5.6 times their usual working week – capped at a maximum of 28 days. You can include time off for bank and public holidays in the entitlement.
Employees will not have to work for a qualifying period. They will be entitled to the increased entitlement in full as soon as they begin work, though you will be able to restrict the rate at which they take holiday in their first year of employment.
Part-time workers must receive annual leave equal to 4.8 then 5.6 times their usual working week, regardless of whay days of the week they usually work.
HMRC guidance following Arctic Systems Ltd ruling
Background
On 25 July 2007 the House of Lords gave its judgement in the case of Jones v Garnett (also known as “Arctic Systems Ltd). HMRC had previously lost this case in the Court of Appeal and as a result had appealed to the House of Lords. The case concerned dividends payments made by a company to Mrs Jones through which Mr Jones provided IT consultancy services. HMRC’s view was that the settlements legislation deemed the dividends received by his wife to be Mr Jones’ for income tax purposes. The House of Lords, however, has now ruled in favour of Mr Jones.
Ministerial statement
On 26 July 2007 the Exchequer Secretary to the Treasury, Angela Eagle made a Written Statement to Parliament:
“The Government acknowledges the judgement given by the House of Lords in the Jones v Garnett (Arctic Systems) case.
The Government is committed to maintaining fairness in the tax system. The case has brought to light the need for the Government to ensure that there is greater clarity in the law regarding its position on the tax treatment of ‘income splitting’.
Some individuals use non commercial arrangements (arrangements that they would not reasonably enter into with an arms-length third party) to divert income (which would, in the absence of those arrangements have flowed to them) to others. That minimises their tax liability, and results in an unfair outcome, increasing the tax burden on other tax payers and putting businesses that compete with these individuals at a competitive disadvantage.
It is the Government’s view that individuals involved in these arrangements should pay tax on what is, in substance, their own income and that the legislation should clearly provide for this. The Government will therefore bring forward proposals for changes to legislation to ensure this is the case. In the meantime, HMRC will apply the law as elucidated by the House of Lords and will be providing guidance in due course.
The Government would not want commercial arrangements to be caught by any change to legislation. Consultation should help to ensure this.”
Jones v Garnett(Arctic Systems): Victory for Jones
The House of Lords has found in favour of Geoff Jones in the landmark tax case Jones v. Garnett (also knows as “Arctic Systems”). The law lords rejected HM Revenue and Customs’ appeal to tax Geoff Jones on dividends paid to his wife, Diana. The judgement marks the end of a tax case that has gripped accountants and small business owners for the last four years and dominated all recent SME tax planning. No further appeals are possible under UK law.
In their judgment, handed this morning, the lords ruled that:
The Jones created an arrangement in the nature of a settlement when they planned, and subscribed for one share each, and set up their company Arctic Systems Ltd
However, the exemption for gifts between spouses also applied and so dividends paid to Mrs Jones were therefore not income arising under a settlement.
The Jones were jubilant after the landmark decision, which was not totally unexpected by HMRC, (the Court of Appeal had previously and unanimously found in favour of the taxpayer), but Geoff Jones said that he is "extremely angry" about HMRC's failed "stunt".
Smoking Ban -Motor Vehicles
The Legislation
The new regulations create three new specific offences:
Smoking in a smoke-free vehicle -This carries a potential fine of up to £200 per offence.
Failing to display no smoking signs in smoke-free vehicles covered by the law -This carries a potential fine of up to £1000 per offence.
Failing to prevent smoking in a smoke-free vehicle -This carries a potential fine of up to £2500 per offence.
The employee and the employer have a duty to ensure the above offences are not contravened. Failure to abide by these new regulations could lead to fines as stipulated above imposed on the employee, the employer, or both.
Tax Credit Deadline
The working and children's tax credit annual review forms must be dealt with before the end of the month.
Please read your review and if you need to submit an annual declaration of income for the year ended 5th April 2007 do so now.
Failure to submit this form will result in awards being stopped and the possibility of you having to repay money back to HMRC.
If you don't have all of the information needed to complete the annual declaration, include an estimate and enter a cross in the estimate box to indicate this. You then have until the 31st January 2008 to supply HMRC with the final figures.
The declarations may be posted or the information submitted to HMRC by telephone.
Changes to Web and Electronic Documents
The government has recently issued new legislation extending the requirements for companies and Limited Liability Partnerships (LLPs) to provide certain particulars about themselves on their websites and in electronic versions of all documents.
The new legislation became effective from 1 January 2007 and there are penalties for those who do not comply.
The changes mean that companies and LLPs must disclose their name, place of registration, registered number and the address of their registered office on their websites. This information must already be included on business letters and order forms. The new legislation extends the requirements to include this information to such documents in electronic format. As so many of us now conduct business correspondence by email, this has implications for the amount of information that must be included.
Please do get in touch if you want any more clarification on this.
Construction Industry Scheme
HMRC has launched their press campaign on the introduction of the new Construction Industry Scheme (CIS) which will be introduced on 6 April 2007. In the Pre-Budget Report the government made two announcements regarding CIS tax rates.
Under the current scheme subcontractors may be entitled to receive payments without deduction of tax if they have satisfied certain criteria. Otherwise there is a standard deduction rate (currently 18%) for registered subcontractors.
According to HMRC an increasing proportion of subcontractors in the current scheme do not have their full tax and NIC met by their deductions. To reduce the additional payments due after the end of the year, the new scheme will have a standard deduction rate of 20%.
A higher deduction rate will be introduced in the new scheme which allows unregistered subcontractors to start work. The government has now confirmed this rate will be 30%. One of the purposes of the higher rate is to encourage subcontractors to register.
In preparation for the new scheme HMRC have recently sent a letter and a paper list or CD-ROM, to all registered contractors. The lists contain details of subcontractors paid since 6 April 2005 and therefore not requiring verification under new CIS.
The new scheme will mean that contractors will have to file monthly returns detailing the payments made to subcontractors and details of the tax deductions made, where appropriate. Contractors also have to sign the return to say that they have considered the status of the subcontractors that have been engaged by the business and that they are not employees.
Penalties apply for late and incorrect forms.
We will be contacting our clients who will be affected by these changes and inviting them to a seminar which we will be heading on this subject. If you are not an existing client but feel that this may be of interest to you then please contact us for details.
HMRC Email Scam
HMRC have issued a warning to taxpayers about an email scam which is a 'phishing exercise' that uses bogus emails and websites to trick people into supplying confidential or personal information.
The email asks taxpayers to complete a form with their bank details, on the understanding that they will receive a large repayment of tax direct to their bank account. The message and the promised tax rebate from 'HMRC Premier Services' are not legitimate.
Contact us immediately if you receive any correspondence purported to be from HMRC and that you are suspicious about.
New Companies Act Now Law
The Companies Act 2006 has finally received Royal Assent. The Act aims to simplify and improve company law and will take two years to implement.
Running to some 1,300 sections the Act sets out the way companies are formed, managed and the legal requirements including new responsibilities for directors.
Trade and Industry Secretary Alistair Darling said that there would be 'widespread and effective communication' to ensure that businesses understand the new Act.
We will of course be in touch with those businesses that will be affected by changes in the law in due course.
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