We have an update for you this month on the long
running Arctic Systems case, tax efficient car management,
possible changes to the filing deadlines of self assessment
tax returns, and, a note of the new VAT car scale charges.
Take note that on the 5 April last week the current
tax year came to an end. This triggered a number of filing
deadlines, particularly for those businesses who employ staff!
Please refer to the Tax Diary section for more information.
Please accept our apologies for the comment we made
in the Budget update last month regarding the lower, weekly
national insurance limit. We inferred that you would pay no
contributions on earnings below £84 per week, this should
have said £97 per week.
Readers may also find the following notes useful:
-
the highest NIC-free/PAYE-free salary to be drawn from
businesses by directors or employees who have no other
income has gone up from £407 to £420pm, (from the 6 April
2006).
-
the maximum monthly tax-free childcare payment by an
employer has gone up from £217 to £243 with effect from
6 April 2006. The monthly allowance this tax year, 2006-2007,
is based on a 53 week tax year. The £243 is calculated
as 53 weeks at £55 per week, divided by 12!
Arctic Systems Case - Revenue have leave to appeal.
This case concerns a Mr and Mrs Jones who set up a limited
company and are now resisting a claim by the Revenue that
the dividends voted to Mrs Jones, 50% of the total declared,
should be taxable as if allocated to Mr Jones!
The basis of the Revenue's claim is that as Mr Jones did
most of the chargeable work, then he should be taxed on most
of the dividends voted. The downside for Mr and Mrs Jones
is that this switch from Mrs to Mr will increase Mr Jones'
higher rate tax bill, and reduce Mrs Jones' standard rate
tax bill - overall a gain for the taxman.
In December of last year the Court of Appeal voted in favour
of Mr and Mrs Jones, however the court did grant leave to
the Revenue to apply for permission to take the case to the
House of Lords.
On Budget day this permission was granted and we will now
have to wait for the case to be decided by the Law Lords.
This is unlikely to be before the end of 2006.
For now we will have to keep a watching brief on the effects
that this case has on the structure and salary/dividend policy
of existing husband and wife run companies. At present the
decision handed down by the Court of Appeal stands. We will
keep you informed of progress with this case and let's hope
that the decision reached in the Court of Appeal is upheld!
Green Cars - tax incentives!
If you have not already noticed, Gordon Brown and his team
at the Treasury are embracing the challenge of climate change,
and attempting to do their bit to encourage us to drive cars
with lower CO2 emissions. For instance:
-
On Budget day last month changes were announced to the
rates of vehicle excise duty. At one end of the scale
cars that are rated at 100 g/km or less will pay NO excise
duty. Cars with a CO2 rating over 225 g/km, and registered
after 31 March 2006 will pay £210 per annum (petrol engine),
£215 per annum (diesel engine). There will be a graduated
duty for cars in between.
-
For all cars that are registered before the 31 March
2008, and have CO2 emissions of less than 120 g/km, you
can claim 100% of the capital cost against your profits
(adjusted for private use). Cars over 120 g/km will be
restricted to the usual 25% writing down allowance up
to a maximum of £3,000 per annum - and again will be adjusted
for private use.
-
Employees who use their own CO2 efficient car for business
mileage, will be getting more value from the rate per
mile they receive for expenses, compared to car owners
who run less fuel effective vehicles.
-
A company car driver will pay tax at his or her highest
rate, on a scale charge calculated as a percentage of
the list price of the company car when new. For cars with
emissions below 145 g/km the rate applied is 15% - rising
to 35% for the gas guzzlers! So again drivers of the lower
rated cars will pay less tax, and, their employers will
pay less class 1A National Insurance.
We would be delighted to work out the comparative savings
if your business converted to a "Green Car" policy. Although
the choice of vehicles may be somewhat limited, and not to
every driver's taste, perhaps the tax and cash flow implications
are worth looking at.
Lord Carter of Coles - Report on Online Services
Lord Carter's report "Review of HMRC Online Services" was
published this month.
Amongst its many recommendations we have highlighted comments
on the filing of Self-Assessment Tax Returns - makes for interesting
reading!
First the bad news.
It is proposed that from 2007-2008 the filing period for
paper returns should be reduced to 6 months - the deadline
will therefore be the 30 September. The filing period for
online returns should be reduced to 8 months - the deadline
being 30 November.
At present the filing period for all SA returns is 10 months,
the 31 January following the tax year end.
If adopted this will have a radical impact on the speed with
which information is collected and processed. For instance
if you are self employed and have a 31 March year end we will
have just 6 to 8 months to prepare your accounts, and prepare
and file returns with the Revenue.
Now the good news.
The report recommends that the period the Revenue have to
query your SA return, and most company returns, the "enquiry
window", should be linked to the date the return is submitted,
and not the filing deadline.
For instance whenever you file your 2006 tax return, assuming
it's before the 31 January 2007, HMRC will have up to one
year from 31 January 2007 to query your return. Under the
new proposals from 2007-2008 the "enquiry window" will be
reduced to 1 year from the date you file the return.
It is hoped that this will help to promote earlier filing
of returns and close the "enquiry window" sooner.
Summary
Eventually it is likely that all returns will be filed electronically.
Certainly Lord Carter is of the opinion that e-filing should
be encouraged. It is best to be prepared. We will monitor
the situation and advise you of practical changes that we
may need to make to ensure your returns are filed in good
time.
VAT - Changes in Fuel Scale Charges
New scale charges apply as from 1 May 2006. We have shown
below the new rates for a three month period, if you require
the annual or monthly rates please call.
These new rates should be adjusted on VAT returns beginning
on or after 1 May 2006.
1400 cc's or less: (Diesel, scale charge £260, VAT due per
car £38.72), (Other, scale charge £273, VAT due per car £40.66)
1401 to 2000 cc's: (Diesel, scale charge £260, VAT due per
car £38.72), (Other, scale charge £346, VAT due per car £51.53)
2001 cc's or more: (Diesel, scale charge £331, VAT due per
car £49.30), (Other, scale charge £508, VAT due per car £75.66)
Tax Diary April/May 2006
1 April 2006 - Due date for corporation
tax due for the year ending 30 June 2005.
19 April 2006 - Last date to pay any outstanding
PAYE and Class 1 NICs for 2005/06 to the Revenue. (If you
pay your tax electronically the due date is 22 April 2006).Interest
will be charged on any payments received by the Inland Revenue
after this date.
1 May 2006 - Due date for corporation tax
due for the year ending 31 July 2005.
19 May 2006 - PAYE and NIC deductions due
for month ending 5 May 2006. (If you pay your tax electronically
the due date is 22 May 2006)
19 May 2006 - The payroll form P35 and P14's
must be filed by this date - employers late in filing this
form may receive a penalty.
31 May 2006 - Ensure all employees have
been given their P60s.
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circumstances do vary and if you feel that tax strategies
we have outlined may be beneficial it is important that you
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