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This months newsletter opens with a seasonal comment on staff
parties and gifts. We have also included an update on new legislation
pending; a timely reminder for self assessment tax payers who
have still not supplied their tax return details for last year;
a note on the transfer of unused married couples allowance;
and finally an update on the proposed new tax credit for claimants
of certain enhanced capital allowances.
The next newsletter will be published on Tuesday 8th January
2008.
May we take this opportunity to wish all our readers a very
happy and prosperous new year.
Start Entertaining for Christmas
The costs of a staff party or other annual entertainment is
allowed as a deduction for tax purposes. As long as the criteria
below are followed, there will be no taxable benefit charged
to employees.
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The event must be open to all employees at a particular
location.
-
The cost is only tax deductible for employees and their
partners (which would include directors in the case of a
company) but not sole traders and business partners in the
case of unincorporated organisations.
-
An annual Christmas party or other annual event offered
to staff generally is not taxable on those attending provided
that the average cost per head of the function does not
exceed £150. Partners and spouses of staff attending
are included in the head count when computing the cost per
head attending.
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All costs must be taken into account, including the costs
of transport to and from the event or accommodation provided,
and VAT. The total cost of the event is merely divided by
the number attending to find the average cost. If the limit
is exceeded then individual members of staff will be taxable
on their average cost, plus the cost for any guests they
were permitted to bring.
-
VAT input tax can be recovered on staff entertaining expenditure.
If staff partners/spouses are also invited to the event
the input tax has to be apportioned, as the VAT applicable
to non-staff is not recoverable. However if non-staff attendees
pay a reasonable contribution to the event, all the VAT
can be reclaimed and of course output tax should be accounted
for on the amount of the contribution.
A final note on gifts for employees.
Trivial seasonal gifts for employees!
Employers may find the following Revenue concession useful
- we have copied the note directly from the HMRC handbook:
"An employer may provide employees with a seasonal gift,
such as a turkey, an ordinary bottle of wine or a box of chocolates
at Christmas. All of these gifts are considered to be trivial
and as such are not taxable. For an employer with a large number
of employees the total cost of providing a gift to each employee
may be considerable, but where the gift to each employee is
a trivial benefit, this principle applies regardless of the
total cost to the employer and the number of employees concerned."
One final caution regarding VAT and staff gifts. VAT is due
from the employer when an employee receives gifts totalling
more than £50 in a year. Turkeys however are zero rated
for VAT purposes!
Merry Christmas!
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New legislation - publication
imminent.
As we write this newsletter we are expecting the Revenue to
publish details of changes to the following areas of tax:
1. Capital Gains Tax
Draft legislation is due for publication December 2007 explaining
the detailed changes to CGT from 6 April 2008. This will provide
us with the small print. At present all we have to go on are
the disclosures made by Alistair Darling in his Pre Budget Report
on 9 October 2007.
If there are no significant changes to the October position,
we can expect the Revenue to provide the draft legal framework
for CGT from 6 April 2008 that will operate without the benefits
of indexation or taper relief. There is also the possibility
that a simplified form of retirement relief may be included
to reduce the tax payable when businesses are sold. It is rumoured
that the first £100,000 of gains on retirement may be
exempted from charge to tax, or subject to a lower rate of say
10%.
We will include a further update on this topic in the January
2008 newsletter.
2. Income Shifting
Where a husband and wife are in business together there is
a risk that the Revenue will become interested in the commercial
justification for the way in which they split earnings or profit.
During 2007 the Revenue were defeated in the House of Lords
in the Arctic Systems case. Here HMRC sought to assess the husband
on his wife's income from their business, on the basis that
he was responsible for the lion's share of the income generation
and management. The Revenue's position failed due to flaws in
their legal arguments. As a direct result of this outcome the
Revenue promised to legislate to enable them to challenge similar
cases in the future.
We are expecting HMRC to publish details of new legislation
to deal with income shifting, either late November or December
2007. This will have ramifications for all husband and wife
business arrangements. (It will also include businesses run
by Civil Partnership couples.) Again we will advise clients
as soon as we have the detail and will publish our comments
in a forthcoming newsletter.
3. Residence and Domicile
Changes to the tax rules regarding residence and domicile are
also expected late November or early December 2007. We will
publish details as soon as they become available.
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office regarding this article.
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Self Assessment filing deadline, tax
year 2006-2007
Clients who have not yet provided information so that we can
complete their self assessment tax returns for 2006-2007 may
like to take note of the following points:
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The deadline for filing the return is 31 January 2008.
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Late filing will incur a fixed penalty of £100 per
return outstanding. The £100 fine is capped at the
amount of tax due. So if your self assessment liability
for 2006-7 is less than £100, the penalty will be
reduced to the same amount. This concession does not apply
to late filed partnership returns.
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The late filing penalty for partnership returns is £100
per partner.
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Until we have your return completed we cannot provide an
accurate computation of your tax payments due in 2008. i.e.
the balance of any tax and/or class 4 National Insurance
for 2006-2007, payable on the 31 January 2008; any first
payment on account which may be due for 2007-2008 on 31
January 2008; any second payment on account for 2007-2008
which may be due 31 July 2008.
If they are not yet provided can we request that you let us
have your tax return details as soon as possible please.
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office regarding this article.
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Married Couples Allowance - for those
born before 6 April 1935.
The Married Couple's Allowance reduces the amount of income
tax a married couple or civil partners have to pay. The amount
you can claim depends on your ages and, for couples who married
before 5 December 2005, the husband's total income from all
sources. For civil partners and couples who married on or after
5 December 2005, the amount depends on the total income of the
spouse or civil partner with the higher income.
For the tax year 2007-2008 the allowance is available when
either partner was born before the 6 April 1935.
The maximum allowances available for 2007-2008 are:
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£6,285 at 10% - if either you or your spouse or civil
partner was born before 6 April 1935 but aged under 75 (so
the allowance can be worth up to £628.50 off your
tax bill)
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£6,365 at 10% - if either you or your spouse or civil
partner is aged 75 or more (so it can be worth up to £636.50
off your tax bill).
What many couples may not realise is that if this allowance
is not fully utilised by the entitled partner any surplus can
be transferred to their spouse or civil partner, and used to
reduce their tax bill. As you would expect there is
a form that needs to be filled in!
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office regarding this article.
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Tax Diary December 2007/January 2008
1 December 2007 - Due date for corporation
tax due for the year ended 28 February 2007.
19 December 2007 - PAYE and NIC deductions
due for month ended 5 December 2007. (If you pay your tax electronically
the due date is 22 December 2007)
19 December 2007 - Filing deadline for the
CIS300 monthly return for the month ended 5 December 2007.
19 December 2007 - CIS tax deducted for the
month ended 5 December 2007 is payable by today.
1 January 2008 - Due date for corporation
tax due for the year ended 31 March 2007.
19 January 2008 - PAYE and NIC deductions
due for month ended 5 January 2008. (If you pay your tax electronically
the due date is 22 January 2008)
19 January 2008 - Filing deadline for the
CIS300 monthly return for the month ended 5 January 2008.
19 January 2008 - CIS tax deducted for the
month ended 5 January 2008 is payable by today.
31 January 2008 - Filing deadline for all
individual, partnership, and trust self assessment tax returns
for the year ending 5 April 2007.
31 January 2008 - Due date for payment of
any balancing self assessment tax and/or NIC class 4 contributions
due for the year ending 5 April 2007.
31 January 2008 - Due date for payment of
any first payment on account of self assessment liabilities
for 2007-2008.
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office regarding this article.
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DISCLAIMER - PLEASE NOTE: The ideas shared
with you in this email are intended to inform rather than advise.
Taxpayers circumstances do vary and if you feel that tax strategies
we have outlined may be beneficial it is important that you
contact us before implementation. If you do or do not take action
as a result of reading this newsletter, before receiving our
written endorsement, we will accept no responsibility for any
financial loss incurred.
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