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This month our newsletter includes some of the tax implications
of redundancy payments; a pre tax year end check list for the
self employed; a comment on the effects of exchange rate fluctuations
if you sell property abroad; and finally an update from HMRC
on advisory fuel rates, the tax status of bonus payments to
pensioners, and an announced further offshore disclosure facility.
Our next newsletter will be published on Thursday 5 March.
Redundancy payments
The notes that follow highlight a few but not all of the considerations
that affect redundancy pay outs:
Q. Do I pay tax or National Insurance on my redundancy payment?
A. No - as long as the amount does not exceed £30,000 and it
is a genuine redundancy payment.
Q. Where can I get impartial advice on my rights if I am made
redundant?
A. Try ACAS on 08457 474747 or their web site www.acas.co.uk,
you could also try Citizens Advice www.adviceguide.org.uk or
find their number in your local phone directory.
Q. What happens if I receive a company car or other goods in
lieu of a redundancy payment?
A. Anything you receive other than money is converted to a cash
equivalent - if the purpose of the transfer of assets is given
to compensate you for your redundancy this cash equivalent forms
part of your £30,000 tax free sum.
Q. What happens if my employer cannot afford to pay me the
statutory redundancy that I am due?
A. The Redundancy Payments Office will make the payments you
are due - ACAS or Citizens Advice should be able to advise you
on the application process.
Q. If I receive a terminal bonus or payment for doing extra
work leading up to redundancy, is this tax free?
A. No - only genuine payments for redundancy are included in
the £30,000 tax free sum.
Q. Do I qualify for statutory redundancy if I have worked for
an employer for one year?
A. No - you must have completed 2 years service since age 18.
If you have concerns about redundancy as an employer or employee
we would be happy to discuss the issues with you.
Planning for the tax year end 5 April 2009
If you are self employed, either a sole trader or in partnership,
you are approaching a key date - the end of yet another tax
year.
Due to the current economic downturn you may recently have
experienced a drop in your profitability, indeed you may be
trading at a loss.
If this is the case please read the check list that follows.
We can only help you to achieve the very best tax result if
we are made aware, in good time, of your financial situation.
Read the check list and call for a pre year end review.
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If you are trading at a loss you may be eligible to carry
up to £50,000 of the loss back for an extended period under
new rules applying to the current year only. To maximise
the losses claimed it may be beneficial to change your accounting
date to 31 March 2009, if it is not already this date.
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Timing of capital purchases or disposals, either before
or after the end of the tax year, can be organised to maximise
claims under the new Annual Investment Allowance of £50,000.
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If your profits have decreased this year, to 31 March 2009,
compared to the previous year (31 March 2008), this may
reduce the tax payments on account you offer in January
and July 2009.
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If you are forced to layoff staff and have some flexibility
when you make redundancy payments, is this best charged
in this current year, or the decision deferred to the next
trading year?
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What is your bad debt situation. Have you made adequate
provision in your accounts. Has any VAT on bad debts over
6 months old been claimed back? Please note that if you
use Cash Accounting for VAT you only pay VAT added to your
invoices when you are paid - so you don't need to worry
about claiming for bad debts.
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If you have made a loss in this current year does this
affect the tax relief you may have received on pension contributions?
Will the tax have to be repaid or contributions recovered?
This is a year when careful consideration of your current trading
position is paramount. There is no point in ducking this issue.
If you do, you may end up paying more tax than is necessary.
Paying less tax, or winning repayments of tax will only be one
aspect of your fight to sustain a healthy cash flow - nevertheless
it is not one you should ignore.
Selling property abroad
Sterling has depreciated considerably against the Euro in the
last year. Whilst this is of great interest to other Euro zone
residents, who can buy property in the UK at much lower Euro
cost, the opposite applies to UK residents who have purchased
property elsewhere in the Euro zone.
For instance a property in Spain costing 1.5m Euros purchased
early 2007 would have required an investment of £1m sterling.
A similar property may currently be worth 1.25m Euros. This
is a loss on your investment of 250,000 Euros. Common sense
might argue that if you disposed of the property now, you would
merely multiply the loss by the exchange rate prevailing when
the sale completed? Unfortunately this is not the case!
Capital gains tax legislation dictates that you compare the
sterling value of the purchase at the date of purchase, with
the sterling value of the disposal at the date of disposal.
In our example a property disposal today of 1.25m Euros converts
to just under £1.2m sterling. You have made a taxable gain of
almost £200,000. Brilliant you may say but what if you want
to reinvest the proceeds in another property in the Euro zone?
The sterling gain of £200,000 will cost you possibly £36,000
in UK taxes; that's £36,000 less to invest!
So be wary. A loss on sale in a local currency can produce
unwelcome tax liabilities when converted to sterling.
HMRC Updates
Advisory Fuel Rates
From 1 January 2009 HMRC have issued revised fuel rates for
car users.
These rates apply when:
The rates can also be applied to calculate the deemed VAT input
tax (included in the fuel element), in mileage rates paid to
employees for the business use of their own cars.
The new rates per mile are:
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1400cc or less: Petrol 10p, Diesel 11p, LPG 7p.
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1401cc to 2000cc: Petrol 12p, Diesel 11p, LPG 9p.
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Over 2000cc: Petrol 17p, Diesel 14p, LPG 12p.
Extra State Bonuses
If you receive the £10 Christmas bonus for pensioners, you
will be entitled to the additional one-off payment between January
and March 2009 of £60.
You will be pleased to know that both payments are tax free!
Second Offshore Disclosure facility
On 20 November 2008 HM Revenue & Customs confirmed that
it is to launch a second campaign in 2009 to collect unpaid
tax in offshore accounts. The Offshore Disclosure Facility (ODF)
will target account holders with money in building societies
and any of the 300 UK-based banks that have offshore operations.
Last year's similar campaign focused solely on customers of
the five largest high-street banks. According to an HMRC spokesman,
"The intention of the new facility will be to provide an opportunity
for account holders to inform us of their own accord of any
unpaid tax or duties and to settle their debts in a similar
way to the original offshore disclosure facility."
Taxpayers affected will face threat of prosecution and higher
fines if they do not come forward. It is likely that fines may
be capped at 20 to 30% of the tax due to encourage people to
come forward. They were capped at 10% under the previous ODF.
However, HMRC stressed the campaign will not be a tax "amnesty"
as all unpaid tax and interest will have to be paid in full.
The Revenue will write to the 300 banks and building societies
requesting names and addresses of all their UK resident customers
with offshore accounts. It will then write to customers requesting
any unpaid tax. The first ODF identified some 400,000 accounts
as suspicious. It raised £450 million from 45,000 people but
a further 50,000 are still being investigated and some may soon
be prosecuted.
"HMRC has made follow-up checks of the disclosures made and
has started a programme of checks on those who did not take
the opportunity to come forward," the Revenue spokesman said.
"In the most serious cases, we are carrying out criminal investigations
and we will bring some prosecutions before the courts."
Tax Diary February/March 2009
1 February 2009 - Due date for corporation
tax payable for the year ended 30 April 2008.
19 February 2009 - PAYE and NIC deductions
due for month ended 5 February 2009. (If you pay your tax electronically
the due date is 22 February 2009)
19 February 2009 - Filing deadline for the
CIS300 monthly return for the month ended 5 February 2009
19 February 2009 - CIS tax deducted for the
month ended 5 February 2009 is payable by today.
1 March 2009 - Due date for corporation tax
due for the year ended 31 May 2008.
19 March 2009 - PAYE and NIC deductions due
for month ended 5 March 2009. (If you pay your tax electronically
the due date is 22 March 2009)
19 March 2009 - Filing deadline for the CIS300
monthly return for the month ended 5 March 2009.
19 March 2009 - CIS tax deducted for the month
ended 5 March 2009 is payable by today.
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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