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George Osborne has declared the date of his first Budget, Tuesday
22 June 2010. It's difficult to call any significant changes
to the tax system due to the emerging news on higher than expected
inflation. A VAT increase, from 17.5% to 20% would feed into
the cost of living index and increase inflation in the short
term, we may see this increase deferred until early next year
when the previous increase in VAT has worked itself out of the
numbers. There is continued speculation in the financial press
that disposals of non-business assets (shares, investment property
etc) will be taxed as income and therefore subject to
the disposers highest rate of tax; potentially 40% or even 50%.
CGT basic rate is currently 18%. We will of course advise you
of the Budget changes as soon as the detail is available.
In this newsletter we have included an article that explains
how to structure a tax-free long service award, possible benefit
in kind complications regarding loans to directors and employees,
cars that qualify for the 100% write-off and a word of warning
about the initial use of the VAT Flat Rate Scheme.
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Tax-free long service awards
If you provide an employee with a non-cash award to reward
long service, the payment can be made without deduction of tax
or National Insurance contributions, as long as the following
criteria are observed:
-
As this is a reward to employees it is not available to
self-employed sole traders or partners. It is available
to directors who receive a salary for their services.
-
The award has to mark at least 20 years of service.
-
You must not have made a previous long service award within
the last ten years.
-
The value of the reward cannot exceed £50 per year
of service - so the maximum value of an award to an employee
with 20 years of service is £1,000.
-
As pointed out in the opening paragraph of this article
the award has to be made in a non-cash form. Cash awards
are taxable as earnings in the usual way. You should also
be wary about awards that can quickly be converted into
cash, for example marketable stocks or shares or precious
metals - these do not fulfil the non-cash criteria.
There are a number of complicated rules to abide by if your
payment falls outside the above five points - for instance if
you exceed the £50 per year or if the employee has less
than 20 years of service.
If you are thinking of making use of this potential tax-free
perk it is best to check with us before making the award.
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Beneficial loans to employees or directors
If a company makes a loan or loans to an employee or director
and the combined outstanding value to an individual never exceeds
£5,000 there is no personal tax or National Insurance
contributions to pay. However, beware; loans to employees who
are also shareholders and directors may create a corporation
tax charge for the company even if the loan does not exceed
£5,000.
If the combined amount exceeds £5,000 a potential benefit
in kind charge may arise if no interest is charged to the loan
account or interest is charged at a lower rate than the official
rate published by H M Revenue & Customs.
The official interest rates for the last three years are:
From 6 April 2007 to 28 Feb 2009 - 6.25%
From 1 March 2009 to 5 April 2010 - 4.75%
From 6 April 2010 - 4%
As we are now approaching the deadline for filing forms P11D,
the forms that declare employees' and directors' benefit in
kind, it is essential that loans are examined to reveal any
benefits due. Overdrawn directors' loans can create difficulties
where the amount of loans fluctuates during a tax year.
If you would like clarification on the amount of benefit in
kind you may have to pay please contact us as soon as you can.
P11Ds have to be filed by 6 July 2010.
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Cars qualifying for 100% tax write-off
Unless the rules change on the 22 June 2010 company cars that
have CO2 emissions of 110g/km or less qualify for a 100% write-off
for tax purposes in the year of purchase.
The list of vehicles that come within this range of CO2 emissions
is expanding. Take a look at the following website that displays
a fairly comprehensive list:
http://www.comcar.co.uk/newcar/companycar/poolresults/110tax.cfm
A few of the more surprising sub-110g/km cars are listed below:
Audi A1 and A3;
BMW 3 series saloon - 320d EfficientDynamics;
Mini Hatch, Clubman, Cambden and Mayfair;
Peugeot 207 - 1.6 HDi Economique;
Smart - fourtwo coupe and cabrio
various VW Golf models;
various Volvo C30, S40 and V50 models.
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VAT - starting on the Flat Rate Scheme
As an incentive to new VAT registered businesses to consider
using the Flat Rate Scheme, H M Revenue & Customs allow
a 1% reduction in the flat rate percentage for your type of
business for one year. This can be a significant benefit for
newly registered traders. If your turnover including VAT is
£117,500 in the first year the 1% will be worth a reduction
in your VAT payments of £1,175.
Please note that this reduction is only available in the twelve
months following registration for VAT. It is not available for
the first twelve months you decide to convert to the Flat Rate
Scheme if you are an existing VAT registered business. Unless
- if say you registered for VAT on the 1 January 2010 and decided
to apply to join the Flat Rate Scheme on the 1 April 2010, you
could apply the 1% reduction in the rate applicable to your
business until 31 December 2010; for the nine months until your
first anniversary of registration is reached.
For smaller businesses who qualify for the lower flat rate
percentages, the scheme can be cash flow positive. If you are
about to register, or have recently registered for VAT and would
like more information please call.
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Tax Diary June/July 2010
1 June 2010 - Due date for corporation tax
due for the year ended 31 August 2009.
19 June 2010 - PAYE and NIC deductions due
for month ended 5 June 2010. (If you pay your tax electronically
the due date is 22 June 2010)
19 June 2010 - Filing deadline for the CIS300
monthly return for the month ended 5 June 2010.
19 June 2010 - CIS tax deducted for the month
ended 5 June 2010 is payable by today.
1 July 2010 - Due date for corporation tax
due for the year ended 30 September 2009.
6 July 2010 - Complete and submit forms P11D
return of benefits and expenses and P11D(b) return of Class
1A NICs.
6 July 2010 - Deadline for submission of new
Tax Credit application for 2010-2011, if you want to secure
a full years claim.
19 July 2010 - Pay Class 1A NICs (by the 22
July 2010 if paid electronically).
19 July 2010 - PAYE and NIC deductions due
for month ended 5 July 2010. (If you pay your tax electronically
the due date is 22 July 2010)
19 July 2010 - Filing deadline for the CIS300
monthly return for the month ended 5 July 2010.
19 July 2010 - CIS tax deducted for the month
ended 5 July 2010 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. |
