CAPITAL GAINS
The British Venture Capital Association has used its budgetary submission to petition the Chancellor for a freeze on capital gains tax for its members.
Telegraph 24.2.10
This is based on speculation that the Government will increase the rate of CGT (which ministers previously cut to 18%) to deter high-earners from translating income into gains to avoid income tax at 50%. It should be noted that treating these gains as liable to CGT, rather than income tax, is in itself controversial when private equity firms are involved: it is based on a memorandum of understanding negotiated by the BVCA, which limits the application of employment-related securities legislation.
GENERAL
The UK must not raise taxes on wealth-creators any further if it wants inward investment to spur recovery, according to leading competitiveness expert Michael Porter of Harvard Business School.
Financial Times 23.2.10
It is widely held, though less widely shown by research, that high taxation discourages entrepreneurship. Most studies showing a correlation relate to rates that were well over 50%. Arguably the level of stability in the tax system is just as important as the rate.
A compulsory levy to pay for social care ‘remains on the table’ in spite of the Conservatives’ refusal to back a so-called death tax, according to health secretary Andy Burnham.
Financial Times 20.2.10
Nothing has been properly proposed yet, so presumably the Government is still considering all avenues.
INCOME TAX
The Conservatives are planning to scrap PAYE and instead deduct tax and National Insurance when taxpayers' gross pay enters their bank accounts.
Telegraph 20.2.10
The PAYE system works well. The problem for employers, particularly the small ones, is the additional requirements with which they have to cope, such as maternity and paternity regulations, and student loan deductions. One result of the change, not so far highlighted, is that employers would not be able to delay handing over the tax to HMRC, either with or without agreement, unless they also delayed payment of salaries to staff.
David Cameron has admitted he cannot promise to reverse planned increases in National Insurance if the Conservatives come to power.
Telegraph 24.2.10
The UK’s deficit is so huge, tax cuts of any kind are unlikely to be possible by any political party coming to power in the foreseeable future.
The number of families who faced legal action as a result of their tax credits being overpaid rose significantly last year.
Mirror & Mail 26.2.10
It would seem HMRC are taking a tougher stance on tax credit claimants who do not repay overpaid credits. However, the number of overpayments is reducing because claimants’ income for the current tax year can be up to £25,000 higher than expected before their tax credits are cut.
PENSIONS
Tax breaks for wealthy pension savers should be slashed in the next Budget to save the Exchequer millions of pounds and simplify complex rules on retirement saving due next year, according to industry lobby group the National Association of Pension Funds.
Guardian 25.2.10
The NAPF describes the Government’s tax plans for reducing higher-rate relief on pension contributions as ‘unworkable’ and says they will not collect anywhere near the amount predicted, while hitting mid-earners. The association says the annual allowance should be reduced to fit better with existing pension policy that would still raise tax revenues. Despite widespread disapprobation, however, the Government has not hinted at any possibility of changing its plans.
VAT
Swansea City Council is leading a legal campaign aimed at clawing back billions of pounds in VAT that town halls and big companies claim was wrongly paid to the Government.
Mail 21.02.10
Most organisations are trying to find ways of increasing their income. Various cases have challenged VAT charged on parking and health club memberships, so councils are also taking action to reclaim overpaid tax.
Friday, 26 February 2010
Monday, 22 February 2010
A Weekly Round Up Of Tax Stories From The Press
BUSINESS
Property companies are preparing to turn top earners into self - employed partners to minimise the impact of the government's impending higher tax regime.
Times
Anyone thinking about following this route will need to ensure the status of their employment when they change to self-employed. Getting this wrong could result in substantial PAYE arrears.
The Government has changed its rules on research and development (R&D) tax credits, allowing small businesses to claim the relief even if they do not own all the intellectual property rights arising from their work.
Financial Times
Bring it on - any possible tax saving is greatly welcomed.
A Celebrity-backed campaign for a "Robin Hood" tax on banking transactions has been condemned by the director of the Centre for Business Taxation at Oxford University, Mike Devereux, for promoting a "stealth tax" that would hit unintended targets while leaving the banks unscathed.
The "Robin Hood" tax is effectively the Tobin tax that has support among some politicians, including Gordon Brown, but none from the USA. Therefore it is unlikely to go anywhere. It is difficult to take seriously a celebrity-backed drive when it comes to taxation though!!!
Around 600 independent filling stations could be put out of business by Government tax changes, according to their trade body RMI Petrol.
This is in relation to the rules covering the rateable value of properties, which are being revised to better reflect the current rental value of petrol stations.
GENERAL
Only 4% of taxpayers are likely to be deliberate tax dodgers, according to a study commissioned by HMRC, which also shows that 26% of people fail to meet their tax liabilities because they do not understand the tax system well enough, or are genuinely unaware of their obligations.
Financial Times
This study was published last September with the aim of helping HMRC understand what problems need to be addressed to encourage compliance. Given the complexity of tax legislation and individuals' natural antipathy to dealing with the Revenue, it is no surprise that such a large percentage of individuals are non compliant because of ignorance.
INCOME TAX
Nearly one in three families will loose their tax credits under plans by the Coservative Party to save £400million from the annual credits bill.
Mirror
Under the Tories' plan, families on incomes of more than £50,000 will not receive the credits - Does this mean Jeremy Kyle will be screened in the evenings too??
INVESTIGATIONS
German tax dodgers have been rushing to declare money that they have hidden in Switzerland after the Government warned that it would buy a stolen disc containing details of secret bank accounts.
The Times
UK tax avoiders be aware. Information purchased by the Germans relating to accounts in Liechtenstein was subsequently purchased by our very own. Leading the way as ever!!!
HMRC are investigating a fund called Inside Track, which brought tax benefits to the film industry on suspicion of tax avoidance.
Mail
The rules relating to film taper tax relief have been tightened up over recent years to ensure that it is applied as intended. As this investigation is on going, it is not clear how the scrutiny works yet.
Property companies are preparing to turn top earners into self - employed partners to minimise the impact of the government's impending higher tax regime.
Times
Anyone thinking about following this route will need to ensure the status of their employment when they change to self-employed. Getting this wrong could result in substantial PAYE arrears.
The Government has changed its rules on research and development (R&D) tax credits, allowing small businesses to claim the relief even if they do not own all the intellectual property rights arising from their work.
Financial Times
Bring it on - any possible tax saving is greatly welcomed.
A Celebrity-backed campaign for a "Robin Hood" tax on banking transactions has been condemned by the director of the Centre for Business Taxation at Oxford University, Mike Devereux, for promoting a "stealth tax" that would hit unintended targets while leaving the banks unscathed.
The "Robin Hood" tax is effectively the Tobin tax that has support among some politicians, including Gordon Brown, but none from the USA. Therefore it is unlikely to go anywhere. It is difficult to take seriously a celebrity-backed drive when it comes to taxation though!!!
Around 600 independent filling stations could be put out of business by Government tax changes, according to their trade body RMI Petrol.
This is in relation to the rules covering the rateable value of properties, which are being revised to better reflect the current rental value of petrol stations.
GENERAL
Only 4% of taxpayers are likely to be deliberate tax dodgers, according to a study commissioned by HMRC, which also shows that 26% of people fail to meet their tax liabilities because they do not understand the tax system well enough, or are genuinely unaware of their obligations.
Financial Times
This study was published last September with the aim of helping HMRC understand what problems need to be addressed to encourage compliance. Given the complexity of tax legislation and individuals' natural antipathy to dealing with the Revenue, it is no surprise that such a large percentage of individuals are non compliant because of ignorance.
INCOME TAX
Nearly one in three families will loose their tax credits under plans by the Coservative Party to save £400million from the annual credits bill.
Mirror
Under the Tories' plan, families on incomes of more than £50,000 will not receive the credits - Does this mean Jeremy Kyle will be screened in the evenings too??
INVESTIGATIONS
German tax dodgers have been rushing to declare money that they have hidden in Switzerland after the Government warned that it would buy a stolen disc containing details of secret bank accounts.
The Times
UK tax avoiders be aware. Information purchased by the Germans relating to accounts in Liechtenstein was subsequently purchased by our very own. Leading the way as ever!!!
HMRC are investigating a fund called Inside Track, which brought tax benefits to the film industry on suspicion of tax avoidance.
The rules relating to film taper tax relief have been tightened up over recent years to ensure that it is applied as intended. As this investigation is on going, it is not clear how the scrutiny works yet.
Saturday, 13 February 2010
Action Points for SME Owners
Applying the following action points to your business can start your business of on the right footing in 2010.
Delegate or outsource some of your work.
Busy, busy, busy there are always things to do when running a small business and never enough time to do it in. Even though there are a lot of tasks to be completed, there is nothing in the rule book that says the business owner or manager needs to do it all themselves. Give clear instructions about the tasks that need to be done, the desired outcomes and then delegate or outsource the task. Outsourcing or delegating tasks can bring in new expertise into your business.
Conduct a weekly review of your business.
Reviewing your business at regular intervals is vital if you want to develop a healthy, growing business. A regular review enables you take stock of what has worked well and what adjustments will be required in the coming week. Taking small steps and plotting a new direction on a weekly basis often results in significant goals being achieved. Setting aside time each week to review, adjust, and plan will help to keep your business focused and avoid costly mistakes.
Set realistic goals.
Setting and measuring goals for your business is a valuable habit to cultivate and maintain. Achieving goals increases confidence and helps to chart the direction your business. It is important to set achievable goals that challenge as well as add value to your business. If your goals are too simple you will lose interest and if they are too difficult you may feel defeated if they are not achieved.
Take the time to analyse what does or does not work for your business.
Not all of your products or services are going to be super sellers. Some of your sales strategies are going to be more successful than other methods. Not all business opportunities are going to be suitable for your business, nor is your business going to require all the services or products that it is offered. Slowly but surely you will need to phase out whatever it is in your business that is not working.
Making a success of your business in 2010 will be a lot easier if you take the time to apply the aforementioned action points to your business. Working on your business strategically is just as important as working on your business practically. 2010 should be the year of working smart not working harder.
Some Articles From The National Press 12 Feb 2010
BUSINESS
Insolvency experts have claimed the Government faces a 'ticking time bomb' of company closures and job losses when HMRC winds up its scheme to allow firms to delay their tax payments.
Independent 8.2.10
The Government has not said when it plans to close its Business Payment Support Service yet. It is pure speculation to say this will happen after the general election – and it is unlikely that HMRC will demand immediate payment when the scheme does close.
Gordon Brown has claimed that the world's leading economies are close to agreeing a global bank tax. In related news, a coalition of charities, unions and aid agencies have called on the UK's political parties to support a global 'Robin Hood tax' on financial transactions.
Financial Times 11.2.10; Telegraph 8.2.10; Independent, Guardian & Times [not online] 10.2.10
These stories relate to the Tobin tax that the PM has been mooting for a while. Although support for the levy is growing within other administrations and various organisations, there is still a long way to go before it becomes a reality. For it to work effectively it needs support globally – and particularly from the USA, which has its own plans for taxing the finance sector.
The Premier League will attempt to broker a deal with HMRC on behalf of its football clubs and players, to protect their sponsorship deals and prevent the loss of up to £100 million in taxes.
Financial Times 8.2.10
Whenever an employer is making payments into a company related to one of its employees, HMRC are likely to be asking whether this is disguised remuneration. Advisers will want to be clear that a large PAYE liability is not accruing, particularly when acting on behalf of the payer. Portsmouth watch out!!!
GENERAL
The prime minister has refused to rule out a compulsory 'death tax' to pay for the care of elderly people who can no longer look after themselves.
Telegraph & Guardian 11.2.10; Telegraph 10.2.10; Guardian 9.2.10
An aging population means paying for care for the elderly is one difficult issue that won’t go away. Labour has proposed a 'tax on death', while the Conservatives have mooted an insurance-type scheme. Payment under either plan would seem likely to depend on a client’s physical health rather than their financial health – and as such may be difficult to advise upon.
Families who build flats for their grandparents could get tax breaks of up to £20,000 under proposals being considered by the Centre for Social Justice, a centre-right thinktank.
Times 6.2.10
The idea appears to be to exempt extensions from capital gains tax when the property is sold. However, main residence relief may already be due if the extension or granny flat is an intrinsic part of the property and could not be sold separately.
Tax breaks for private healthcare and new charges or co-payments for NHS services will have to be considered by the next government, according to Adrian Fawcett, chief executive of BMI, Britain's biggest private hospital group
Financial Times 12.2.10
Tax relief was available to the over 60s under the previous Conservative administration, but this was abolished by the Labour party when it came to power. Neither party currently has plans to introduce tax relief for private health insurance, saying they are committed to providing care under the NHS.
Millions of taxpayers could lose up to £2,500 a year due to a computer error at HMRC, while company cars or private health insurance could be taxed twice.
Mail 7.2.10
IT IS IMPORTANT to check notices of coding. The homepage of HMRC’s website currently explains what taxpayers should do if they think their code is incorrect. Another shining example of how HMRC seem intent on incompetence.
UK families in which only one married parent works are being unfairly penalised by the tax system, compared to those in other developed countries, according to CARE, a Christian social policy charity
Telegraph 2.2.10
The Conservatives say they wish to address the position of families with one working parent – for example, by offering tax breaks – should they win the general election.
GREEN TAXES
The Environmental Audit Committee is calling on the Government to introduce measures such as a new carbon tax to push the price of carbon from its level of £13 a tonne to what the MPs see as a more credible price of £88.
Guardian 8.2.10
The recession has resulted in a fall in the price of carbon, but this is likely to rise as the economy returns to growth. The scheme has its faults, but the overall cap on carbon emissions is due to start falling, which should exert upward pressure on the price of credits.
Ministers could save £12 billion of public spending over four years by clamping down on tax breaks for polluting oil exploration, cement, aluminium and transport, according to the Green Alliance thinktank.
Guardian 8.2.10
Green taxes could be a helpful way of building the Government’s finances, but they could be difficult to impose. Given that the Treasury has recently provided a new tax break for gas exploration in the west of Shetland area, it seems unlikely such reliefs will be withdrawn.
INCOME TAX
Wealthy families are being urged to snap up a little-used tax break by making pension contributions for non-working spouses and children, amid fears that the relief will be scrapped in the next Budget.
Financial Times 6.2.10
The run-up to the Budget has for many years featured fears about restrictions to tax relief on pension contributions. With recent restrictions on higher-rate relief, and a desperate need for increased tax revenues, abolishing the relief on pension contributions for the non-working spouses and children of the wealthy may become a reality.
Far-reaching reform of tax incentives for charitable giving has been abandoned by the Treasury, in spite of calls from charities for a change to the gift aid system.
Financial Times 9.2.10
The Treasury will be reluctant to make changes to gift aid, which the department regards as successful – and it is likely to fear that alterations to the scheme would have an adverse effect on government finances.
INVESTMENTS
High earners caught by limits on pension tax relief are expected to double the amount of money put into venture capital trusts (VCTs) this year – but analysts warn that these investments in small businesses will become riskier under new regulations.
Financial Times 6.2.10
VCTs can form part of an investment strategy, especially for wealthier clients, but, advisers should be wary of suggesting these riskier investments as a direct alternative for pensions.
Thursday, 4 February 2010
HMRC INVESTIGATIONS - What you need to know!!!
Since the introduction of self assessment in 1996, HMRC has been retraining its staff to develop investigatory skills rather than deal mainly with compliance and the preparation of assessments, as was previously the case. This new focus of the Revenue and certain developments over the last year suggest that the number of tax investigations, which may target businesses or individuals, is likely to continue rising over the coming months.
During 2009 governments across the world were engaged in a co-ordinated campaign to limit banking secrecy, sign tax information exchange agreements with known tax havens, gain information on any potential tax dodgers and stamp out tax evasion. With tax information exchange agreements negotiated even with the jurisdictions traditionally committed to banking secrecy such as Switzerland or Liechtenstein, HMRC has access to an increasingly wide pool of information and there are few places to hide for tax evaders.
Those who may have unpaid tax liabilities but choose not to come forward voluntarily, are likely to see investigations launched into their financial affairs, as tax inspectors attempt to recover revenue for the Exchequer. Britain’s public debt stood at £15.7bn at the end of 2009, and it is clear that the government will need to raise its tax take in order to plug that hole.
The information network
Details of offshore account holders handed over by banks under new tax information exchange laws are not the only reason for the start of HMRC enquiries. The tax authorities assess a wide range of information. For example, they look at gross profits of similar businesses up and down the country and if your income is significantly different from the average, that might trigger an investigation.
A large proportion of tax enquiries, perhaps over 50%, are started by informants - former business associates, jilted lovers and others.
Tax investigations are becoming an increasingly inevitable part of the fiscal landscape but there are some simple rules which will help you limit the trouble and anxiety associated with an enquiry if not avoid it altogether.
Keep good records
Good records are essential to running a business as well as keeping an individual’s financial affairs in order. They will also be a great help during tax investigations. You need to ensure (especially if yours is a cash business) that your books are carefully maintained, with all transactions properly logged and recorded so that should you or your business ever be subject to a tax investigation, you will be able to respond to all queries and provide all information requested. By law, self-employed individuals are required to keep all records pertaining to their tax return for five years from the filing date, and those whose tax is deducted through PAYE must keep records for 12 months from filing date.
Cooperate
Under the Taxes Management Act, HMRC has the right to request information from you or a third party (e.g. your accountant), and you are obliged to cooperate. However, cooperation is not just a matter of legal necessity - it can also significantly help your case. Timely responses to HMRC enquiry letters, providing all the information requested can help resolve an enquiry early on before it turns into a full-scale investigation, saving you a great deal of trouble.
Cooperation can also be rewarding in purely monetary terms as any penalties imposed can vary significantly depending to the extent to which you demonstrated a willingness to come forward with information and cooperate with HMRC investigators.
Seek quality professional advice
Having a good professional adviser representing you will, in many cases, help you avoid becoming the target of an enquiry in the first place. If you are facing a tax investigation, the help of an experienced professional who has a good reputation with HMRC will be invaluable in dealing with any enquiries.
Subscribe to:
Posts (Atom)
Posts
