Entries from March 2006 ↓

Ernst & Young has calculated that the tax burden will be 37.6% of gross domestic product this year, close to the 37.7% peak reached in the early 1980’s.

Next year it will reach 37.8%, before rising to 38.1%, Ernst & Young said, basing its figures on official Treasury numbers.

Tax revenues will total £490bn compared to £271bn when Brown delivered his first Budget speech 10 years ago.

What are the chances of a tax cut in this week’s Budget speech? Don’t hold your breath.

A court case last week could signal a change of emphasis for the infamous IR35 tax. To date, these rules apply such that a contractor working for a large business through their own personal service company could be stung for increased taxes if they fall foul of the IR35 rules.

However, the case of Muscat v Cable & Wireless was decided such that the contractor can be deemed to be an employee of the large business rather than the contractor’s own peronsal service company.

Although this was only an employemnt law case, if the precedent becomes extended to tax law, the increased taxes would fall on the large business rather than the contractor’s personal service company, thus turing IR35 legislation upside down.

We will, of course, bring you any developments as they happen.

Taxpayers may soon be asked to file their tax returns via the banks’ BACS system. It is thought that the current HMRC computer system may not be able to cope with the projected growth in online filing over the the next few years.

It is not known yet whether the taxpayers will have to pay a fee for this privilege. For further details, see AccountancyAge.com.

If you use your cycle for work, here are a couple of tax tips you might find useful.

1) Employers can provide cycles to their employees without incurring a tax charge. Lets say you are going to buy a new bike for £1,000. To pay for it yourself would use up salary of £1,700 if you are taxed at higher rate income tax. However, if you get your employer to pay for it and take a salary of £700 rather than £1,700 there is no extra cost to your employer, you get the bike you were going to buy anyway and you also end up with £400 (after tax) in your pocket!

2) If you already have a bike, your employer can pay you 20p per mile cycled without you having to pay tax. However, this applies only for business journeys so those weekend rides to the country pub don’t count.

HM Revenue & Customs has announced that six offices will close as part of the Inland Revenue and Customs & Excise merger.

HMRC will close offices in Aberdeen, Colwyn Bay, Newtown, Londonderry, Chester, Redhill and Exeter. The changes relate to Customs and Revenue offices merging in those towns, a spokeswoman said. We understand that no jobs will be lost as a result of these latest closures.

Around 15 offices have now closed or will close as part of the merger.

The top earners in the UK are paying more than half of their earnings to the government in taxes.

Patrick Minford, professor of economics at Cardiff University, said the chancellor’s ‘tax-and-spend policies’ had pushed the overall marginal tax rate on Britain’s highest earners to 57.1%.

Average taxpayers are not much better off, paying around 48.5% once national insurance contributions, value added tax and excise duties are added to income tax.

Lets wait and see how much higher tax rates go when Gordon Brown presents his next Budget on 22 March.

The Bank of England has left UK base rates at 4.5%, following this month’s meeting of the Bank of England’s Monetary Policy Committee. A steady inflation rate and signs of a gradual recovery in the housing market are believed to be behind the decision to keep rates frozen.

The last time rates were cut was in August 2005, when they fell 0.25%.

Many people have asked us what information they have to legally disclose on their company’s invoices. So here’s our list:

• full name of company
• registration number of company
• registered office address
• country of incorporation
• details of any regulated professsion
• either a list of all the directors or no list at all

If you are VAT registered you also need the following:

• VAT number
• sequentual invoice number
• date of supply of goods/services
• name and address of your client/customer
• description of the goods/services sold
• amount excluding VAT, total amount of VAT at each VAT rate applicable, gross amount payable
• amounts should be quoted in £sterling

In the past it has been very difficult to claim back the VAT when a business buys a new car. But a recent case may be changing things.

Theoretically, you can reclaim the VAT if the car is used solely for your business as long as its not available for private use. However, the VATman usually strongly resists any attempt to claim back the VAT and he has won case after case on this very point.

However, the VATman has lost a recent case - Elm Milk Ltd. The company board minuted a resolution that the company did not intend to make the car available to anyone for private use, and it would be in breach of an employee’s terms of employment to use it for private purposes.

The reasoning behind the court’s decision seems to be that although the car was physically available for private journeys, it was not the company’s intention to make it available for private use. So if you want to take advantage of this make sure you have a formal board minute which states that the car must not be used privately. On a £20,000 car, this will save you nearly £3,000.

Remember, you can’t use the car for home-to-work travel, but if you work from home this shouldn’t be a problem. To strengthen your case, you should also have access to another car for private use.

The last day of the 05/06 tax year is 5 April 2006. Make sure any tax planning for this year is completed by this date.