Entries from October 2007 ↓

Below are the key announcements in today’s speech by the new Chancellor, Alistair Darling MP.

New capital gains tax rate of 18%
This will replace the existing taper relief regime for individuals who generally would pay at either 10% (business assets) or 24% (non-business assets). Some clear winners and losers here.

Inheritance tax nil rate band of £600k for married couples
This effectively adds together the existing bands of £300k for individuals and applies to couples who are either married or civil partners. A welcome change which reflects common sense and may actually encourage some people to tie the knot! This measure is to be backdated for widows and widowers.

Self assessment payments on account
The minimum annual tax liability to rise from £500 to £1000 before people have to make six monthly payments on account of their self assessment liability.

Small companies
New rules to be introduced from April 2008 to prevent Arctic Systems scenarios arising, e.g. married couples shifting income to the lower earning spouse.

Non-domiciled individuals
Tax charge of £30,000 for individuals who are non-UK domiciled but have been UK resident for seven years. Possible further charges after ten years of residency.

If you have a tax investigation we recommend seeking professional advice immediately. However, it is much better to avoid the investigation in the first place. Based on years of experience, here are some hints on how to give yourself a better change of falling below the radar:

- ensure your accounts and tax returns are submitted on time; if you can’t be bothered to submit on time the Taxman will think you can’t be bothered to get the numbers right either
- avoid large or unusual items when compared to the previous year; these items prompt a raised eyebrow from the Taxman
- less is more; avoid saying too much or giving copious explanations of things
- be quick to answer the Taxman’s questions; this will keep him happy and less likely to ask further questions
- be polite; although it is sometimes tempting not to, it will be better for you if you keep the Taxman sweet and show curtesy

Enquiries by the Taxman into self assessment tax returns generated, on average, an extra £7,778 of tax over the last year. This is a big jump from the year before when the average take was £4,527.

Could this be something to do with the fact that tax inspectors now get a commission based on the extra tax that they find? Also, many of those targeted do not have accountants working for them and may be susceptible to pressure exerted and games that the Taxman has been known to play.

In the last year HMRC has been contacted by nearly 200,000 informers via phone calls, emails and post.

It is not known how many prosecutions have resulted or how much extra tax has been collected, but beware of who you tell down the pub about your own tax affairs!