Entries Tagged 'Tax news' ↓

We are often asked what income is taxable (and should be reported on a tax return) and what income is not taxable.  Here is a list of taxable and non-taxable income from the Taxman.

We have been advised that HMRC has identified ‘upwards’ of 800 hospital consultants to be investigated in 2010.  Up until now the motor and travel expense claims have been the primary risk areas identified by HMRC, but the emphasis will change next year.

HMRC has issued formal notices to BUPA, Sun Life and other institutions who pay commission to hospital consultants to identify enquiry cases where the commissions appear to have either been understated or omitted from Tax Returns.

We understand an amnesty may be offered, similar to that available to offshore bank account holders, but watch this space.

Today’s statement by Alistair Darling was arguably more of a pre-election manifesto than announcing any moves to aid the economic recovery.  However, here is the good and bad news for small businesses:

Good News

• Small company tax rate to remain at 21% rather than increase to the previously announced 22%.
• The tax payment service enabling struggling businesses to spread payment of their tax bills is being extended.
• No changes to the capital gains tax rates (suprisingly).
• Various minor tax breaks for electric cars and vans.

Bad News

• National Insurance is increasing by 1% from April 2011 (a 0.5% increase had previously been announced).  This affects employees, employers and the self-employed where earnings exceed £20k pa.
• The rate of VAT will revert to 17.5% on 1 January 2010.  The Flat Rate percentages will also increase by varying amounts.
• A 50% supertax will be charged on bank bonuses in excess of £25k per employe (some may argue this should be a Good News item!).
• Company cars will become slightly more expensive as the benefit bands have been shifted down by 5g/km of Co2.
• The stamp duty exemption on the purchase of most residential properties has been reduced from £175k to £125k.
• A telephone landline tax of 50p per month per line is being introduced from 1 October 2010 to pay for faster broadband speeds.

Further details on the less common taxes can be found here and changes announced in the April 2009 Budget can be found here.

If you subscribe for shares in a trading company, and later dispose of them at a loss, you can normally offset the loss against other taxable income (section 131 of the 2007 Income Tax Act).

However, the Taxman has found a wrinkle in the tax legislation such that he thinks subscriber shares issued in joint names (usually married couples) cannot benefit from this offset.  Section 131 applies to shares “which have been subscribed for by the individual”.  The Taxman argues that jointly owned shares are subscribed for by a couple rather than an individual and thus the offset is not available.

A way round this is for one individual to subscribe for the shares and then transfer some of them to their spouse. The spouse is then treated as subscribing for the shares in their own right. 

This is how we recommend shares are subscribed for when effective joint ownership is desired.

The Taxman has set out his charter, pledging to respect taxpayers, provide help and support, and treat them even-handedly.  However, in return he does ask that the taxpayer is honest and fair with him!

Limited company directors will be excluded from the Agency Workers Directive under the lastest proposals from the Government.  However, those working through umbrella companies and all contractors who are not genuinely self-employed (i.e. if you fail the IR35 test) will still be covered.

Many freelancers have been concerned that the Directive would given them similar rights to employees in terms of hours, holidays, sick pay etc. making them less attractive to businesses.

The Directive only applies to workers who have been in a position for at least 12 weeks and is not effective until 1 October 2011.

Provisions are being introduced from 6 April 2010 to charge penalties on the late payment of monthly PAYE and CIS.  A penalty will not be levied for the first default but penalties will then increase as follows:

• up to 3 defaults - 1% of the amount paid late
• 4-6 defaults - 2% 
• 7-9 defaults - 3%
• 10+ defaults - 4%

If tax is more than 6 months overdue, a 5% penalty can be charged with an additional 5% if the tax becomes 12 months overdue.

Alistair Darling has confirmed that the Pre-Budget Report will be announced at 12.30pm on 9 December 2009.

As announced in the 2009 Budget, ISA limits are being increased to £10,200, of which up to £5,100 can be invested in a cash ISA with the balance in a stocks and shares ISA. Investors who will be aged 50 by 5 April 2010 can subscribe up to the new limits from 6 October 2009. All other investors can access the new limits from 6 April 2010.

From 1 January 2010 new laws will come into force for the supply and receipt of overseas services between UK VAT registered businesses and individuals and businesses in other EU member states.

• if you are selling services to a private individual you should charge UK VAT on your invoice
• if you are selling services to a VAT registered business you should not charge UK VAT on your invoice
• If you are receive a service from a business registered for VAT in another EU member state you need to operate the Reverse Charge mechanism.  The Reverse Charge mechanism is where you pretend that you sold yourself the service meaning that you make the relevant entries in boxes 2 and 4 of your VAT return.

Also from 1 January 2010 businesses selling services will need to complete an EC sales list.  This is a declaration that lists supplies of services made by a UK VAT registered business to a VAT registered customer in another member state.  You will have only 14 days from the end of the relevant period to submit this form.  Businesses selling goods already have to complete these EC sales lists.

Follow this link for further information on these (and other) cross border VAT changes.