EJBC Chartered Accountants

Stamp Duty Land Tax
One of the give-aways of this Budget is relief from Stamp Duty Land Tax (SDLT) due on buying residential properties that cost up to £250,000, where the property transaction is completed between 25 March 2010 and 25 March 2012. The issue is that this zero rate only applies to first-time buyers, and the relief will have to be claimed by those individuals, it will not be given automatically.
To help fund this tax relief an additional rate of SDLT is to be introduced at 5% on properties costing £1 million or more from 6 April 2011. So if you are planning to buy that million pound home, get on with it!
 

VAT Rates
The rates of VAT have not been changed. The standard rate remains at 17.5%, the reduced rate is 5%.
 

VAT Registration Threshold
The level of turnover that triggers a requirement to become a VAT registered trader within 30 days is to rise by £2,000 to £70,000 with effect from 1 April 2010. The turnover threshold below which traders can apply to become deregistered for VAT increases by £2,000 to £68,000 from the same date.
 

Postal Services VAT
Certain commercial postal services provided by the Royal Mail and ParcelForce will become subject to standard rate VAT from 31 January 2011. Services provided to private individuals, such as stamped mail, will continue to be exempt from VAT.
 

TAX Avoidance
 

Off-shore Income
The Taxman has been gathering information about off-shore accounts held by British residents from banks based in the UK and in tax havens such as Liechtenstein. Now three further tax havens; Belize, Grenada and Dominica are about to sign information exchange deals with the UK.

Tax evaders with off-shore accounts were given until 12 March 2010 to come clean and declare all their off-shore income and gains to HMRC. If they persist in their tax evasion tactics after 1 April 2011 and hide money in a country that does not have an information exchange agreement with the UK, they will find themselves subject to penalties of up to 150% of the tax due. If the tax evaded is £25,000 or more, HMRC may publish the taxpayer’s name and address as part of their name and shaming powers.
 

Security for PAYE
Currently the owners or directors of new businesses may be asked to provide a lump sum to HMRC as security before the business is permitted to become VAT registered. The Tax Office tends to demand such payments where the business owners have previously been involved in a business that failed owing VAT. From 6 April 2011 HMRC will also be able to ask for security payments from the business owners before the business is permitted to operate a PAYE scheme.
 

Special Annual Allowance Charge
Taxpayers with total income of over £150,000 will have to pay a special annual allowance charge (SAAC) of 20% to 30% of the irregular pension contributions they make that exceed £20,000, or in some cases £30,000, in 2009/10 or 2010/11. Irregular contributions are defined as those made less frequently than quarterly. The measure of income is the taxpayer’s total income before deductions for the current tax year, or in either of the two preceding tax years.

New Obligations on Employers
In spite of these excessive tax charges on high pension contributions the Government wants all workers to be a member of a pension scheme. From a date to be announced in 2012, all employers will be required to ensure that their employees are members of a pension scheme. If the employee is not already a member of a registered pension scheme he will be automatically enrolled in the Government scheme known as the National Employment Savings Trust (NEST). The employer will be required to make contributions to NEST or the employee’s registered pension scheme.

Income Tax Allowances
All personal tax allowances have been frozen for 2010/11 at the 2009/10 levels as follows:

Savings Income
The tax-free ISA limits have already been increased for 2010/11 to £10,200, of which £5,100 can be saved in a cash form such as a bank savings account. These limits will now be increased by the rate of inflation (RPI measure) every year from 6 April 2011. If the RPI is negative the ISA limit will not be reduced. The amount that can be saved in a cash form will continue to be half the value of the full ISA limit for stocks and shares.

Capital Allowances
The maximum Annual Investment Allowance (AIA) available to each business or group of companies will double to £100,000 for expenditure incurred from 1 April 2010 (6 April 2010 for unincorporated businesses). The cost of all qualifying equipment (not cars or buildings), that falls within the AIA limit can be deducted in full from the business profits in the year the equipment is bought.

Business Rates
Businesses that occupy premises in England with rateable values of up to £6,000 per year will be able to claim full exemption from business rates for 12 months from 1 October 2010. In addition those businesses in properties with rateable values of up to £12,000 will be able to claim reductions in their business rates from that date. Different business rates relief schemes apply for properties in Wales and Scotland, but details of those schemes were not given in this Budget statement.

Now is often the time of year businesses review staff salaries & benefits. With an eye to future tax increases and pension law changes, you may want to think about ways to mitigate costs of these changes:
The easiest and most used way to address employee benefits would be to offer a straight salary increase. However, for every £100 increase in salary, there is a further £12.30 to pay per year in employers’ National Insurance Contributions (NIC). From April 2011, when NIC rates increase again, £100 salary increase will cost an additional £13.30.

What about pensions? Making a pension contribution is a great way of rewarding staff without incurring a National Insurance charge. In addition, it may well be worth considering now in your pay & benefits considerations ahead of pension rules coming into play in 2012.
 Bear in mind that paying pensions for people earning more that £150,000 per annum, can become very complicated, so please get in touch if you need help.
 

Other options

A company mobile phone - This can be a popular choice, as a mobile provided and paid for by an employer is not a taxable benefit even, if an employee never makes any business calls. The phone contract must be in the name of the employer. 
 

Providing a free parking space - As an employer, you can provide a parking space at or near your workplace with no tax implications for either the employer or the employee. The same rules apply for another vehicle, such as a motorcycle or bicycle. Such arrangements can be in the form of purchasing a season ticket for the employee.
N.B. If the team member does not drive (and is a health fanatic!) you could consider providing a free bicycle. As long as the bicycle is used mainly for travelling to work, it is again a tax-free perk with no National Insurance consequences.
 

Health insurance - This is often paid to employees as a benefit in kind, but it is treated as a taxable benefit for the employee and incurs a national insurance contributions for the employer. However, a simple health screen is a tax-free benefit and offers piece of mind!
 

Childcare vouchers - If you have an employee paying child care costs, then you should consider implementing a Childcare Vouchers scheme. Childcare vouchers are tax and national insurance free to both employer and employee. It normally requires a element of salary sacrifice, but could be implemented as part of an overall pay review. Childcare vouchers can affect tax credits, so please advise your employee to make their own checks on this before signing up to a work scheme.
 

Mileage rates - Do you currently pay mileage rate to employees which are less that the Inland Revenue fixed profit car scheme?  If you do, please consider that employees can receive up to 40p per mile for the first 10,000 business miles driven in a year, and 25p thereafter. The mileage is an allowable business expenses and neither employee or employer incur a tax or national insurance charge if you keep within the rates mentioned above. 
Please bear in the mind that commuting costs do not get classed as business mileage.   

As you were born in Croatia your home country is outside the UK, and you probably have the tax status known as ‘non-domiciled’. This is not certain as your domicile for tax purposes depends on a number of matters, including whether you intend staying in the UK in the future. If you are non-domiciled you may be able to ignore your overseas income for UK tax purposes, if the total income and gains left outside the UK each tax year amounts to less than £2,000. However, you must include on your UK tax return any overseas income or gains you bring into the UK, known as a ‘remittance’.

Where your overseas income and gains amounts to more than £2,000, you currently have a choice:

- pay an annual £30,000 tax charge and ignore your overseas income (which remains overseas) for UK tax purposes; or
- declare all your overseas income and gains on your UK tax return.

This a very complicated area of tax and you should discuss your personal circumstances with us before deciding what to include on your UK tax returns.

You may have recently received a letter from the VATman that officially notifies your company or business to file its VAT return online, or face penalties. If your business had a turnover of £100,000 or more in the year ending 31 December 2009 you are legally required to file your VAT returns online, rather than as a paper form, for all periods beginning on or after 1 April 2010. So you can file your VAT return for the quarter to 31 March 2010 on paper, but VAT returns for later periods must be submitted online.If you don’t agree that your turnover was £100,000 or more in the year to 31 December 2009, you need appeal against the VATman’s decision within 30 days of the date of his letter. The VATman has not sent a copy of his letter to us, so please forward it on if you have concerns about this turnover threshold. If you want us to submit your VAT returns online on your behalf we will need that letter as it contains some key details for the registration process.Even if you have already filed several of your VAT returns online, and your turnover is over £100,000, you will still receive the notification letter from the VATman, including the expensive glossy brochure. If your turnover is currently less than £100,000 per year, you will not have to file your VAT returns online until 2011. The Government has announced that all VAT registered businesses will be required to file their VAT returns online from April 2011, but that requirement is not law yet.If your business first registers for VAT on or after 1 April 2010 you will be required to file all your VAT returns online from your first VAT return, even if your turnover is way below the £100,000 threshold.

Although this is a relatively small amount you should correct your tax return for 2008/09. However, before you do so double check that you have also included all the expenses and deductions for that tax year, as it looks bad to the Taxman if you correct your return, or ‘amend’ it in tax-speak, more than once. As you filed your return online you can also amend it online, just log into the self-assessment online area of the HMRC website and pick your 2008/09 return to amend. You have until 31 January 2011 to do this. You may have some more tax to pay for 2008/09 if your extra £280 of income is not covered by losses, allowances or expenses. You should pay the extra tax due as soon as possible as interest will be charged from 31 January 2010.

HMRC are very keen for all businesses and individuals who need to submit a tax return, to keep complete and accurate records. They recently issued a new leaflet that summarises all the records different types of businesses should keep, and those they are required to keep by law. See:
http://www.hmrc.gov.uk/factsheet/record-keeping.pdf   

If you do not keep complete and accurate records of all your income, sales, gains, expenses, and business costs, you will not be able to prove the figures reported on your tax return are correct. If the Taxman challenges the entries on your tax return, and you cannot produce the evidence to back up those figures, he will assume they are incorrect. The Taxman will then think up a more reasonable figure (in his eyes), and look to tax you on that. You may then have to pay the additional tax, interest for late paid tax, and a penalty of up to 100% of the underpaid tax.

You can avoid such a nightmare if you keep accurate and complete records. Talk to us if you are uncertain about what paper and electronic records you should keep.