Financial Monitor (January 2007)
UHY Hacker Young.
We hope you like our new website which coincides with us joining the UHY Hacker Young group, one of the top 20 groups of chartered accountants in the UK. In addition we have become members of UHY International a global association of accounting and consulting firms, represented by offices in 164 cities in 53 countries around the world.
We remain an independent firm but with the additional resources that membership of UHY Hacker Young brings.
It is a great honour to have been selected to represent UHY in South Yorkshire and a testimony to our long-standing commitment to quality and client service. Financial Monitor will continue to be produced on a monthly basis and we hope you will find matters of interest and relevance to yourself.
End of Year Tax Planning for Individuals and Partnerships.
It is important that consideration is given to maximising tax reliefs and allowances available on an annual basis before 5 April each year.
- An individual is entitled to earn approximately £38,000 per annum before paying tax at higher rates. Those who are shareholders in family owned businesses should where practical ensure dividends are declared to provide maximum earnings at the basic rate of tax. No additional tax is paid by a basic rate taxpayer on dividends received.
- The annual capital gains tax allowance (currently £8,800) should also be utilised whenever possible. Those with share portfolios who have not utilised this allowance should consider crystallising gains by selling shares. If it is wished to retain these shares in the portfolio, then they can be repurchased after 30 days or bought back immediately through a spouse or via an ISA investment.
- Pension contributions can no longer be carried back into previous years so those wishing to make personal pension contributions or additional voluntary contributions into their employer’s pension scheme need to do so before 5 April 2007 if they want tax relief in the 2006/07 tax year.
Tax liability on company vans.
The new benefit-in-kind charges for those using vans (or other small commercial vehicles, eg. pick-ups) provided by their employer for private use come into force from 6 April 2007.
The annual taxable benefit is increasing from £500 (£350 for vans over 4 years old) to £3,000 with an additional £500 if fuel is provided for private use.
No benefit applies if the only private use is home to work travel and the occasional private journey, eg. a trip to the tip.
We suggest all employers write to their van driver employees confirming that the only private use of a company van that is allowed by the employer is home to work travel. A copy of the letter should be signed by the employee and retained by the employer to justify not including the benefit on the end of year form P11D.
New Companies Act requirements.
With effect from 1 January 2007 companies need to ensure that their business letters, order forms and website all contain the company’s full name, the place of registration (eg. England), company number and registered office address.
Is a Blackberry a mobile ‘phone?
H M Revenue and Customs have stated that the new generation Blackberry has functions which make them more like computers than mobile ‘phones. Consequently a replacement Blackberry or a new one provided to an employee after 6 April 2006 will be subject to a benefit-in-kind charge unless personal use is not significant. Employees should be advised to ensure minimum private use of an employer provided Blackberry if they want to avoid a benefit-in-kind charge.
Cutting Petrol Station pollution.
Every petrol station in England which sells more than 3.5 million litres of petrol a year has been given until 1 January 2010 to install equipment to capture and recycle the fumes. Further information can be obtained on www.tinyurl.com/tp43b
The new Construction Industry Scheme.
The new scheme will commence in April 2007 and in this month’s Financial Monitor we would like to focus on two potential problems.
- Contractors’ monthly returns – contractors will need to make a monthly return of all payments to sub-contractors whether made gross or with tax deducted at the standard rate (20%) or higher rate (30%). The monthly returns are required even if the contractor qualifies as small and only needs to make payment of deductions once a quarter. The returns can be filed on line.
The returns need to be filed within 14 days of the month end and there are penalties for late submission. The penalty is automatic and is £100 per month or part month late per 50 subcontractors, ie. a return for 51 subcontractors which is one month and one day late will incur a penalty of £400.
- If returns are submitted late then this will count against the contractor if he is also a subcontractor and wishes to renew his gross payment certificate. If such a certificate is not obtained then further receipts by the contractor under the scheme would then be subject to a tax deduction of 20% on labour costs which could cause significant cash flow difficulties.
Attention to paperwork and time limits will be very important under the new regime and we can take on that burden for clients if they wish.
Intrastat changes from 1 January 2007.
The intrastat threshold for those required to provide statistical information relating to trade within the European Community has increased from £225,000 to £260,000. Those with trade below the threshold need not complete the statistical returns.
Changes to maternity pay.
Statutory maternity pay, maternity allowances and statutory adoption pay will increase from six months to nine months for babies due on or after 1 April 2007. In addition there are the following changes to the regulations.
- The amount of notice required from women wanting to change the date they return from maternity leave is increased from one month to two months.
- The introduction of up to 10 ‘keeping in touch days’ to allow mothers to go into work to keep in touch with developments and training providing that is acceptable to the employee and employer.
- The entitlement to 52 weeks maternity leave for employees whose babies are due after 1 April 2007 regardless of their length of service. However, the existing service requirements are still needed to qualify for statutory maternity pay.
Self assessment tax liabilities.
Please remember that any balance of self assessment tax due for the 2005/06 tax year which is not paid by 31 January 2007 will accrue interest from that date. If payment is not made by 28 February 2007 a surcharge of 5% of the tax due will be applied in addition to interest. In practice surcharges below £50 are not raised.
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