Financial Monitor (March 2010)

Some Tax Saving Tips

Look to minimise the impact of the introduction of the additional rate of tax. From 6 April 2010, income over £150,000 will be taxed at 50%. The additional rate will be 42.5% on dividend income. You might be able to restructure the ownership of income-producing assets between spouses or civil partners to ensure that neither of the couple has income exceeding £150,000. In the case of a partnership, you might be able to revise the profit sharing arrangements between spouses to achieve a similar result. You could use similar processes to minimise the impact of the reduction of the income tax personal allowance where income exceeds £100,000 from 6 April 2010. Jointly owned assets between spouses are treated as owned equally, even where the capital has been contributed in different proportions so income will be assessed for tax purposes in equal shares.

Make large pension contributions. There is an annual allowance of £245,000 in 2010/11. You and your employer between you can contribute up to this amount, but you personally cannot contribute more than 100% of your earnings for the year. Even if you have no earnings, you can benefit from tax relief on gross contributions of £3,600 in any tax year. If your income is more than £130,000, you may suffer a tax charge on pension contributions that exceed £20,000, so talk to us before taking any action.

Take advantage of the increased individual Savings Account (ISA) investment limits and generate tax-free income and capital gains. The maximum annual amount that can be invested in an ISA will increase on 6 April 2010 from £7,200 to £10,200. But if you were born before 6 April 1960, you have been able to invest up to £10,200 in an ISA since 6 October 2009. Half of the maximum can be in a cash ISA with the remainder invested in a shares ISA. As there are many ISAs on the market, it is worth shopping around to find the best deal, taking account of the rates of return and fees charged.

Incorporation can still be worthwhile. Despite recent changes in the rate of corporation tax, a business with profits of around £50,000 can still save tax and national insurance of some £3,700 by trading through a company and taking most of your earnings as dividends, compared with operating as a sole trader. This needs to be balanced against the additional administration and compliance costs resulting from the operation of a company.

Choose the right company car and reduce your tax. You can set the full cost of buying a new company car against your company’s profits, if you choose one with a CO2 emissions rating of 110 g/km or less. And as the driver, you will also benefit from a lower income tax charge.

Payments of Value Added Tax by Cheque

From 1 April 2010 all cheque payments by post will be treated as being received by HM Revenue & Customs (HMRC) on the date when cleared funds reach HMRC’s bank account.

This means that you must allow enough time for the payment to reach HMRC and to clear into HMRC’s bank account no later than the due date shown on your VAT return. A cheque takes three working days to clear – excluding Saturdays, Sundays and bank holidays. This change does not affect any cheque payments made by bank giro.

If your cheque payment does not clear by the due date shown on your VAT return you may be liable to a surcharge for late payment.

HMRC recommends that you make your VAT payment electronically as this is safe and secure and, in most cases, gives you up to seven extra calendar days to pay or, if you pay by direct debit, at least 10 extra calendar days. Note that HMRC regards payments by bank giro as electronic payments and so they are not affected by the shorter time limit for cheque payments.

Remember that if you file your VAT return on line you must pay electronically.

Naming and Shaming Tax Evaders

Taxpayers, including, companies who deliberately evade taxes may have their name, address and details of the taxes evaded made public under new legislation which comes into force on 1 April 2010. The information will be published on HMRC’s website, but of course this will be available to journalists, etc. Those evading tax of more than £25,000 risk being named although, where full disclosure is made without delay, publication of the details can be avoided.

VAT on Entertaining Costs

A recent European VAT case has suggested that VAT on Entertaining of clients and customers may be reclaimable because HMRC’s rules not allowing such claims are not in accord with European legislation. The decision has yet to be confirmed but if you have a significant amount of expenditure on entertaining it may be worth making a protective VAT claim in anticipation of a successful outcome. Please contact Peter Newsam for further details.

Employer Supported Childcare

From 6 April 2011 the first £55 per week of employer supported childcare through childcare workers will continue to be free of tax and national insurance contributions (NIC) for basic rate taxpayers only. Those paying tax at 40% will obtain up to £28 per week tax and NIC free and those paying tax at 50% up to £22 per week tax and NIC free. All taxpayers are therefore given tax relief of £11 per week. These new rules only apply to those who join a scheme after 6 April 2011. Those currently members of a scheme will continue to obtain full tax relief on up to £55, irrespective of their level of income.

The provision of workplace nurseries will continue to be exempt from a benefit in kind charge.

The Statement of Fitness for Work

From 6 April 2010 the sick note is changing to become a fit note.

Sick notes (or Medical Statements) are the forms issued by doctors to people when they are ill or injured. They provide advice about whether or not an individual with a health condition is fit for work. They are commonly used by employers as evidence that an employee cannot work for sick pay purposes.

Many people with health conditions can, with some basic support from their employer, work as they recover from their condition. This helps the individual because for many people work can help recovery and also benefits the employer by reducing sickness absence.

Under the sick note system, doctors could only advise their patient on whether their health condition meant that they should or should not work. As a result many people who could benefit from support whilst in work, would be advised that they could not work. Their employers would not have had the opportunity to consider how they could help them achieve an earlier return to work.

To help more people get the support they need to get back to work the new fit note system will mean that doctors can advise that an employee is either:

A doctor will give a 'may be fit to work' statement if they think that their patient's health condition may allow them to work if they get suitable support from their employer.

Minimum Wage

The new rates of minimum wage come into effect from 1 October 2010. For those aged over 21 the rate will be £5.93 per hour (currently £5.80), the 18-20 year old rate will be £4.92 per hour (currently £4.83) and the 16-17 year old rate will be £3.64 per hour (currently £3.57).

A new apprentice minimum wage of £2.50 per hour will be introduced for those aged under 19 or those aged 19 or over who are in the first year of their apprenticeship.

Finance Yorkshire - £90million of Funds Available

Finance Yorkshire is a new £90million fund set up to promote businesses across the Yorkshire and Humber region with funding to start and grow. 45% of the funds have been allocated to the South Yorkshire area.

New and early stage technology and knowledge based businesses are eligible for equity based investment of between £15,000 and £780,000. These and other businesses are eligible for unsecured loans of between £15,000 and £150,000 where they are established businesses or between £15,000 and £50,000 for new businesses. Equity linked finance of between £100,000 and £2 million is also available for all types of business.

You can contact the fund on 0845 6490000 or visit their website on www.finance-yorkshire.com or contact ourselves for assistance in applying for funding.

Whilst every care has been taken in the preparation of these notes we can accept no responsibility for errors or omissions contained in them or for any loss arising from their use unless we have been consulted professionally prior to any action being taken.

UHY Wingfield Slater
Wellington House, 39 Wellington Street, Sheffield S1 1XB
Tel: 0114 275 1544 Facsimile: 0114 275 1366 Email: info@uhy-wingfieldslater.com Web Site: www.uhy-wingfieldslater.com
Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales

A member of the UHY Hacker Young Group of independent UK partnerships. A member of UHY, an international association of independent accounting and consulting firms.

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