Financial Monitor (June 2010)
New Premises
Our move to new premises was completed over the bank holiday at the end of May and we are now settled in our modern surroundings. There were one or two problems with post redirection and transfer of the telephone and fax numbers but these have now been resolved. Our apologies to anyone who was inconvenienced by these issues. Unfortunately we were unable to publish a May edition of Financial Monitor because of the time committed to the move.
Emergency Budget
Those of you who receive Financial Monitor by email will have had a copy of our summary of the Chancellor’s Emergency Budget. If those of you who receive this publication by post would like a copy of that summary please contact us.
The main proposals can be summarised as follows:
- The increases in national insurance proposed by the previous government have been confirmed albeit with an increase to the starting point at which employers’ national insurance is paid of £21 per week.
- VAT will increase to 20% on 4 January 2011 and there will be provisions to prevent businesses charging the 17½% rate on goods or services to be provided after 4 January 2011.
- Corporation tax rates will fall by 1% on 1 April 2011. The rate will be 27% or 20% for companies with profits below £300,000. The 27% rate will reduce by 1% each year for the following three years.
- The above corporation tax savings will be offset by reductions in capital allowances for all businesses from April 2012.
- The rate of capital gains tax has been increased for disposals after 22 June 2010 if together with other income the gain exceeds the upper limit of the income tax basic rate band. It is only the excess of gain over the limit which is taxed at the new higher rate of 28%. Gains below this limit will continue to be taxed at 18%. This will potentially make capital gains tax planning more complicated and the calculations more difficult for the 2010/11 tax year where two different regimes apply to gains before and after 22 June 2010.
Entrepreneurs’ relief which applies, subject to a number of conditions, to the disposal of businesses will continue to attract a 10% capital gains tax rate and the lifetime limit of relief available has been increased from £2 million to £5 million. - For those aged under 65 the personal allowance will increase by £1,000 to £7,475 from 2011/2012. The benefit of this increase will only be given to basic rate taxpayers.
Business Journeys in Company Cars
Where an employer provides a company car but the employee pays for the fuel, the employer can pay a mileage allowance for business journeys. HMRC have revised their 'tax free' rates with effect from 1 June 2010. The previous rates are in brackets:
| Engine size | Rate per mile |
||
| Petrol | Diesel | LPG | |
| Up to 1400 cc | 12p (11p) | 11p (11p) | 8p ( 7p) |
| 1401 to 2000 cc | 15p (14p) | 11p (11p) | 10p ( 8p) |
| Over 2000 cc | 21p (20p) | 16p (14p) | 14p (12p) |
National Insurance for Females over 60
Women born after 6 April 1950 have had their state pension age (SPA) revised from 60. Their SPA increases by one month for each month they were born after 6 April 1950 until it equals the relevant age for men of 65.
This has a consequence for employers because there is no requirement to deduct employees’ national insurance for those aged over the SPA. Employers need proof of age before ceasing to deduct employees’ national insurance and need to monitor the position for those female employees born between 6 April 1950 and 5 April 1955. Employers’ national insurance contributions are not affected as they continue to be paid whatever the age of the employee
VAT Fuel Scale Charges
The VAT scale charges for the private use of road fuel on which input tax has been reclaimed have been increased for VAT periods beginning on or after 1 May 2010.
The new rates are:
CO2 band |
Scale charge £ |
VAT element £ |
120 g/km or less 125 130 135 140 145 150 155 160 165 170 175 180 185 190 195 200 205 210 215 220 225 230 or more |
141.00 212.00 212.00 227.00 241.00 255.00 269.00 283.00 297.00 312.00 326.00 340.00 354.00 368.00 383.00 397.00 411.00 425.00 439.00 454.00 468.00 482.00 496.00 |
21.00 31.57 31.57 33.81 35.89 37.98 40.06 42.15 44.23 46.47 48.55 50.64 52.72 54.81 57.04 59.13 61.21 63.30 65.38 67.62 69.70 71.79 73.87 |
Foreign Workers and National Insurance
If you employ someone from another European country they may be exempt from UK NI contributions but only if they provide a form A1 (formerly E101). The forms last for two years (or one if issued before 1 May 2010) and you must commence to deduct UK NI if a form has expired. It is the employee's responsibility to have the form renewed not the employer’s.
If individuals from other European countries work for you and are paid by you but they remain employees of a foreign business then you could be responsible for applying the NI rules of the appropriate European country. This could apply when an employee is seconded from a fellow group company that is based in another European country. HMRC have indicated that they will provide assistance in these circumstances.
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
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