Financial Monitor (September 2009)
New Disclosure Opportunity for Offshore Income
As reported in our July edition of Financial Monitor, HM Revenue and Customs is offering a second opportunity for those who failed to declare income earned overseas, for example bank interest on deposits in offshore bank accounts, to make a full disclosure.
If a disclosure is made then penalties will be limited to 10% or 20% if the taxpayer received a letter from HMRC about the previous offshore disclosure in 2007 but did not respond. There will be no penalty where the outstanding tax is less than £1,000 or the disclosure relates to the pre-death liabilities of a deceased taxpayer.
The taxpayer must report undisclosed offshore income and gains that arose in the last 20 years. Taxpayers wishing to make a disclosure must advise HM Revenue and Customs by 30 November 2009 that they intend to do so and must make the disclosure in detail by 12 March 2010 (if submitting online). The full disclosure must be made by 31 January 2010 if not submitted online.
Special Offshore Disclosure Regime for Liechtenstein Bank Accounts
The UK government has come to an agreement with the government of Liechtenstein which requires all banks and other financial intermediaries in the principality to advise their UK customers that they need to disclose details of income earned in Liechtenstein to the UK Revenue. Those that fail to do so will see their accounts in Liechtenstein closed.
Those who make a disclosure under the Liechtenstein Disclosure Facility by 31 March 2015 will only have to declare income from 6 April 1999 and in most cases the penalty will be restricted to 10%.
If you need to discuss either of the above disclosure facilities please contact Peter Newsam.
Subcontractors in the Construction Industry
The Revenue has announced a totally new approach to the taxation of tradesmen working in the construction industry. The question of employment status, whether an individual is self-employed or employed, will simply be ignored. Instead, everyone working in the industry will be taxed (and pay National Insurance contributions) as if he was an employee unless either:
- He provides not only his own labour but also substantial equipment – for example, a JCB owner-operator. Provision of ordinary hand tools would not be sufficient; or
- He provides all the materials necessary to do the work – for example, under a ‘supply and fix’ contract; or
- He provides the services of other workers (for example, a team of bricklayers) rather than just his own labour.
The new scheme will apply only to payments within the construction industry, by developers and contractors to subcontractors. It will not apply where a tradesman works direct for a householder or a non-construction industry business.
The detail of the new scheme is subject to consultation and the implementation date has not yet been fixed; 6 April 2010 would seem the earliest possible date, with 6 April 2011 perhaps more likely. A further announcement is likely as part of this autumn's Pre-Budget report.
Capital Allowance Changes
The recently enacted Finance Act 2009 includes two important amendments to the capital allowances codes for equipment and vehicles.
First, there is a 40% first-year allowance for purchases made in 2009/10 (the year 1 April 2009 to 31 March 2010 for companies and the 2009/10 tax year for unincorporated businesses). This sits on top of the £50,000 Annual Investment Allowance, so if a trader spent a total of £120,000 on new machinery in his accounting year to 31 March, he would be entitled to claim:
Annual Investment Allowance - 100% x £50,000
£ 50,000
First Year Allowance - 40% x £70,000
£ 28,000
Total allowances for the year
£ 78,000
Not all machines and vehicles qualify, the main exceptions being motor cars and some fixtures in buildings.
Secondly, the new Finance Act also amends the capital allowance code for motor cars. In the past, there has been a special rule limiting the capital allowances that can be claimed on motor cars costing more than £12,000, to £3,000 a year (and also restricting tax relief for lease rental payments on such cars).
For cars purchased on or after 6 April 2009 (1 April 2009 for companies) this rule is replaced by one restricting capital allowances on cars with CO2 emissions above 160 g/km to 10% a year (instead of the usual 20%). Lease rental payments on such cars will be subject to a flat rate restriction of 15%. Importantly, these new restrictions will apply to taxis and hire cars, which were exempt from the old rules.
Employees who are Sick whilst on Holiday
It has been the widely held view that if an employee was sick whilst on leave that was simply unfortunate for that person. However, the European Court of Justice has held that employees who are sick during scheduled annual leave should be allowed to take their holidays at a different time. Employers need to ensure that their sickness absence policies have specific provision for employees to report illness whilst on holiday.
Scam Emails
A number of our clients have received an email, supposedly from HM Revenue & Customs, which suggests they are due a tax repayment and requesting bank details to enable a repayment to be made. Please note this is a scam email and HM Revenue & Customs would never contact a tax payer for information in that way. Please ignore such emails.
Business Opportunities
Every small business in the UK will now have free access to thousands of lower value government contracts on the Government’s website www.supply2.gov.uk. For three years, supply2.gov.uk has advertised thousands of public sector procurement opportunities worth up to £100,000 – making the website ideally suited to small and medium sized businesses.
The fee previously charged to search the site across the UK will now be removed, providing firms with better access to public sector contracts to help their businesses grow.
Savers and Pensioners
The Chancellor has made two adjustments to help savers and pensioners who have been hit hard by the reductions in interest rates:
- The ISA savings limits are to be increased to £10,200, and £5,100 for the cash-only element of the ISA. These new limits come into effect on 6 April 2010 for most savers, but savers who are aged 50 or over on 6 October 2009 will be able to take advantage of new limits from that date.
- The amount of capital disregarded when making a claim for pension credit, and certain other benefits, will be increased from £6,000 to £10,000 from November 2009.
Taking Pension Benefits
If you were born between 6 April 1955 and 5 April 1960 you have until the end of this tax year, April 2010, to decide whether to take the benefits from your pension schemes, or to wait until after you turn 55. The reason for this deadline is that the minimum age from which you can take benefits from your pension schemes is being increased on 6 April 2010 from 50 to 55.
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.
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