Protecting your business
As many of you will know we have a range of insurance products
available in association with our partners Qdos consulting.
Around half of our clients take up tax enquiry insurance each year, and
benefit from £50,000 of cover for tax enquiries, and disputes about PAYE
and VAT.
The 2005/06 policy year starts on 1 December, and renewal information
was sent out in the middle of November - if you missed this and want to
renew your cover, visit www.garbetts.com/insurance or
www.garbetts.com/download/teiinsurance.pdf
and you can get cover quickly and easily. NB our specialist scheme
for personal service companies/IR35, also run with Qdos, has a separate
renewal date - 1st February each year, so if you are a contractor, don't
panic!
Also, with Qdos, Garbetts recently launched a new Employment and Health
and Safety service.
This innovative scheme provides consultancy on employment law and
H&S issues, a library of resources, forms, documents and manuals, and
insurance cover representation for tribunals and disputes.
Starting from £420 pa for 1-9 employees, this is incredibly good
value.
For more information and details, see www.garbetts.com/employment.
Pre-Budget Report - 5 December 2005
Income Tax Allowances - 2006-2007
All allowances that are inflation proofed have been raised by 2.7%,
(Based on the increase in the Retail Price Index to September 2005).
Personal Allowance will be increased to £5,035 (£4,895
2005-2006)
Personal Allowance (age 65-74) will be increased to £7,280
(£7,090 2005-2006)
Personal Allowance (age 75 and over) will be
increased to £7,420 (£7,220 2005-2006)
National Insurance
There are similar increases in the lower, upper and other exemptions
for national insurance purposes.
The standard main rates of employees and employers contributions are
unchanged.
The flat rate of Class 2 contribution remains unchanged at £2.10 per
week.
Fuel Duty
The Chancellor announced a continuation of the freeze in main fuel duty
rates and the rates for road fuel gases.
VAT
The VAT Annual Accounting Scheme turnover threshold will be doubled to
£1,350,000, and the Government has written to the European Commission for
permission to increase the Cash Accounting Scheme turnover threshold to
the same level.
Child and Working Tax Credit rates and Child Benefit -
2006-2007.
Child benefit is raised in line with inflation, the lone parent element
remains frozen. The disabled and severely disabled child elements rise
with inflation.
Interestingly the Government is raising the disregard in Tax Credits
for increases in income from one tax year and the next - from the present
£2,500 to £25,000. This should ensure that almost all families with
increasing incomes will not have their tax credit entitlement reduced in
the first year of a salary or income increase.
The Revenue & Customs will also put automatic limits on the amounts
which can be recovered if there has been an overpayment.
These changes should provide a greater degree of certainty for
claimants particularly for families with a rise in income.
However new responsibilities are being placed on claimants.
From November 2006, claimants will have to report more changes of
circumstances. They will be:
- ceasing to work at least 16 or 30 hours per week
- ceasing to be responsible for a child or young person.
- a child or young person ceasing to qualify for support.
From April 2007 claiments will have just one month to report a change
that reduces their tax credit entitlement, not three months as at present.
Tax Avoidance!
If you have devised your own in-house direct tax avoidance scheme, the
Government are introducing a provision that will require you to notify the
Revenue within 30 days of implementation! This will be effective from 6
April 2006.
New Property Trust
The Government is to bring forward legislation to introduce UK Real
Estate Investment Trusts in the Finance Bill 2006.
The new status will be open to public companies listed on a Recognised
Stock Exchange. Companies or groups that qualify will not pay corporation
tax on qualifying property rental income or qualifying capital gains.
There will be a requirement to distribute at least 95% of net taxable
profits on rental income to investors, who will then pay tax at their
marginal rate.
The Government will announce a conversion charge applying to companies
joining the scheme.
More on Property.
To deal with the problems experienced by first time buyers getting a
toe-hold on the property ladder, the Government is to expand shared equity
schemes, where lenders and the government take a stake in the homes of
first-time buyers.
This will be combined with a reform of the planning system aimed at
speeding up the building of new homes.
Planning Gain Supplement
The Government is to consult on the introduction of a Planning Gain
Supplement (PGS) which would give the government a slice of any rise in
the value of the land which has been granted planning permission. The
imposition of a PGS is unlikely to be popular with house builders, or
individuals owning land!
The aim is to use the money raised to improve the infrastructure in
areas where new building is taking place.
Small Company Tax Rates - simplified!
In 2002 the Government introduced a zero per cent rate of corporation
tax - it applied to companies with profits up to £10,000.
This opened up the possibility of earning up to £10,000 profit as a
limited company and then distributing the profit as dividends to
shareholders. For basic rate band shareholders this allowed them to earn
and receive the £10,000 profit completely tax free.
Somewhat concerned by this apparent misuse of the zero rate band the
Government introduced legislation called the "non-corporate distribution
rate" in 2004 that effectively taxed all the company's profit at 19% if,
the profits earned up to £10,000 were distributed to shareholders. In
other words the first £10,000 zero rate band only applied if you retained
the profit in the company.
After discussing this "over complicated" area of corporate tax with
interested parties, both the zero rate band and the non-corporate
distribution rate are to be abolished. There will now be a single small
companies' rate of 19%.
Pensions - tax simplification 6 April 2006.
Residential Property and other assets.
From the 6 April 2006 the new pension rules will be amended to
remove the tax advantages for investing in residential property,
fine wines, classic cars and art and antiques, where the benefits are
"self-directed".
This is aimed at preventing tax payers benefiting from tax relief, in
relation to contributions made to pension funds, for the purpose of
funding the purchase of assets for their or their families own use.
The change will remove any tax advantages of holding residential
property directly, or other exotic assets within a SIPP. (Self Invested
Personal Pension)
Recycling of tax-free lump sums.
Presently it is possible for pension scheme members to withdraw a tax
free lump sum which is then reinvested back into a registered pension
scheme - this automatically generates the possibility of more tax relief
on the amount reinvested.
This scheme will be blocked by inserting an anti-avoidance rule into
the new pensions legislation to take effect from the 6 April 2006.
Finally - two allowances for pensioners.
Winter Fuel Payments.
This year the Chancellor has increased the payments to pensioners to
assist with winter fuel costs:
- £200 for households with someone age 60 or over, or
- £300 for households with someone age 80 or over.
This increased amount will apply for the rest of this parliament.
Free central Heating!
Pensioners on Pensions Credit will be able to install central heating
free of charge.
Other pensioners, not receiving Pensions Credit, can apply for a £300
discount if they did not previously have central heating in their
homes.
