Garbetts News - March 2009

Dispensations and benefits in kind

If you provide any sort of beneficial payment or gift of goods to employees, generally speaking most will be taxable as a benefit in kind - as if they were payments of salary etc.

However there are some beneficial payments that you can include in a dispensation. For example the provision of certain business travel for an employee. Items covered by a dispensation do not have to be returned on the annual P11D form.(Payments for the use of a company car or van are not included here as they are covered by separate rules.)

Essentially you can apply to HMRC to dispense with the need to include expenses or benefits for which your employee gets a full tax deduction.

For some businesses this could take some of the pain out of this annual chore.

HMRC require that you need to have the following systems in place to qualify you for a dispensation, they are:

You must have an independent system in place for checking and authorising expenses claims. At a minimum, this means having someone other than the employee claiming the expenses check that:

the amount claimed isn't excessive
the claim doesn't include disallowable items

If it is not possible for you to operate an independent system for checking and authorising expenses claims, for example, because you are the sole director of your company and you have no other employees, you will only be able to obtain a dispensation if you:

ensure all expenses claims are supported by receipts for the expenditure
demonstrate that the claim relates to expenditure that can be covered by a dispensation, your receipts may be sufficient for this purpose, but if not you must retain additional information.

Once a dispensation is granted it will last indefinitely although HMRC may review from time to time to make sure the conditions under which the original grant was made still apply.

Generally speaking dispensations are granted from the application date. However HMRC may agree to apply the dispensation from the beginning of the tax year in which you apply. It's not too late to apply for 2008-09, call if you would like assistance to do this.

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		Beating low interest rates
	UK interest rates have tumbled in recent months, from 5% in September 2008 to 1.0% by February 2009. This might spell good news for borrowers, but not so for savers who have witnessed plummeting rates on their bank and building society accounts. According to a survey conducted by Moneyfacts early in January, almost 40% of savings accounts already paid interest of 1% or less. Many savers rely on interest payments to supplement their income, and are now looking for alternative strategies that will generate income. A cash ISA is one alternative. Rates on cash ISAs are not necessarily much higher than rates on normal deposit accounts, but ISAs do at least pay this interest tax-free. Meanwhile, in an environment where UK interest rates have reached unprecedented lows, bonds might offer an opportunity to generate a stable income stream with less volatility than the equity market – and, having fallen heavily last year, bonds are considered well priced. As share prices have fallen, dividend yields have soared, increasing the attractions of equity income funds. Firms that pay high dividends tend to be established companies with stable businesses and strong balance sheets. Admittedly, in the current climate, some companies are cutting or cancelling these dividends as they attempt to protect their profits from the economic downturn. Nevertheless, an equity income strategy allows investors to benefit from a relatively high yield whilst also giving their capital the opportunity to grow. Garbett’s Financial Strategies have worked extremely hard for our clients over the last few months developing a strategy to combat this dramatic loss of income. If you would like to find out if our work could benefit you please call our friendly team on 01983 527111 or e-mail gfs@heritage-financial.co.uk Contributed by Matt Jones of GFS. Call GFS on 01983 527111. www.garbetts.com/gfs Back to top


	DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.