We have covered some of the property related dilemmas faced by couples about to marry (or enter into a civil partnership after 5 December 2005). We have also highlighted the dangers of failing to take account of the tax rules applied to "Agency Workers", the use of Nil Rate Band Trusts for inheritance tax planning and a quick reminder of the benefits of stakeholder pensions for minors.

We were going to include an article this month on the changes to the Construction Industry Scheme to be introduced April 2006. You will be relieved to know that this has been set back a year, the changes will not now be implemented until 6 April 2007!

Last month Garbetts launched a new Employment and Health and Safety service with our partners Qdos consulting.

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.

In April 2006 there are major changes coming up to the pension regime - the so called 'A day' changes.

We’ll be providing a briefing on these soon, but in the meantime please put the evening of 17 November in your diary for our evening seminar on the subject, in association with Butterfield Private Bank (incorporating Leopold Joseph).

The A day changes are quite wide ranging, and even if pensions are not normally your thing you should make time to appreciate whats happening and how it allows you flexibility in planning for the future.

On 19 October 2005 the Government announced that the new CIS scheme, scheduled to start in April 2006, was to be deferred to April 2007.

However 'assistance' (for which read more inspections and bureaucracy) was promised to Construction Businesses to help them prepare for the scheme over the next 18 months or so.  This means we are likely to see a lot more attention paid to status issues - are sub contractors employed or self employed over coming months.  The law on self employed status has not changed for may years, and is not scheduled to change as part of new CIS (although the tax man would like you to think it was). 

Its important that businesses in the Construction Industry make sure that self employed status for sub contractors is checked and verified.  It’s a must to have contracts in place which are regularly renewed. 

Don't forget to keep an eye on garbetts.com, our www site, where you can find a selection of tools and briefings to help you with your accounts and taxes.

All comments that follow apply equally to married couples and partners registered under the Civil Partnership Act (from 5 December 2005).

One of the most critical pieces of tax planning for couples prior to marriage concerns property.

If both parties own their own home prior to marriage then a choice needs to be made as only one of the properties can qualify as a tax exempt principal private residence after marriage.

Factors that can influence the best tax strategy include:

1. Are both properties to be kept after marriage, or one sold shortly afterwards?
2. Should the properties be owned jointly or continue to be owned separately?
3. If retained what are the future plans for the second property after marriage - will it be let?
4. Which property has the most equity, and so on?

After marriage any transfer of property between partners is free of both Capital Gains Tax and Inheritance Tax. Typical tax planning objectives might be:

Capital Gains Tax

• If both properties are retained, and the non-principal private residence is let post marriage, then no capital gains tax will apply on a sale up to three years after marriage.
• Whatever the decision, to keep a second property or to sell, it is likely that actions will have to be taken after marriage. This being so it is vital that proper elections are made to choose which property is to be considered the couple's main residence for tax purposes. This involves signing and lodging the appropriate piece of paper with the tax office. This only applies if both properties are actually used as residences.
• These elections can be varied. There is also a two year time limit for filing which starts from the date of marriage in most cases.

Inheritance Tax

• Depending on the mix of assets in each parties ownership, moving properties into joint ownership can help to equalise estates and reduce overall tax risk.
• Marriage or formal partnership should trigger a visit to your advisors to revise your wills. This again should aim to equalise your joint or separate ownership of property and other assets. See the separate article we have written this month on the use of Nil Rate Band Trusts.

So if you are planning to marry, or enter into a civil partnership, please call so that we can make the most of the tax benefits available.

What is an agency worker?

If you supply labour only to your clients, your relationship with your subcontractor is likely to be that of employer and employee. You may need to stop tax and national insurance from their pay.

For instance if you are a contractor and your client asks you to build a house, then any subcontract labour that you use can be dealt with under the construction industry rules as long as the workers present a correct CIS4 certificate.

However, if your client decides to build the house himself and asks you to supply a plumber (rather than merely introduce him), then you would be considered an agent, and the plumber your agency worker. Even if the tradesman had a valid CIS4 certificate you would still need to stop tax and national insurance on the wages paid to him for that labour only contract.

Of course this sort of situation is not restricted to the construction industry but to most business contracts where a supply is made on a labour only basis.

The rules apply if your subcontractor is a sole trader or a partnership. The rules DO NOT apply if your subcontractor is a limited company.

If you trade on a labour only basis and use subcontract labour to do the work, then potentially the Agency Worker tax rules may apply. Please call if you would like us to review your contracts to ensure that you are keeping the right side of the legislation.

There have been a number of anti-avoidance provisions enacted in recent times that have stopped the benefits of a number of complicated inheritance tax planning schemes.

However the use of a Nil Rate Band Trust, as part of a properly executed will, is still a perfectly legal and workable tax planning tool.

Essentially the trust allows married couples (and, from the 5 December 2005, couples registered under the new Civil Partnership Act) to use up their individual exempt estate values for inheritance tax purposes. Presently the exempt estate value is set at £275,000. Without the use of this planning tool it is possible that on the first death up to £275,000 of exemption may be lost.

There are risks to be avoided which can be achieved by using a particular type of variant trust.

If you would like more details of this scheme please call.

It is perfectly acceptable for parents, grandparents or other interested persons to set up and pay for a stakeholder pension for your children.

The rules allow for a gross contribution of up to £3,600 per year. After notional tax has been deducted the net amount payable is £2,808. Payment up to this amount can be made even when the beneficiary has no relevant earnings.

The £3,600 will be invested in a tax exempt fund and the minor will not be able to withdraw any cash benefits until age 50 (Note. The pensionable age is due to rise to age 55 by the year 2010) - so this is a long term and tax effective investment.

The good news is that this favourable tax treatment will not be affected by the new rules on pensions which start on the 1 April 2006.

1 November 2005 - Due date for corporation tax for the year ending 31 January 2005.

19 November 2005 - PAYE and NIC deductions due for month ending 5 November 2005. (If you pay your tax electronically the due date is 22 November 2005)

1 December 2005 - Due date for corporation tax for the year ending 28 February 2005.

19 December 2005 - PAYE and NIC deductions due for month ending 5 December 2005. (If you pay your tax electronically the due date is 22 December 2005)

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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.