Tax Tips & Advice from Glazers Accountants London

The new CGT rules that we previously reported on, which will be effective from 6 April 2008, have been tweaked a bit to allow individuals to realise gains of up to £1m and only pay capital gains tax at 10%. After this the rate of 18% will be charged. You can save tax by timing your disposal right, depending on the type of asset being sold.

Many assets will not qualify for this new 10% rate, such as property investment and normal quoted shares, so it is still advisable to sell this type of asset after 5 April 2008 so as to reduce the effective tax rate from 24% to 18%.

The domicile rules are changing from 6 April 2008. if you have recently taken advantage of your non UK domiciled status then you will need to review it in the light of the new changes. Basically, you can pay a flat £30,000 tax and still benefit from your status or you can declare and pay tax on your worldwide income.

Looking for a cheap and useful tax-free perk to give your employees? - well how about a mobile phone? All calls made will be allowable for tax and no benefit arises to the employee, as long as the contract is between the employer and the phone provider .Please note that under new rules only one phone per employee now qualifies.

With 5 April not far away now you should be looking at pre-year end tax planning such as topping up your pensions, making full use of your ISA allowances, use up your CGT allowance and IHT allowance.

For more advice on any of the above matters, please call our tax partner Darren Specterman on 020 8458 7427 or email darren.specterman@glazers.co.uk and he will be pleased to assist you.

Under the proposed new CGT rules you are advised to make any disposals of assets which may qualify for business asset taper relief prior to 5 April 2008, otherwise what would have been taxed at 10% will be taxed at 18% if sold after 5 April 2008.

Sell later and save tax!

If you hold assets that only qualify for the non-business asset taper relief then you are advised to sell after 5 April 2008. Currently the tax rate for a higher rate taxpayer who has held an asset for 10 years from April 1998 will be 24% . However, this will fall to 18% if sold after 5 April 2008.

Christmas partying

With Christmas once upon us again, don’t forget that annual Christmas parties are tax allowable against business profits. If the party is the only staff function you put on each year, then you can spend up to £150 (including VAT) per head.

Christmas giving

Christmas time is a time for giving and don’t forget that whilst giving is a splendid act in itself, why not also take advantage of the gift aid relief provisions which allow higher rate taxpayers to claim back 18% of the gross donation they make to charity.

Check your Wills

The Inheritance Tax nil rate band which currently stands at £300,000 has now effectively been doubled to £600,000 for married couples. Hence it is no longer required for wills to leave the 1st £300,000 to children to ensure that the band is not wasted, although if your will already stipulates this then there is no need to alter it.

For more advice on any of the above matters, please call our tax partner Darren Specterman on 020 8458 7427 or email darren.specterman@glazers.co.uk and he will be pleased to assist you.

The UK rate of corporation tax for small companies increased on 1 April 2007 from 19% to 20%. Depending on your company's year end, it might make sense to defer any post-year-end directors' salaries that would otherwise be voted, in order to obtain a higher rate of tax relief in the following year.

Gordon Brown is cutting the capital allowances available on all purchases of business equipment and fittings from 25% to 20% with effect from 6 April 2008. It might therefore be advisable to accelerate any capital purchases into this current tax year.

With the environment high on the political agenda, the Government has set up a separate capital allowances regime for so called “environmentally friendly” items of plant and equipment and if any items you acquire are on the list then your business is entitled to 100% write off against your income.

If you run a small company and take advantage of the low salary / high dividend route as a legitimate way to avoid paying income tax or national insurance, the figures for 2007/08 have now been released and you should take note of these when planning how much profit extraction you can make. If you take no salary then the maximum dividend you can take without giving rise to a tax liability is £35842. If however, you take a salary of say £4500, then the dividend figure alters to circa £31700.

For more advice on any of the above matters, please call our tax partner Darren Specterman on 020 8458 7427 or email darren.specterman@glazers.co.uk and he will be pleased to assist you.

The new rules for making personal pension contributions came into force on 6 April 2006 and with it all the old rules were pretty much scrapped. The maximum allowance for 2007/08 that can be put into a pension scheme is £225,000, increasing from £215,000 the year before. Remember there is no longer any carry back or forward facility so make sure you use as much as you can before 5 April 2008. For advice on pension planning, email david.higgins@glazers.co.uk or call David on 020 8458 7427.

Christmas is fast approaching so make sure that office party is fun and is fully tax deductible. That way both employees and employers enjoy the occasion. Don't forget the limit per head is £150 (inclusive of VAT).

Don't pay more Inheritance Tax on your death than you have to; Gordon Brown won't thank you for it! Make sure, if you can afford it, that you utilise the £3000 annual exemption or the "gifts out of income" exemption, which basically allows you to make regular gifts to people out of your everyday income so long as you don't effectively deprive yourself.

Do you have a holiday home? Maybe just acquired it? Or have had one a while but never used it much? Are you thinking of selling it and worried about the capital gains tax? Well it is possible to mitigate this by making an election which will assist in reducing the overall gain.

A new Special Commissioner's decision now means that when looking at one's UK resident status, ignoring days of arrival and departure may not be correct. So it is important to obtain proper advice in this area before relying on this old rule. There will be tax consequences flowing from a person being deemed to be UK resident. Do not rely on the old 90-day rule!

At this time of year, charities are in need of fund-raising to help out people at Christmas and to look after those in need of food and shelter. If you are a 40% taxpayer, then you can give to these charities and receive a tax refund of the higher rate tax. The donation would need to be made under gift aid, which is very simple.

For more advice on these matters, please call our tax partner Darren Specterman on 020 8458 7427 or email darren.specterman@glazers.co.uk and he will be pleased to assist you.

The Chancellor has brought back the 50% first year allowance on plant and machinery for one year commencing on 1 April 2006 for companies and 6 April 2006 for individuals and partnerships. Make sure you accelerate those spending plans on computers and other equipment to ensure you benefit from the allowance which may be phased out after 31 March / 5 April 2007.

With effect from 6 April 2006 the limit on investing in Enterprise Investment Schemes (EIS) doubles to £400,000, which means that a maximum income tax relief of £80,000 is available. EIS also allows for the deferral of capital gains without limit and so is a very useful tax shelter.

Looking to set up in business and use a limited company for the purpose? Well a tax-efficient way of structuring such a company would be to have a minimal share capital of say £100 and then introduce the rest of the funds as loans to the company. This way, when the company can afford to, it can repay your loans tax-free and even pay you a commercial rate of interest on the loan. This is a tax-efficient way of extracting money too, as interest, although taxable, bears no national insurance and the company should get a tax deduction for it.

Do you have an offshore bank account which earns interest? If so, are you declaring the interest each tax year to the tax man? If not you should be as now the UK Revenue & Customs are obtaining information for taxpayers who hold overseas accounts and are enquiring into their tax affairs where no interest has been declared. Please note if you are non-UK domiciled then you may be able to get this interest UK tax free.

For more advice on these matters, please call our tax partner Darren Specterman on 020 8458 7427 or email darren.specterman@glazers.co.uk and he will be pleased to assist you.

If you have still not filed your income tax return for the year ended 5 April 2005, now is the time to collate the information needed to do so. There is an automatic penalty of £100 for returns not filed by 31 January.

Many thousands of parents who have received Child Trust Fund (CTF) vouchers have not yet invested in a CTF account and are losing the benefit of tax-free returns.

The CTF is a long-term savings and investment arrangement. It is started with the initial voucher worth at least £250 (the amount depends on the child’s date of birth, and family income). Relatives, friends and the child themselves can then contribute up to £1,200 a year in total into the account. The fund is entirely tax free and the child will have access to the money once they turn 18.

The government has postponed the introduction of the tough new rules by 12 months, to April 2007. Any business involved in construction work should use the extra time to ensure that its existing arrangements are in order; in particular by ensuring that all workers paid under the scheme are genuinely self-employed. We are happy to advise on this thorny issue.

For more advice on these matters, please call our tax partner Darren Specterman on 020 8458 7427 or email darren.specterman@glazers.co.uk and he will be pleased to assist you.

VAT receipts and employee mileage claims

HM Revenue & Customs has announced changes to the procedures for input VAT recovery by employers on employees' mileage allowances. In future employees will have to produce a garage VAT receipt to support the claim for expenses made. Without this supporting receipt the employer will not be able to reclaim the input VAT on the fuel element of the expenses. The changes become effective from 1 January 2006.