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Dean Statham Newsletter April 2006
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Tax News Introduction |
We have an update for you this month on the
long running Arctic Systems case, tax efficient car management, possible
changes to the filing deadlines of self assessment tax returns, and, a note
of the new VAT car scale charges. Take note that on the 5 April last week the
current tax year came to an end. This triggered a number of filing deadlines,
particularly for those businesses who employ staff! Please refer to the Tax
Diary section for more information. Please accept our apologies for the comment
we made in the Budget update last month regarding the lower, weekly national
insurance limit. We inferred that you would pay no contributions on earnings
below £84 per week, this should have said £97 per week. Readers may also find the following notes
useful:
If so, then one way is by setting up a
standing order through your company. Until December 2006 there is a cash payout
of at least £300 available to help you as an employer to cover the setting up
costs of offering payroll giving to your employees. As an extra incentive the
Government will match your employee donations to your chosen charity for the
first six months by up to £10 per month. So you should consider making the
monthly payments through your company and perhaps pass on the £300 grant to
the charity as well. Further information about the Payroll Giving
Grants Programme can be found at: www.payrollgivinggrants.org.uk
or from your usual Dean Statham contact.
This case concerns a Mr and Mrs Jones who
set up a limited company and are now resisting a claim by the Revenue that
the dividends voted to Mrs Jones, 50% of the total declared, should be taxable
as if allocated to Mr Jones! The basis of the Revenue's claim is that as
Mr Jones did most of the chargeable work, then he should be taxed on most of
the dividends voted. The downside for Mr and Mrs Jones is that this switch
from Mrs to Mr will increase Mr Jones' higher rate tax bill, and reduce Mrs
Jones' standard rate tax bill - overall a gain for the taxman. In December of last year the Court of Appeal
voted in favour of Mr and Mrs Jones, however the court did grant leave to the
Revenue to apply for permission to take the case to the House of Lords. On Budget day this permission was granted
and we will now have to wait for the case to be decided by the Law Lords.
This is unlikely to be before the end of 2006. For now we will have to keep a watching
brief on the effects that this case has on the structure and salary/dividend
policy of existing husband and wife run companies. At present the decision
handed down by the Court of Appeal stands. We will keep you informed of
progress with this case and let's hope that the decision reached in the Court
of Appeal is upheld! If you have not already noticed, Gordon
Brown and his team at the Treasury are embracing the challenge of climate
change, and attempting to do their bit to encourage us to drive cars with
lower CO2 emissions. For instance: 1. On Budget day last month changes were announced to the
rates of vehicle excise duty. At one end of the scale cars that are rated at
100 g/km or less will pay NO excise duty. Cars with a CO2 rating over 225
g/km, and registered after 31 March 2006 will pay £210 per annum (petrol
engine), £215 per annum (diesel engine). There will be a graduated duty for
cars in between. 2. For all cars that are registered before the 31 March
2008, and have CO2 emissions of less than 120 g/km, you can claim 100% of the
capital cost against your profits (adjusted for private use). Cars over 120
g/km will be restricted to the usual 25% writing down allowance up to a maximum
of £3,000 per annum - and again will be adjusted for private use. 3. Employees who use their own CO2 efficient car for
business mileage, will be getting more value from the rate per mile they
receive for expenses, compared to car owners who run less fuel effective
vehicles. 4. A company car driver will pay tax at his or her highest
rate, on a scale charge calculated as a percentage of the list price of the
company car when new. For cars with emissions below 145 g/km the rate applied
is 15% - rising to 35% for the gas guzzlers! So again drivers of the lower
rated cars will pay less tax, and, their employers will pay less class 1A
National Insurance. We would be delighted to work out the
comparative savings if your business converted to a "Green Car"
policy. Although the choice of vehicles may be somewhat limited, and not to
every driver's taste, perhaps the tax and cash flow implications are worth
looking at.
Lord Carter's report "Review of HMRC
Online Services" was published this month. Amongst its many recommendations we have
highlighted comments on the filing of Self-Assessment Tax Returns - makes for
interesting reading! First the bad news. It is proposed that from 2007-2008 the
filing period for paper returns should be reduced to 6 months - the deadline
will therefore be the 30 September. The filing period for online returns
should be reduced to 8 months - the deadline being 30 November. At present the filing period for all SA
returns is 10 months, the 31 January following the tax year end. If adopted this will have a radical impact
on the speed with which information is collected and processed. For instance
if you are self employed and have a 31 March year end we will have just 6 to
8 months to prepare your accounts, and prepare and file returns with the
Revenue. Now the good news. The report recommends that the period the
Revenue have to query your SA return, and most company returns, the
"enquiry window", should be linked to the date the return is
submitted, and not the filing deadline. For instance whenever you file your 2006 tax
return, assuming it's before the 31 January 2007, HMRC will have up to one
year from 31 January 2007 to query your return. Under the new proposals from
2007-2008 the "enquiry window" will be reduced to 1 year from the
date you file the return. It is hoped that this will help to promote
earlier filing of returns and close the "enquiry window" sooner. Summary Eventually it is likely that all returns
will be filed electronically. Certainly Lord Carter is of the opinion that
e-filing should be encouraged. It is best to be prepared. We will monitor the
situation and advise you of practical changes that we may need to make to
ensure your returns are filed in good time.
New scale charges apply as from 1 May 2006.
We have shown below the new rates for a three month period, if you require
the annual or monthly rates please call. These new rates should be adjusted on VAT
returns beginning on or after 1 May 2006. 1400 cc's or less: (Diesel, scale charge
£260, VAT due per car £38.72), (Other, scale charge £273, VAT due per car
£40.66) 1401 to 2000 cc's: (Diesel, scale charge
£260, VAT due per car £38.72), (Other, scale charge £346, VAT due per car
£51.53) 2001 cc's or more: (Diesel, scale charge
£331, VAT due per car £49.30), (Other, scale charge £508, VAT due per car
£75.66) 1 April 2006 - Due date for corporation tax due for the year ending
30 June 2005. 19 April 2006 - Last date to pay any outstanding PAYE and Class 1
NICs for 2005/06 to the Revenue. (If you pay your tax electronically the due
date is 22 April 2006).Interest will be charged on any payments received by
the Inland Revenue after this date. 1 May 2006 - Due date for corporation tax due for the year ending
31 July 2005. 19 May 2006 - PAYE and NIC deductions due for month ending 5 May
2006. (If you pay your tax electronically the due date is 22 May 2006) 19 May 2006 - The payroll form P35 and P14's must be filed by this
date - employers late in filing this form may receive a penalty. 31 May 2006 - Ensure all employees have been given their P60s. If you cannot read the contents of this
email please reply entering the words "please forward plain text
version" in the subject line. We will then arrange for all future
newsletters to be sent in plain text format. If you would like your email address removed
from our subscriber list please reply to this email with the word
"unsubscribe" in the subject bar. 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. Dean Statham, 29 King Street, Newcastle, Staffs, ST5 1ER. Tel: 01782 614618 Fax: 01782 717287. Web: www.dsonline.co.uk. Dean Statham is a limited liability partnership,
registered for VAT under reference 812 0016 96. Partners in the firm are
members of the Institute of Chartered Accountants in England and Wales
(ICAEW). This body has its headquarters in the UK and its rules of
professional conduct can be obtained from its web site. Dean Statham are
authorised to act as statutory auditors by the ICAEW. |
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