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Bulletin No. 41 (13 March 2008)
Taxation Reminder Dates
5 April: End of 2007/08 tax year.
19 April: Final payment of 2007/08 PAYE.
19 May: Filing of 2007/08 PAYE year-end data to be done.
6 July: Filing of 2007/08 forms P11D (Expenses and benefits).
31 July: Payment of 2nd installment self as-assessment taxation is due.
Accounts
We should have dealt with, or be dealing with, any Accounts to be dated 31 October 2007, or earlier.
This Bulletin
This Bulletin is produced rapidly and mainly to advise clients of the proposed Budget changes. It could contain errors. Note that the Budget is not law until passed by Parliament as an Act. The main details are transferred into the taxation pages.
GENERAL BUDGET BACKGROUND
The main background to the Budget is the global market turmoil "triggered" by the banking crisis and causing fear of recession. UK Gross Domestic Product was estimated at 3% for 2007, it is expected to grow between 1.75% and 2.25% this year, recovering thereafter to up to 3.00% in 2010. The Monetary inflation target is retained at 2%, on the CPI basis, expected to be back on target by the end of 2009. No forecast of consumer spending is noted, but public spending is forecast to increase by 2.2% this year. Government borrowing is to rise, and the "tax-take" is higher.
Notes:
10% Income Tax Band. The exclusion of earned income from charge under the lower rate band is perhaps the most extra-ordinary feature of this Budget. Instead it will apply only to savings income (in much the same way as for dividends).
National Insurance / Income Tax. The band of income chargeable at the highest rates for National Insurance has increased by £ 4,990 per annum. This compares with the increase in the Standard Rate band for Income Tax: just £ 1,400 per annum.
Income Splitting. Very welcome news was that the government is deferring until April 2009, its plans to ensure that a "main earner" is subjected to tax in respect of income allocated to an associate, deemed done to avoid taxation.
Possible Tax planning in short time before 5 April.
INCOME TAX
1. Consider use of un-used allowances, or lower rate bands so as to lessen following-year tax. Could any income be "placed" before/after 5 April, to advantage.
2. Consider ISA accounts for 2007/08 (and 2008/09).
3. Consider making another pension plan contribution.
CAPITAL GAINS TAX
1. If you have profits in excess of the exempt amount, consider realising some losses before 5 April.
2. After splitting investment with your spouse, consider realising such profits as will cause no actual liability. (Re-purchase, if required, after 30 days, so as to re-base cost in 2008/09, at then current values.)
INHERITANCE TAX
Consider using the exempt transfers for 2007/08.
New advisory Car Fuel Rates from 1 February 2008
|
Engine Size |
Petrol |
Diesel |
LPG |
|
|
Up to 1400ccs. |
11p |
11p |
7p |
|
|
1401 to 2000ccs. |
13p |
11p |
8p |
|
|
over 2000ccs. |
19p |
14p |
11p |
|
Capital Allowances
For small businesses, first year allowances on capital equipment (excluding cars) will be 100%, on purchases made after 5 April, up to a total for the year of £ 50,000. This replaces 50%. However. the general annual writing-down allowances reduce from 25% to 20%.
Capital Gains Tax Changes
Withdrawal of accumulated Taper and Indexation allowances may increase the actual tax payable, even if it is at a lower rate.
IR35 Regulations
In two recent cases, it appears the Special Tax Commissioners were influenced to rule in the contractors’ favour, amongst other factors (including rights to assign, or substitute), by:
Case 1. the contractor carried financial risk (demonstrated by his agent’s bankruptcy!), organised the work, used his own computer (in his own time) and had retained Intellectual Property rights, arising from the work.
Case 2. Although the contractor worked as part of a team, he was working on discrete sections and the client wished to learn from the contractor. (There was no agent involved in this one.)
OTHER DETAILS & COMMENT
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@ 12 March 2008 |
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| At Close £ | = Euro | € 1.304 |
| = US | $ 2.021 | |
| FTSE 100 | = | 5776.4 |
The Markets
Brought on by the bank “credit crunch,” world stock markets are volatile, generally all suffering from fears of recession and inflation. The London stock exchange FTSE 100 closed up 86 points on the day.
The RPI inflation index was up 2005: 2.2%, 2006: 4.4%, 2007: 4.0%. About a year ago, £ 1 was worth: € 1.47. Admittedly, the US $ is also very weak. Raw materials, fuel and food prices are recently higher and increasing. Monetary inflation is a concern.
The Budget: Non-Domiciled UK Residents
“Non Doms” are generally residents born outside of the UK of non-UK parents. Currently, they are required to pay UK taxation on UK income and gains and only on their foreign income to the extent that it is remitted to the UK. The proposed new provisions will only apply to those claiming Non-Domiciled status and who have un-remitted foreign income of at least £ 2,000 per annum.
US Presidential Campaigns
The Republican Party candidate favours free trade rather more than either of his two opposing and competing Democrat candidates.
Mortgages and the “Credit Crunch”
The US Treasury has offered their bonds to US banks, in exchange for mortgage loan rights. It seems they too must “nationalise” mortgages, as we did with the below?Northern Rock
Having ended up with two (at least discussible) rescue proposals, HM Government could surely have negotiated these acceptable and put them to the company shareholders to decide. Because of fears that they might make too much profit, HMG looks like
“digging itself into a hole” and some litigation. Those profits would be taxed one assumes..To return directly to the greenhow home page click here: [home] or view: [Bulletin No.40], [Bulletin No. 41],[Bulletin No. 42] , [Bulletin No.43],[Bulletin No.44],[Bulletin No. 45],[Bulletin No. 46],[Bulletin No. 47]