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December 2006 - PRE-BUDGET REPORT SUMMARY 2006

This year’s Pre-Budget Report is almost certainly Gordon Brown’s last as Chancellor. On this occasion, his March 2006 Budget predictions for growth and borrowing have proved reasonably accurate, even if overall borrowing is still at an uncomfortably high level. While Mr Brown’s speech itself contained very few surprises, the supporting material issued by the Treasury and HM Revenue & Customs (HMRC) revealed a wide variety of important tax measures.

December 2006 - NEW COMPANIES ACT NOW LAW

The Companies Act 2006 has finally received Royal Assent. The Act aims to simplify and improve company law and will take two years to implement.

December 2006 - LATE PAYMENT PROBLEMS

Late payment by customers is a serious issue for any business. According to research by BACS Payment Schemes Limited (BPSL) there has been a significant rise in the number of small businesses experiencing late payment problems. In 2005, 59% of small businesses experienced problems with late payments - almost double the percentage for the previous year.

December 2006 - CONSTRUCTION INDUSTRY CHANGES

HMRC have recently launched their advertising campaign to inform contractors in the construction industry of the new monthly returns which have to be made from April 2007.

December 2006 - RETIREMENT ANNUITIES

Those individuals who receive income from a retirement annuity contract (an old type of pension) should expect a change to the way in which these are taxed from April 2007.

December 2006 - REFORMS TO ISA AND PEP SCHEMES

The Individual Savings Account (ISA) is a tax exempt savings account which allows individuals to invest up to £7,000 per annum. Income from these accounts is tax free.

November 2006 - STAMPS AVAILABLE ONLINE

We reported a couple of months ago on the changes to the postal charging system which introduced pricing by size and weight.

November 2006 - PAYROLL ONLINE FILING INCENTIVE AVAILABLE

HMRC have advised small employers who successfully filed their 2005/06 payroll end of year returns, P35 and P14s, online that they can now reduce their next PAYE payment by the £250 incentive payment. They advise that this can be done without waiting for HMRC confirmation that the amount is due.

November 2006 - VAT FUEL CHARGE SET TO RISE

The EC has finally agreed the UK’s proposal to align the output VAT charge with the benefit in kind charge on the provision of private fuel assessable on the individual. The proposals and legislation were announced in the 2005 Budget and will be implemented from May 2007.

November 2006 - BENEFITS IN KIND ON PRIVATE USE OF COMPUTER EQUIPMENT

The Finance Act 2006 abolished the £500 tax exemption for the private use of computer equipment provided by an employer to an employee. This removed a tax-free incentive by which employers had been able to offer their employees tax-free home use of computer and related equipment such as scanners and printers. The reason for the withdrawal of the incentive was that some employers had been using the exemption to provide their employees with packages including MP3 players and games consoles.

November 2006 - PENSIONS WARNING

Tony Hobman, chief executive of the Pensions Regulator, has warned companies not to sell or abandon their final salary pension funds without proper provision for meeting their deficits, which are estimated to be more than £100bn.

October 2006 - MITCHELLS ADVISES ON SALE OF EMS MEDICAL LIMITED

Cheltenham based accountancy firm Mitchells has assisted in the sale of its client EMS Medical Limited.

October 2006 - NATIONAL MINIMUM WAGE CHANGES

Many legislative changes are confined to April and October each year. 1 October 2006 sees the introduction of a number of changes not least of which are the increases to the national minimum wage (NMW) rates.

October 2006 - HMRC WON'T GIVE OPINIONS ON TRADING STATUS OF COMPANIES

For a number of years taxpayers or their agents have been able to approach HMRC for their views as to whether a company was a trading company for business taper relief purposes. Many advisers have used this facility to great effect to ensure the availability of the 75% reduction in the taxable gain.

October 2006 - AGE DISCRIMINATION AND PAYE

The Employment Equality (Age) Regulations 2006 become law from 1 October 2006 and this has far reaching implications some of which we have reported on previously. HMRC have published some guidance which looks at the implication of the legislation on payment of some statutory payments which employers make. Payments affected include statutory sick pay (SSP), maternity pay and paternity pay.

October 2006 - GUIDANCE ISSUED ON MATERNITY PAY CHANGES

As part of the Work and Families Act there will be some significant changes to maternity pay entitlement for women whose babies are due from 1 April 2007 onwards. The due date should be taken from the maternity certificate MATB1 which the woman obtains from the midwife when she is about 20 weeks pregnant.

September 2006 - GUIDANCE ON INHERITANCE TAX

Previously we have reported on the changes to inheritance tax (IHT) and trusts, which were announced in the Budget and caused great controversy.

September 2006 - POSTAL CHANGES

The postal charging changes came into effect from 21 August 2006. You should have received details of the new sizing guide direct from the post office.

September 2006 - TAX CREDITS FINAL REMINDER

Tax credits are a state benefit which is generally available to lower income families. However, the credits are significantly increased where individuals pay for childcare. To check whether you may qualify click on the HMRC website link below.

September 2006 - HMRC LETTERS

As in previous years, HMRC offices will be sending out letters over the next few weeks with advice for small businesses on calculating business income for the purposes of self assessment. The letters have been criticised in the past for giving the impression to taxpayers that there was something wrong with their tax returns.

August 2006 - TAX RETURN DEADLINE

Lord Carter has revised his recommendations on bringing forward the personal tax return submission deadline.

August 2006 - ADVISORY FUEL RATES FOR COMPANY CARS

HMRC have announced new rates for journeys on or after 1 July 2006. These rates apply to company car drivers who are reimbursed for business miles driven. The rates can also be used by company car drivers who claim all their fuel costs and then reimburse their employer for their private mileage.

August 2006 - PERSONAL TAX PAYMENTS ON ACCOUNTS DUE

The second payment on account (POA) of income tax and Class 4 National Insurance liabilities for 2006/07 is due on 31 July. These payments generally need to be made by individuals within the self assessment system whose liabilities are not covered by tax deduction at source. The system of tax deduction at source includes tax deductions through PAYE, for current or previous year’s liabilities, or tax deductions by banks and building societies.

August 2006 - £250 TAX FREE PAYMENTS FOR ONLINE FILING

HMRC have advised employers with less than 50 employees who filed their end of year returns online for the year ended 5 April 2006 that they can deduct the £250 tax free compensation payment they are due from their next payment of PAYE.

August 2006 - HMRC INTERVENTIONS

HMRC have been considering various ideas which might reduce time spent on enquiries and have announced that trials started in July.

August 2006 - LOW PAY COMMISSION TO CONSIDER SMALL BUSINESSES

The Low Pay Commission (LPC) has been advised to consider the impact of any increase in the national minimum wage on small businesses, which is a change to the current remit of their considerations.

July 2006 - ACCOUNTANT RAISES MONEY FOR LOCAL CHARITY

A director from Cheltenham based Mitchells Chartered Accountants is preparing to reach an impressive 15 summits in order to raise funds for a newly created charity.

July 2006 - IHT AND TRUSTS

Last month we reported on the proposed inheritance tax (IHT) changes for trusts. The professional bodies have been lobbying HMRC and the government to reconsider the rules and appear to have had some success. The legislation is being amended on its way through parliament.

July 2006 - TAX RETURN DEADLINE

Last month we updated you on reaction to the surprise announcement, made on Budget Day, of the proposal to bring forward the tax return submission deadline from 31 January to 30 September for paper returns and 30 November for electronic ones. The professional bodies have been campaigning against the recommendations made as part of Lord Carter’s review.

July 2006 - PENSIONS WHITE PAPER

The long awaited White Paper was released on 25 May. It contains many proposals which would change the pensions system quite radically.

July 2006 - HMRC GET TOUGH ON STATUS

In recent months, HMRC have begun to take a very hard line with the reclassification of subcontractors to employment status. The effects of this can be bad enough for a business but it now appears that HMRC are taking a much harder line.

July 2006 - "TRAIN TO GAIN" INCENTIVES

Small businesses (those with less than 50 employees) will be able to claim back the salary costs of employees taking part in the government’s ‘Train to Gain’ programme. The programme is designed to improve the basic literacy and computer skills of employees in the workplace. The programme is not yet available in all areas of the UK but is set to be rolled out across the country by August 2006.

July 2006 - EBAY TAX CHEATS

HMRC are using a search engine device to track down traders who sell large quantities of goods on eBay and don’t declare their earnings. Also, HMRC are looking for those traders who are not VAT registered.

July 2006 - IS THE TAX MAN CALLING YOU?

A Cheltenham based firm of Chartered Accountants is advising local businesses to be aware of a recent announcement by HM Revenue and Customs which could see them encouraged to discuss alleged tax breaches.

June 2006 - PROPOSED TRUST AND TAX RETURN CHANGES

Last month we reported on the proposed inheritance tax (IHT) changes for trusts. The professional bodies are lobbying HMRC and the government to reconsider the rules and we will keep you in touch with developments. If you have a trust, created before Budget day, there is no need to take any immediate action as the IHT charges will not generally take effect until 2008.

June 2006 - SMALL COMPANIES AND THEIR ASSOCIATES

A decision in the High Court has overturned HMRC’s usual interpretation of the rules on associated companies. The small companies rate of tax of 19% is payable where a company’s profits are less than the upper limit of £300,000. Where the company has associates (broadly companies under common control) the upper limit has to be divided equally between the companies, resulting in the companies paying higher rates of corporation tax if they breach this reduced limit.

June 2006 - P11D DISPENSATIONS

Last month we reported that forms P11D which report details of employees’ benefits in kind and expenses have to be with HMRC by 6 July. Some of you will no doubt be trying to collate the necessary information to prepare these forms which is a time consuming process.

June 2006 - WILL YOUR BUSINESS WIN DURING THE WORLD CUP?

Independent shopkeepers are expected to score a higher percentage of alcohol sales than the big supermarkets during this summer’s football World Cup. Scottish and Newcastle UK predicts that independents will account for two thirds of the extra sales of beer to be drunk at home during the tournament.

June 2006 - HMRC AND OFFSHORE ASSETS

There has been a lot of recent publicity about HMRC formally requesting financial institutions, including Barclays, to deliver up details relating to offshore bank accounts. This is clearly a major offensive by HMRC, who seem to feel that many UK residents ‘hide’ monies offshore.

May 2006 - FREE SEMINAR FOR LOCAL RECRUITMENT COMPANIES

Cheltenham based accountants and business advisers Mitchells is holding a free to attend seminar at the Thistle Hotel on 23rd May for local recruitment companies.

April 2006 - SHOULD YOU AUDIT YOUR AUDIT PROCEDURES?

A firm of Cheltenham based accountants is advising local businesses to consider whether they really need an audit after the publication of an industry report showed that many directors are confused over the issue.

Mitchells Chartered Accountants

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