Bond eNews January 2008

Welcome to the first enews of 2008. In this month’s enews we report on a very busy time in the world of tax, with the filing deadline for self assessment tax returns keeping us all working hard.

We also report that after several delays, and much pressure from the business community and professional bodies, Chancellor Alistair Darling has issued some guidance on Entrepreneurs’ Relief, a new capital gains tax relief.

We also include our usual round up of news. Please browse through this month’s articles using the links below and contact us if any issues or questions arise.

Entrepreneurs’ Relief
Residence and Domicile
Money Laundering Regulations
PAYE end of year returns
HMRC payments due 31 January 2008
HSE launch campaign to stop slips and trips
PAYE tax codes about to be issued
Holidays

ENTREPRENEURS’ RELIEF
In the Pre-Budget Report in October 2007 the Chancellor, Alistair Darling, announced a series of changes to the capital gains tax (CGT) regime for individuals and trustees. These changes included the abolition of taper relief and indexation relief and the introduction of a single rate of CGT of 18%. The changes take effect from 6 April 2008.

On 24 January 2008, in response to pressure from the business community, the Chancellor announced a new ‘Entrepreneurs’ Relief’. The first £1m of gains qualifying for relief will be charged at an effective rate of 10%.

Gains in excess of £1m will be charged at 18%. An individual will be able to make more than one claim for relief, up to a lifetime total of £1m of gains.

Business leaders had been calling for the re-introduction of a form of Retirement Relief, which some of you may remember. The rules for retirement relief required you to have been in business for a number of years but the new rules are designed to be simpler:

there will be no minimum age limit, and
relief will be available where the relevant conditions are met for a period of one year.

The relief will apply to gains arising on the disposal of:

the whole, or part, of a trading business that is carried on by the individual, either alone or in partnership, and
shares in a trading company, or holding company of a trading group, provided that the individual owns broadly a 5% shareholding and has been an officer or employee of the company.

Commenting on the announcement Richard Lambert, Director General of the CBI, said:

‘This is superficially quite clever and on the surface might seem like a relief after three months of uncertainty, but even the smallest business owner will lose taper relief and indexation and be worse off.

The reality is that these revised measures will do nothing to help the real business powerhouses of this country. Although £1 million might sound a lot, it could have been built up over twenty or thirty years. It is clear that the real wealth and job creators of the UK's economy, selling assets for a lot more, will be seriously clobbered.

Today's changes still discriminate against the long-term holding of assets, in favour of short-termism, and will do nothing to restore stability to the life insurance market, which faces a period of turmoil.’

Please do get in touch if you have any immediate concerns. We will let you have further detail once this is available.

Internet Links: HMRC guidance and CBI Press release

RESIDENCE AND DOMICILE
Following the Pre-Budget Report announcement that HMRC would be reviewing the rules on residence, HMRC have issued some draft legislation which is expected to take effect from 6 April 2008.

The tax treatment and conditions that need to be satisfied for an individual to be non-resident and/or non-domiciled are complex. The aim of the proposed legislation is to ensure that individuals contribute in respect of the foreign income and gains which they keep abroad and on which they currently do not pay UK tax.

The proposed legislation includes:

amending the residence rules, so that days of arrival and departure to and from the UK will count towards establishing residence
individuals who are resident (but not domiciled or not ordinarily resident) will generally have to make a claim to be taxed under the favourable remittance basis. There will be an exception to this rule where the unremitted foreign income and gains are less than £1000.
individuals who are taxed on the remittance basis will not be entitled to the personal allowance or capital gains tax annual exemption, and
individuals who are resident (but not domiciled or ordinarily resident) for longer than seven out of the past 10 years will only be able to use the remittance basis of taxation on payment of an annual charge of £30,000. This charge will not apply where unremitted foreign income and gains are less than £1,000.

HMRC confirm that the legislation is draft at present and should be regarded as ‘work in progress’.

If you are potentially affected by these rules or have any questions or concerns please do get in touch.

Internet Link: HMRC residence and domicile

MONEY LAUNDERING REGULATIONS
From 15 December 2007, the Money Laundering Regulations 2007 require certain businesses to have systems in place to prevent money laundering and report suspicious transactions. These regulations replace the previous ones which have been in force since 2004.

Not all businesses have to operate the regulations but most UK financial businesses (banks, building societies, money transmitters, bureaux de change, cheque cashers, savings and investment firms) are covered. In addition, the regulations cover legal professionals, accountants, tax advisers, auditors, insolvency practitioners, estate agents, casinos, high value dealers and trust or company service providers.

If you operate in any of these areas you need to ensure that you are complying with the new regulations. If you have dealings with businesses in these sectors, such as ourselves, you may find you have to provide more information, for example confirming your identity. We will let you know if we require any further information.

HMRC have updated their guidance which can be found by visiting the link below.

Internet Link: HMRC Money Laundering guidance

PAYE END OF YEAR RETURNS
HMRC are running a series of workshops on the online completion of end of year PAYE returns. You can use the link below to see when sessions are running in your area.

The end of year forms P35 and P14, which include details of amounts paid to employees as well as deductions made under the CIS scheme, have to be filed by 19 May 2008. Employers with more than 50 employees have to file online or face penalties. Smaller employers are entitled to a tax free incentive payment of £100 for filing the 2007/08 end of year forms online.

If we already deal with your payroll, you can be assured that we will deal with this on a timely basis for you. If however you would like some help in this area please do get in touch.

Internet Link: HMRC online filing

HMRC PAYMENTS DUE 31 JANUARY 2008
HMRC have apologised for a problem that they have identified with the self assessment tax return. The problem apparently only relates to tax returns submitted prior to 31 October 2007 where the taxpayer asked for any unpaid tax to be collected directly rather than by a restriction in their tax codes for 2008/09. It is only possible to collect underpayments via a tax code restriction where you are an employee or company director, with sufficient pay to enable any underpayment up to £2,000 to be collected.

If you have received a statement advising you that your unpaid tax will be collected through your PAYE tax code and you would rather pay directly please let us know as soon as possible so we can sort this out.

If alternatively you are happy to have the underpayment collected through your tax code, please let us have a copy of your coding notice for checking when received.

Internet Link: HMRC working together

HSE LAUNCH CAMPAIGN TO STOP SLIPS AND TRIPS
The Health and Safety Executive (HSE) have announced that they will run a workplace slips, trips and falls campaign in February and March this year. The campaign, which is called Shattered Lives, is aimed at workers who are most at risk of a slip, trip or fall in the workplace. These include not surprisingly construction workers and kitchen workers.

The HSE says that around 1,000 workers every month are seriously injured during these types of accidents.

Internet Link: HSE Shattered Lives

PAYE TAX CODES ABOUT TO BE ISSUED
HMRC have advised that they are about to issue PAYE tax codes to employees for the 2008/09 tax year.

If you receive a coding notice it is worthwhile letting us have a copy for checking if you have any concerns. Employees who have the use of a company car may find they are worse off in the new tax year due to an increase in the percentage, linked to the car’s CO2 emissions, applied to the list price of the car.

HMRC’s guidance on PAYE tax codes includes some frequently asked questions and can be found at the link below.

Internet Link: HMRC coding notice guidance

HOLIDAYS
On returning to work in the New Year, many will be reaching for the travel brochures to plan their next holiday getaway. Now would be a good time to ensure that your employees (or your own) holiday entitlement has been correctly calculated. The minimum statutory holiday entitlement was raised from 20 days to 24 days per annum from 1 October 2007. This entitlement is inclusive of Bank Holidays.

Where the holiday year end is not 30 September, then employees are entitled to a pro-rated entitlement. The Business Link website gives a link to enable individual entitlement to be calculated. This is particularly helpful for part time employees.

The further increase in entitlement from 24 to 28 days applies from 1 April 2009.

Internet Links: Business link holiday calculator and BERR website