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PAYE – Reminder

Year-end forms P35 and P14/60 are due in to the Inland Revenue by 19 May.  Penalties may be charged for any forms not with the Inland Revenue by that date, and will automatically be charged for forms received after 25 May 2002.

Employees must receive their P60 by 31 May 2002.

Forms P9D and P11D and returns of Class 1A NIC’s on form P11D (b) must be submitted by 6 July, and payment of Class1A NIC’s must be made by 19 July.

Revised notices of coding will be issued early in June, and any P6 PAYE code changes should be made on the first payday after 17 June.

The period when an employer may use a P45 dated 2001-02 has been extended to 24 June 2002.

Schedule E Change

The following changes to the legislation governing the taxation of employment income are to be made:

·                    Gains from Share Options

The rules for avoiding a double charge to tax on the exercise of employee share options are to be changed so that the amount of gain chargeable on exercise is reduced by the amount of gain charged on the grant of the option.  The legislation previously gave relief by deducting the level of tax charged on the first gain from the tax liability on the second gain.

·                    Credit Tokens

The use of a credit token by the relative of an employee will now be treated as if the employee has used the credit token and a tax charge may arise.

·                    Termination Payments

The Inland Revenue have clarified what will be treated as normally exempt benefits from a charge to tax for benefits provided in connection with the termination or change in employment.

Benefits excluded from charge include:

·                    If provided in connection with a change benefits that accrue from a

change of residence in a continuing employment 

·                    If provided in connection with the termination of an employment, excluded benefits are:

·                    Benefits provided in connection with a car or van that is otherwise taxable, i.e. a charge to income tax can still be applied with reference to other schedule E rules.

·                    Meals in a staff canteen

·                    Use of a mobile phone

·                    Provision of computer equipment (up to £500)

·                    Work related training

·                    Education and training

·                    Retraining courses

·                    Counselling

·                    Employers’ contributions to approval personal pension arrangements

Pension Schemes and Part-Time Staff

The tax treatment for part-time workers being given backdated rights to join occupational pension schemes following the decision in the Preston case have been clarified.

The House of Lords found employees can claim retrospective rights back to 8 April 1976 or, if later, the date employment commenced.

The tax treatment of contributions will apply as follows:

·                    Employer contributions will be allowed under normal rules

·                    Employee contributions can be single premium or on-going; tax relief will be granted of 15% of remuneration paid in the tax year

·                    Employees cannot carry back contributions but, if the scheme trustees agree, could fund the shortfall by instalments over future years to keep within the 18% maximum

·                    If a compensatory sum is agreed between the employer and employee this will be subject to capital gains tax, not income tax.  The employee may utilise the normal annual exemption if available.

Personal Pension Schemes – Earnings Cap

The Inland Revenue have announced that from 23 April they will allow the earnings cap applicable to the current tax year to be applied to the net relevant earnings of an earlier year where these are being used as the basis year to support higher level contributions.

Using your own vehicle for work

The Inland Revenue setting out the far-reaching changes that have been made to the company car and using your own car for work rules has published a new leaflet.

If you would like a copy or want to discuss how the changes will impact upon you please give us a call.

Fuel Scale Charge 2003/04

The fuel scale charge is to be linked to the car’s CO2 emissions from 2003/2004.

The charge will be calculated by applying the same percentage utilised to calculate the car scale charge to a set figure each year.  The annual figure for 2003/2004 has been set at £14,400.

The taxable benefit for the least environmentally friendly cars will rise by 20%.

VAT Flat Rate Scheme

A new notice is available from H M Customs & Excise setting out the format of the new flat rate VAT scheme. (For details see our budget update.)

If you would like a copy of the notice or wish to discuss the implications of the scheme then please contact us.
 

Stamp Duty Restricted Abolition

The Finance Bill contains measures to abolish stamp duty in respect of some transactions in non-residential land in disadvantaged areas.

Inland Revenue Guide to Trusts – Update

The updated guide to trusts has been published by the Inland Revenue.  The booklet provides a short guide to UK trusts and how they are taxed.  In particular it covers in detail the changes to the dividend credit rules and their interaction with the tax pool calculations.

Reminder:  the changes are to the dividend credit rules, which have an adverse impact upon discretionary trusts, as the dividend credit becomes non-repayable with the result that the benefit cannot be effectively passed on to the beneficiary.

Offshore Funds

The Inland Revenue have issued a consultation document on the taxation of offshore funds.

The Government feels that the current rules are not sufficiently up to date to deal adequately with the changing commercial and regulatory environment in which theses funds are sold.

Comments on the document have to be with the Inland Revenue by 31 July 2002.

Climate Change Levy

A new notice has been issued by H M Customs & Excise giving guidance to recipients claiming relief from the climate change levy.

If you would like a copy of the notice or wish to discuss its implication please give us a call.

Residence and Domicile

The Chancellor announced in the Budget that a review is to be undertaken into the rules in respect of residence and domicile.

There have as yet been no further details released as to the scope of the intended review or the timing of the implementation of its findings. 

We will of course report in full on any future developments in this important area.

Import Tax on Motor Vehicles

The Court of Appeal has upheld a High Court decision in Customs & Excise v Upton.

Mr Upton had purchased a Lamborghini Diablo and claimed a deduction for the input tax on the basis that he acquired the car solely for business purposes to impress his customers.  The court found that, despite the fact that there had been no private use of the car, nor had Mr Upton any intention of so using the car, this was not enough because he had not taken any steps to prevent the car being available for private use.  It would therefore appear that to be successful in making a claim for input tax on a private vehicle the taxpayer must take steps to prevent it from being privately used.  What steps a sole trader could take in these circumstances the Court of Appeal acknowledged would be difficult to determine.