Taxation on dividends from small companies
Disclosure of tax avoidance schemes
Anti-avoidance rules for films
Class 3 National Insurance contributions
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European Union expansion Taxation on dividends from small companies Disclosure of tax avoidance schemes Anti-avoidance rules for films Class 3 National Insurance contributions |
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European Union expansion - National
Insurance treatment From 1st May 2004 the following countries are to join the EU; - Cyprus - Czech Republic - Estonia - Hungary - Latvia - Lithuania - Malta - Poland - Slovakia - Slovenia From that date onwards the European Community Regulations which presently apply to migrant workers who move between existing member states will also apply to the 10 new member states. The EC Regulations apply to both employed and self employed people moving between member states with the general rule being that these people must pay social security contributions in the state where they are working. A system of certificates is in place however where people are sent by their employer in their home state to work in another member state. Form E101 can be obtained by the employer on behalf of the employee when the employee is expected to work less than 12 months in the other member state and is not replacing another employee. This can be further extended by 12 months by using form E102. These forms keep people covered under their home state social security for the period concerned. These regulations also effect students working in another member state during their holidays. At the moment students are exempt from paying National Insurance for the first 52 weeks of employment in the UK where the following apply: - employment is under a contract of service; and - they are not ordinarily resident in the UK; and - they are pursuing a course of full time study outside the UK; and - they are being employed temporarily during a vacation from that course; and - the employment is in a nature “similar or related to” the course being studied. However, the 52 week exemption will not apply to students from the states joining the EU on 1st May 2004 and both they and their employers will be liable to pay National Insurance contributions. The UK has chosen to restrict certain benefits to workers from other member states but, generally speaking, if people come to the UK to work and contribute then they will be included in the UK contributory benefit scheme and they will gain entitlement to UK healthcare. If you require more details of the regulations and how they may affect you please contact us. Taxation on dividends from small companies As was expected from the contents of the Chancellors pre-Budget report last December, changes were announced in the 2004 Budget “to ensure that the right amount of tax is paid by owner managers of small incorporated businesses on the profits extracted from their company.” The changes announced look set to affect small companies with profits of up to £50,000 and should not affect companies with profits above this level. These changes will have an impact on profits distributed by such companies after 31st March 2004. The essence of the changes is to ensure that any profits distributed have been subject to corporation tax of at least 19%. This means that the maximum additional tax to pay will be £1,900 being the first £10,000 of profits at 19% however the 0% rate will still be available for the first £10,000 if the profits are retained rather than distributed. Any extra tax due will be calculated as part of the corporation tax computation and will be paid when the corporation tax is due. Where dividends are paid from reserves brought forward they will be treated as if relating to the period in which they are paid even if they are declared to be for the previous period. For more details of these changes please contact us. Disclosure of tax avoidance schemes The Chancellor has announced a new requirement for promoters of certain schemes, where the main benefit is to obtain a tax advantage, to disclose such schemes in advance to the Inland Revenue. Promoters of such schemes will be required to provide the Inland Revenue with: - a detailed description of the scheme - the tax consequences of the arrangement - the statutory provisions on which they rely These schemes will be registered by the Inland Revenue and will each be allocated a reference number. Tax payers using these schemes will then be required to show the registration number on their tax returns. The purpose of the new requirement is to provide the Inland Revenue with advance information of these schemes and to allow them to take action to deal with the avoidance. If you would like more details of the type of schemes that are likely to be included in this please contact us. Anti-avoidance rules for films The government has also announced new measures regarding film partnerships to tackle tax avoidance which came in to effect from 26th March 2004. The measures apply to partnerships who trade in the exploitation of films and also where an individual enters into a film partnership designed to provide a guaranteed income. They do not however apply to production partnerships. In the past such partnerships have been used to generate loss relief for investors which they in turn have offset against their other income. Under the new measures these losses, for the first four years of trade, will have to be carried forward and offset against future profits rather than being offset against other income. Please contact us for more details of the new measures. Class 3 National Insurance contributions If you paid Class 3 national insurance contributions at the higher rate for tax years 1996/97 to 2001/02 then you could receive a repayment of part of your contributions at some point between April and September this year. Class 3 national insurance contributions are payable where there is a short fall of national insurance contributions in any tax year. When these payments are made more than 2 years late they are charged at a higher rate. However, the letters that are normally sent out telling people about these shortfalls were not issued for tax years 1996/97 to 2001/02 and so the Inland Revenue is now waiving the higher rate rule for theses years and issuing those who paid it with a repayment of the excess as well as inviting those who still have a shortfall for these years to make contributions at the standard rate. If you think this may apply to you then please contact us for more details. |