Tax Credits
Partnership Losses
European Union Savings Directive
Insurance Premium Tax
International Accounting Standards (IAS) – Tax Implications
Charities – Gifts of Land and Buildings
PAYE – Online Filing
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2002/2003 Self
Assessment Late Filing Penalties The Inland Revenue have reported a large number of tax payers and agents querying penalty notices they have received for 2002/2003 returns that were apparently filed on time. The Inland Revenue are now in the process of reviewing their systems to ascertain whether or not an error has occurred. If you have received such a notice and feel that it is not correct please contact us to discuss lodging an appeal against the penalty. Tax Credits Overpayment of tax credits seems to be an increasing problem. This seems to arise mainly from people not receiving any notification of how their payments are calculated. Although people receive an award notice this only explains the award and how it will be paid not how it was arrived at. As far as we are aware this situation is not likely to be amended until at least 2005. If you receive tax credits and are unsure of how they are made up or if you have received the correct amount please contact us. Partnership Losses Changes have been announced to tackle avoidance schemes that at the moment allow trading losses from a partnership to be offset against an individual’s other income. Such schemes include those that allocate larger losses than a partner’s economic contribution in order to receive a tax advantage and those where large initial losses are set against income but the partner leaves the partnership before most of the income arises to avoid the tax on the later profits. If you feel these changes may effect you please contact us. European Union Savings Directive The Inland Revenue is introducing a scheme to gather information in relation to savings income received by certain overseas residents. The information gathered will be exchanged with certain other countries within the EU and will mainly effect banks, registrars and other financial institutions making interest payments to individuals in prescribed territories. The scheme is not expected to come into effect until at least January 2005. Insurance Premium Tax Customs & Excise have recently reviewed the Insurance Premium Tax (IPT) treatment for credit insurance and gap insurance. At present both of these are excluded from the higher rate tax. In 1997 when the higher rate of IPT was announced it was decided that this higher rate would not apply to credit insurance and gap insurance as these could only be sold through motor dealers in connection with finance agreements and so were not taxable insurance contracts relating to a motor vehicle. Since then however a new type of gap insurance has been introduced which relates to the motor vehicle itself rather than any finance arrangements. It has now been decided that only credit insurance and financial gap insurance (sold as part of the finance agreement to cover any gap in the insurance received on write off and the amount outstanding on the loan) fall within the exclusion and that any other gap insurance is now liable to the higher rate of IPT. This will apply to premiums received on or after 1st April 2004 International Accounting Standards (IAS) – Tax Implications The Chancellor announced in his Pre-Budget Report that the Finance Bill 2004 will include measures to ensure that companies choosing to prepare their accounts using IAS will largely receive the same tax treatment as those continuing to use UK GAAP ( Generally Accepted Accounting Practice). The Inland Revenue is presently working together with consultative groups looking at the details of the IAS and of the complementary changes to UK GAAP set to come into force in 2005. This will lead to changes in legislation to ensure that accounts prepared under either set of standards receive similar treatment. Charities – Gifts of Land and Buildings The Inland Revenue have recently produced detailed guidance notes on gifts of land and buildings to charities. This includes details of certificates that are to be issued by charities when they receive such a donation. For relief to be secured for such gifts a person must give the whole of their interest in the property and where more than one person holds the property, all the owners must dispose of their interest in the property to the charity. For more details of the guidance and how it may apply to you or your charity please contact us. PAYE – Online Filing Small employers ( 1 to 49 employees ) are being encouraged to file end of year employers returns online from May 2005 although this will not become mandatory for them until May 2010. The Inland Revenue are offering up to £825 in payments over 5 years to tempt these employers into making the change sooner rather than later. Small employers who file online in May 2005 will receive a £250 tax free incentive. Another £250 will be available in the following year with diminishing amounts available over the remaining three years up to May 2009 totalling £825 over the period. These tax free incentives will be offset against the employers PAYE liabilities for the year in which the return is filed. As mentioned above small employers will not be obliged to file online until May 2010. Medium sized employers ( 50 to 249 employees ) will have to file online from May 2006 onwards and large employers ( 250 or more ) will have to file online from May 2005. For more information regarding the online filing of returns please contact us. Construction Industry Scheme The Inland Revenue have announced that the introduction of the new scheme has now been put back 12 months to April 2006 which will no doubt come as a relief to almost everyone concerned. The main features of the new scheme are as follows: Registration – subcontractors will no longer be issued with a card or certificate but they will continue to register with the Inland Revenue who will inform them whether or not they are to receive payments net or gross. Verification – contractors must get in touch with the Inland Revenue to confirm the sub contractors self employed status and ascertain whether payments should be made net or gross. Recording and reporting – contractors to submit a monthly return to the Inland Revenue showing what has been paid to which contractor. If you would like more details of the scheme please get in touch with us. |