April 2007

There has been a lot of publicity about the announcement that the government propose to reduce the basic rate of income tax from 22% to 20%. This change is due to take effect from 2008/09 and not from 6 April 2007.

2008/09

The proposal is to radically change the tax rates for 2008/09 onwards when the 10% starting rate will be abolished for earned and pensions income and the 22% basic rate of tax will be reduced to 20%. The higher rate of tax will continue at 40%.

The starting rate will continue to be available for savings and investment income and capital gains. There are no changes to the tax rates applicable to dividends.

2009/10

He also announced that the point at which people start paying the higher rate of tax will be increased significantly to £43,000 from 2009/10.

Not all good news watch the national insurance (NI)

There is, however, a significant sting in the tail for those with earned income. For 2007/08 there is no change in the rates of NI but there are significant proposed changes to the limits between which NI contributions are payable. For 2007/08 the lower and upper earnings limits (UEL) increase by inflation so that employees will pay 11% NI on earnings between £100 and £670 per week. Employees continue to pay contributions of 1% on earnings above the UEL. For 2008/09 the UEL will be increased by £75 per week above indexation.

The upper profits limit for Class 4 NI for the self-employed will also be increased in 2008/09 by £75 per week above indexation.

In 2009/10 UEL will be aligned with the point at which the higher rate of income tax becomes payable.

The government claims the increases in national insurance are aimed at simplifying the tax system but it comes at quite a cost to employees and the self-employed.

Internet link: Treasury press notices

April 2007

Sutton Coldfield based business advisors and accountants Weatherer Bailey Bragg are celebrating having successfully assisted a longstanding corporate client with its first business acquisition.

Security solutions company All Security Limited of Carshalton in Surrey has purchased another local security company which will take its total number of security officers from 50 up to 70, marking the start of an ongoing expansion strategy for the company.

Having employed the services of Weatherer Bailey Bragg for a number of years, All Security Limited called upon the firm’s extensive expertise to help with the acquisition.

Marilyn Phillips, the Managing Director of All Security Limited comments: “Weatherer Bailey Bragg have played an integral role in this acquisition. From the initial business planning stage right through to the signing of the deal, Richard Miner and the rest of the team provided us with continued support and assistance throughout the entire purchase process.

“As our first business acquisition, this was naturally quite a daunting new venture for us and we couldn’t have done it without their help. We look forward to continuing to work with Weatherer Bailey Bragg with our ongoing business strategy over the year and indeed beyond.”

Richard Miner, a partner at Weatherer Bailey Bragg comments: “As a firm, we pride ourselves being able to provide a wealth of experience and reputable knowledge in the all areas of business strategy and enjoy seeing our clients’ businesses thrive as a result.

“All Security is a longstanding and innovative business and we have been delighted to assist Marilyn and her team with this recent acquisition.”

April 2007

The Chancellor has moved to discourage small businesses from incorporating for tax reasons by increasing the tax they will pay on profits up to £300,000, from 19% to 20% with effect from 1 April 2007. The small companies rate will further increase 21% in 2008 and to 22% in 2009.

In contrast the corporation tax rates for large companies, broadly those with profits of £1,500,000, are set to be cut from 30% to 28% from 1 April 2008.

Internet link: Budget notes

April 2007

HMRC’s intention is to change significantly the VAT fuel scale charges payable by businesses on the provision of fuel for private motoring for their company car drivers. The system of calculating the output VAT charge on a simple cylinder banded table is withdrawn for the businesses first VAT return commencing after 1 May 2007.

The new 21 band table will obviously take some getting used to and relies on knowing the benefit in kind percentage which is linked to the CO2 emissions of the car and the type of engine. Under the benefit in kind system there are discounts available for environmentally friendly cars.

The output VAT charge for a quarter is found by looking up the relevant percentage in the table.

Internet link: Budget notes pages 131 to 133

April 2007

The Employers annual returns P35 and P14 (P60) are due for submission to HMRC by 19 May 2007. There is a tax free incentive payments due of £150 for small employers with less than 50 employees who successfully file their returns electronically.

HMRC have issued their usual guidance and a list of thing to check out for in the year end paperwork. Unfortunately there are some errors in the guidance with regard to the national insurance limits used. Use the links below to access the original guidance together with the changes.

HMRC have also announced that their online system with be unable to process returns at all between 4 and 6 April and will be able to accept returns but not issue acceptance or rejection notices on 7 and 8 April. The shutdown of the system is due to them running the annual tax year rate change updates.

Internet links: HMRC advice 4-8 April , E10-errors and E10 booklet