Entrepreneurs’ Relief

February 2008

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 Link: HMRC guidance and CBI Press release

Residence and Domicile

February 2008

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


February 2008

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 Link: Business link holiday calculatorand BERR website

Money Laundering Regulations

February 2008

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 Tax Codes About to be Issued

February 2008

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