January 2009

HMRC have issued some draft legislation and guidance on how the tax relief on business cars, known as capital allowances, will be calculated from April 2009.

The new rules apply to expenditure incurred on or after 6 April 2009 (1 April 2009 for companies). The 100% immediate write off for expenditure on cars with CO2 emissions of 110 gm/km or less remains but the old expensive car rules are abolished.

The rate of annual writing down allowances for expenditure on other cars will be determined by the car’s CO2 emissions. The new rules provide that expenditure on cars with CO2 emissions:

• not exceeding 160gm/km will be pooled in the main 20% pool: and
• over 160gm/km will be pooled in the 10% pool.

The legislation is draft at present and we will keep you informed of developments.

Meanwhile do get in touch if you are planning significant expenditure in this area.

Internet link: Treasury note

January 2009

Sutton Coldfield accountants Weatherer Bailey Bragg LLP have welcomed a new package of government measures designed to give small and medium-sized businesses a financial boost.

The package, announced by Business Secretary Lord Mandelson on 14 January, includes:

• a £10 billion Working Capital Scheme, securing up to £20 billion of short-term bank lending to companies with a turnover of up to £500 million. The government hopes the first £1 billion tranche of the scheme will be operational by 1 March.

• an Enterprise Finance Guarantee Scheme, securing up to £1.3 billion of additional bank loans to small firms with a turnover of up to £25 million. The guarantee, available through high street banks, will apply to loans and can also be used to convert existing overdrafts into loans to enable businesses to free up current overdraft facilities to meet working capital demands.

• a £75 million Capital for Enterprise Fund, made up of £50 million from government plus £25m from the banks, to invest in small enterprises that need equity but have exhausted traditional forms of finance to invest in their business.

Richard Miner, partner at Weatherer Bailey Bragg, said: “As accountants and business advisers, we are keenly aware of the challenges currently facing our business clients and have been working closely with them to help weather the economic storms. We welcome the government’s initiative and look forward to seeing this new money making a difference to businesses. As approved suppliers to Business Link, there may also be other ways in which we can help local companies plan for the future and we urge them to contact us.”

A new web portal, to direct companies to the most appropriate form of financial support and help them check their eligibility for a range of government aid, is available at www.businesslink.gov.uk/realhelp/finance.

January 2009

HMRC have issued further guidance to businesses on the reduction in the standard rate of VAT from 1 December 2008. The guidance clarifies certain issues regarding the ‘tax point’ rules for the date of supply.

In normal circumstances, where a business invoices within 14 days after the supply of goods and services, this is generally the effective tax point for VAT, replacing the basic date of supply rule. This does not apply where payment is received in advance, as this triggers the tax point earlier. It does mean that goods and services supplied between 18 and 30 November but invoiced from 1 December 2008 onwards should be charged at 15% where provided within 14 days of the supply date. Concern that businesses would not be able to effect the necessary changes to their accounting systems in time has resulted in a prompt response by HMRC.

HMRC have agreed that the normal 14 day limit can be extended to 30 days for goods or services provided between 18 November 2008 and 30 November 2008 inclusive. Such supplies can be invoiced at 15% at any time up to 30 days after the supply was made, provided that the invoice is raised on or after 1 December 2008. This is to apply to all businesses without the need to obtain formal approval. This effectively allows businesses additional time to amend their accounting systems following the rate change.

Where a business has previously agreed an extension to the 14 day limit with HMRC, it can continue to use that time limit but where it is less than 30 days it can opt to use the 30 day limit instead.

The link at the bottom of this article will take you to the guidance on the change in the standard rate of VAT. However, please do get in touch if you have any queries on the VAT changes.

Internet link: HMRC VAT guidance

January 2009

Acas, the Advisory, Conciliation and Arbitration Service, have reported a sharp increase in the number of businesses and employees seeking advice on redundancy, lay-offs and business transfers.

Apparently:

‘…the employers are most likely to ask about their legal responsibilities, consultation periods and how to decide which employees to make redundant. Common enquiries from employees include asking about their own notice period and redundancy pay levels.’

Ed Sweeney, Acas Chair, commented:

‘Given the challenging economic environment, these figures are not surprising. We are urging businesses to resist any knee-jerk reactions, and ensure that decisions are assessed well ahead of being made.

Thinking about the longer term or looking at alternatives to redundancy, such as redeployment, are just two areas where businesses may be able to save jobs and money in the medium-long term.’

Please do talk to us if you have any concerns in this area.

Internet link: Acas guidance