|
RECENT
TAX CHANGES
We
begin this bulletin with notes on a number of recent tax changes which may
affect many of our small business clients:
Two-thirds
discount on new computers
The
100 per cent first-year allowance, for a small firm’s expenditure on
computers, software and ‘peripherals’ such as printers and scanners, has
been extended for a further year, until 31 March 2004.
Where
such expenditure is incurred, by a self-employed trader, between 6 April 2003
and 31 March 2004, it will usually reduce his income tax liability by 22 per
cent of the cost and his Class 4 National Insurance liability by 8 per cent. If
he is claiming income-related Tax Credits (that is to say, more than the basic
‘family element’ of £545 a year, or £1,090 if there is a new baby) it will
also increase his Tax Credits claim by 37 per cent of the cost, making the total
Government subsidy 67 per cent of the cost.
While
it is never a good idea to spend money just to qualify for a tax allowance, if
you need a new computer you should
plan to buy it while the ‘special offer’ is open. A final point is that, if
your annual accounting date falls before 31 March, you will enjoy the relief
sooner if you make the purchase before your accounting date.
Tax
incentives for ‘green technology’
100
per cent first-year allowances are also available for a range of
‘environmentally- friendly’ equipment – the list of qualifying items is
not limited to advanced technologies but includes everyday items such as some
lighting systems, refrigerated display cabinets and even cold-water plumbing.
Indeed, the range is so wide we cannot give details here, but full information
is given on the Government website www.eca.gov.uk.
Construction
industry scheme
The
Government has confirmed that the new scheme for the construction industry,
first proposed in November last  year, will not be introduced until April 2005.
Under this new scheme, Registration Cards, Certificates and Vouchers will be
abolished. Instead, all subcontractors will have to register with the Inland
Revenue and a contractor, intending to engage a subcontractor, will have to
check with the Revenue (by telephone or e-mail) that the individual or company
is properly registered. This will be known as ‘verification’ and the Revenue
will, as part of the verification process, state whether payments to the
subcontractor should be made gross or net of tax.
The
contractor will be required to give the subcontractor a payment advice with
every payment, and to make monthly or quarterly Returns to the Inland Revenue.
Professional
firms and other partnerships
The
Finance Act includes changes to the legislation governing life assurance. To
ensure that no unexpected tax charges will arise, group life policies of the
type often used by partnerships for succession planning need to be reviewed
before the end of this tax year (5 April 2004). Your insurance broker, or the
life assurance company itself, should be able to advise you.
CGT Taper
Relief and business assets
The
capital gains tax taper relief is much more generous for business than for non-
business assets. Unfortunately, the definition of a ‘business asset’ is not
only complex, but it changes from time to time. For example, from 6 April 2004
land or buildings let to a sole trader or partnership will qualify as a
‘business asset’.
When
an asset changes from being a non-business to a business asset (either because
of a change in the law, or because of a change in the use to which the asset is
put), some complex calculations have to be made, the effect of which is that
full business taper relief is not available until ten years after the asset
became a business asset.
In
many cases it is possible to shorten that period to two years, or a little
longer, by taking appropriate tax planning steps when the asset becomes a
business asset, or soon after. If you have any assets which have become business
assets, or which are likely in the future to become business assets, please
contact us for further details.
VAT
Amnesty
There
is a limited amnesty for traders who failed to register for VAT when their
annual turnover reached the registration threshold (currently £56,000). If they
register before the end of September, they will not be charged the usual late
registration penalty. They will still have to pay the VAT they would have paid,
had they registered as soon as they were liable to do so, but they will be
allowed to pay by instalments.
It
sometimes happens that turnover creeps over the registration threshold without
the proprietor noticing, because the reference period is the last twelve months
(now, in August, the year to 31 July 2003), not the trader’s usual accounting
year. If you have any doubts about your VAT registration position, please
discuss them with us well before the VAT amnesty closes at the end of September.
Money for
good causes
From
April 2004, people will be able to donate their tax repayment direct to a
charity, by ticking a box on their Tax Return. Any charity is able to join the
scheme, so hopefully it will raise funds for small, local charities as well as
the better-known national appeals.
However,
to join the scheme the charity must submit an application to the Inland Revenue
no later than 30 September 2003. The application form is very simple and may be
downloaded from www.inlandrevenue.gov.uk/charities/charity_flyer_4.pdf,
or obtained from Inland Revenue Charities, SA-Donate, St John’s House, Merton
Road, Bootle, Merseyside L69 9BB. If you are a keen supporter of a small
charity, suggest to the Treasurer that you should register for the scheme and
advertise the ‘Tax Return donation’ facility locally.
|
