E Smart Tax 6

THE DIGITAL BUSINESS AND WEALTH MANAGEMENT MAGAZINE

eSmartTaxJanuary // February // March 2009

BUSINESS AND TAX THE CREDIT CRUCH END OF TAX YEAR INVESTING IN SIPPS

Tax competitiveness

ALSO INSIDE THIS ISSUE

more businesses are actively considering moving their tax residence

are you paying more than you really need to?

Smaller companies deferral of rate increase a much welcomed reprieve

Rights issues reduction in subscription times

Distributing your profits temporary reprieve from controversial new tax rules

Planning for the year enddo you need to sharpen your business focus?

Take a lookat your tax

Welcome to the latest issue of our business and wealth management magazine, featuring articles designed to help you make more of your money during this official recession.

An economic slowdown could have considerable implications for most people’s taxes. Whatever your position, now is an excellent opportunity to take a look at your tax. In some instances, people may be oblivious to the fact that they are paying more tax than they really need to and they subsequently never claim this sum back. Turn to page 14 to read the full article.

The current credit crisis and economic downturn have forced businesses of all sizes to be even more focused on their financial positions. On page 22 we look at how the survival of many businesses will be dependant on their ability to address some key fundamental issues during these challenging times.

On page 6 we look at the package of measures for business unveiled by Chancellor Alistair Darling during his second Pre-Budget Report last November, including a postponement to increase corporation tax for small firms, the creation of a fund for small business borrowing and a reduction in the rate of VAT.

At the time of publication, the global financial crisis and events are changing very quickly, and some further changes are likely to have occurred by the time you read this issue. A full content listing appears on page 3.

inside this

issue

02

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

20

1913

14

To discuss your specific requirements or to obtain further information, please contact us.

If you would like us to email a copy of our digital magazine to someone you know, please email us with their details and we’ll send them a copy.

2405

06

08

09

1310

141618

19

20

22

26

28

29

3032

3435

1005

Inside this issueHMRC will not incur any interest cost on money owed…announcement will speed up changes following a movement in market rates

Measures for business unveiled…broad support for many of the initiatives announced

Pre-Budget Report for business…a wide-ranging package

Rights issues…reduction in subscription times

Business Payment Support Service…help for viable firms with cashflow problems

Estate planning…don’t leave your heirs facing an unexpected tax bill

Corporate matters…cost-effective solutions for today’s challenging business environment

Take a look at your tax…are you paying more than you really need to?

Planning for the year end…do you need to sharpen your business focus?

45 per cent tax rate for high earners…the wealthy could face substantial tax rises

Smaller companies…deferral of rate increase a much welcomed reprieve

Employing temporary workers will cost more…sector seeks a postponement to VAT changes

Traditional bank lending still the preferred option…raising additional capital to cope with a lack of money

Distributing your profits…temporary reprieve from controversial new tax rules

Standard rate VAT change, the first for 17 years…how has your business been affected?

Focus on your finances…surviving the economic downturn

A tough year ahead for business…make sure you are one of the survivors

Small companies tax regimes…firms in the UK paying an extra £2.4bn a year

Tax inspector visits to home-based offices…is part of your residence being used for business purposes?

Is your business in serious trouble? It’s good to talk

More small businesses reluctant to seek financial advice…a reflection of declining levels of service offered by banks

Tax competitiveness…more businesses are actively considering moving their tax residence

Rigorous credit control is essential for survival…safeguard your business from the risk of bad debt

Unblocking the credit market…businesses struggle to access credit despite the governments multi-billion package

Pre-Budget Report 2008…were you a winner or a loser?

Wrapping assets in a SIPP…a solution for your specific requirements and financial objectives?

Environmental legislation…how much energy does your business use?

Business Rate Supplements Bill…small firms should have a say

Company Tax Returns…one-minute check list of the most common errors

The UK economy…it’s official, we’re in recession

Shareholder warning…database provides fraudsters with valuable information

03

Explore your business and wealth management options...tell us what you need?

Click Here *

January / February / March 2009 05

HMRC will not incur any interest cost on money owed

HM Revenue & Customs (HMRC) have announced that they will not incur any interest cost on money owed to people who have overpaid tax, despite charging an interest rate for those who owe HMRC.

The reduced rates that cover quarterly instalment payments and early payments of corporation tax not due by instalments (for accounting periods ending on or after 1 July 1999) took effect from 19 January 2009.

The reduced rates that cover all other direct and indirect taxes and national insurance contributions paid late and overpaid took effect from 27 January 2009. These rates of interest are the first announced since legislation was amended in December 2008 to allow HMRC to more quickly change there rates following a movement in market rates. The amended

legislation provides for these rates to come into effect thirteen working days after the meeting of the Monetary Policy Committee of the Bank of England. Previously it took around a month to change these rates. The amendment to the legislation also included confirmation that HMRC interest rates will not fall below zero.

Rate changesAll the rates changed on 27 January 2009 except where otherwise stipulated.

The rate of interest charged on income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax paid late, tax credits overpayments in cases of fraud, neglect and on penalties charged, and on tax charged by an assessment for the purpose of making good

to the Crown a loss of tax wholly or partly attributable to failure or error by the taxpayer changes from 4.5 per cent to 3.5 per cent.

The rate of interest on overpaid income tax, national insurance contributions, capital gains tax, stamp duty, stamp duty land tax and stamp duty reserve tax (repayment supplement) changes from 0.75 per cent to 0 per cent.

The rate of interest for development land tax, petroleum revenue tax (including supplementary petroleum duty and advance petroleum revenue tax), and on advance corporation tax and income tax on company payments which became due on or before 13 October 1999 paid late or overpaid changes from 3.5 per cent to 2.75 per cent.

The rate of interest on late payment of income tax on company payments which became due on or after 14 October 1999 changes from 4.5 per cent to 3.5 per cent.

The rate of interest for late payments or repayments of inheritance tax, capital transfer tax and estate duty changes from 2 per cent to 1 per cent.

The rate of interest charged on underpaid instalment payments of corporation tax (CT) changes from 3 per cent to 2.5 per cent. This rate took effect from 19 January 2009.

The rate of interest on overpaid instalment payments of corporation tax, and on corporation tax paid early (but not due by instalments) changes from 1.75 per cent to 1.25 per cent. This rate took effect from 19 January 2009.

The rate of interest for either late payments or repayment of corporation tax for accounting periods ended on or before 30 September 1993 - pre CT (pay and file), changes from 3.5 per cent to 2.75 per cent.

The rate of interest charged on unpaid corporation tax for accounting periods ending on or after 1 October 1993 - under CT (pay and file) changes from 3.5 per cent to 2.75 per cent.

The rate of interest paid on overpaid corporation tax for accounting periods ending on or after 1 October 1993 - under CT (pay and file) changes from 0.5 per cent to 0 per cent.

The rate of interest on unpaid corporation tax for accounting periods ending on or after 1 July 1999 (other than underpaid CT instalments) changes from 4.5 per cent to 3.5 per cent.

The rate of interest on overpaid corporation tax for accounting periods ending after 1 July 1999, in respect of periods after the normal due date, changes from 1 per cent to 0 per cent.

Customs duty, environmental levies and tax, excise duties, insurance premium tax and VAT

The rate of default interest charged on:n under declared VAT, air passenger duty, insurance premium

tax, landfill tax, climate change levy, aggregates levy n excessive repayments of VAT, insurance premium tax, land

fill tax, climate change levy, aggregates levy and customs duties recovered by assessment

n late payment of customs duty n Changes from 4.5 per cent to 3.5 per cent.

The rate of statutory interest paid:n where an official error has caused an overpayment, a failure

to claim credit, or a delay in certain repayments of VAT, insurance premium tax, land fill tax, climate change levy, aggregates levy and excise duties

n where there has been undue delay in processing a claim for repayment of excise duty and customs duty

n Changes from 1 per cent to 0 per cent.

Announcement will speed up changes following a movement in market rates

Taxation

The package of measures for business unveiled by Chancellor Alistair Darling during his second Pre-Budget Report last November, included a postponement to increase corporation tax for small firms, the creation of a fund for small business borrowing and a reduction in the rate of VAT.

Once profitable firms can offset up to £50,000 of any losses they incur over the next three years so that they can claim valuable cash rebates.

Business groups welcomed the decision to defer a planned increase in the rate of corporation tax paid by smaller companies from 21per cent to 22 per cent. The postponement to increase the rate of corporation tax had originally been planned for April this year.

There was also broad support for many of the other initiatives announced. A new Small Business Finance scheme set up with the regional development agencies to lend, alongside banks, up to £1bn from early this year, with a further £25m put into specific cashflow loan funds, operated by the regional agencies.

The creation of the government fund for small businesses is aimed at stimulating viable businesses that have suffered from the credit crunch, while a £4bn loan from the European Investment Bank was also secured for the purpose of freeing up capital for UK banks to pass onto small businesses.

The Treasury said; “It was acting because it had become clear from discussions with banks and businesses that many of these small businesses are struggling to access short-term credit.”

The Treasury also launched a new £50m fund that will take stakes in “over-leveraged” businesses by buying up distressed debt and turning it into equity holdings.

The cut in the rate of VAT from 17.5 per cent to 15 per cent became effective from 1 December last year and will run until 31 December 2009. This announcement is a temporary measure, with much of what will be given due to be clawed back post 2011.

There was also welcome news that payments could be spread for VAT, national insurance and corporation tax over a longer period, while previously profitable businesses that need to repay tax will be able to offset losses for the last three years against the amount they owe.

Owners of empty commercial

premises with a rateable value of less than £15,000 a year could also benefit from the temporary increase in empty property relief for 2009/10.

John Walker, national policy chairman of the Federation of Small Businesses (FSB) welcomed the package, and said; “This is a sign of the importance of small businesses to the UK economy.”

“The government’s Small Business Finance Scheme, which closely resembles the Small Business Survival Fund the FSB has been calling for, will provide a vital cash boost to businesses struggling with rising costs and a lack of credit.”

The 0.50 per cent increase in national insurance contributions (NIC) from 2011would cost employers an extra £2bn, he warned, while the increase in the top rate of income tax to 45 per cent at the same time would increase the war for talent as more people opted to move to countries with a lower threshold.

“It is likely that higher taxes and NIC costs will lead to a demand for employers to introduce tax mitigation schemes as these become even more attractive in a higher tax regime,” he said. “Of particular interest, with share prices currently low, may be schemes that offer shares to employees now which will ultimately suffer an 18 per cent capital gains tax charge on sale rather than a 45 per cent income tax and 1.5 per cent NIC charge.”

06

Broad support for many of the initiatives announced

Measures for business unveiled

The creation of the government fund for small businesses is aimed at stimulating viable businesses that have suffered from the credit crunch.

January / February / March 2009

Pre-Budget Report

07

PRE-BUDGETREPORT FOR BUSINESS


Corporation tax The government will defer the increase in corporation tax for small businesses. Corporation tax for small firms was set to rise to 22 per cent from April 2009 from 21 per cent as part of a staged increase set out in the March 2007 Budget. Small and medium-sized enterprises (SMEs) The Chancellor announced he would deliver £1bn of tax cuts through the Small Business Finance Scheme and £2bn of loan guarantees. Lending to SMEs Banks will receive an extra £4bn to help SMEs. The Chancellor said banks should follow the Royal Bank of Scotland’s example of not increasing charges to SMEs. Business tax repayments SMEs will be allowed to spread business tax payments over a period to help to ease cashflow and credit constraints. Export guarantees Small businesses will gain £1bn in export guarantees from this January through the Export Credit Guarantee Department. Tax repayments There will be an extension of a scheme to help businesses that were previously profitable but are now making losses. Losses of up to £50,000 can be offset against profits made in the past three years rather than just one year. Foreign dividends The Chancellor introduced an exemption for companies’ foreign dividends from tax in 2009, in an effort to allay concerns over proposed changes to taxation of foreign earnings that have led some companies to shift their tax domicile out of Britain. Rates Empty commercial properties will be exempt from business rates from 2009/10 if the rateable value is less than £15,000.

The government has accepted the recommendations of a working party made up of the Financial Services Authority (FSA) and the Treasury to make rights issues quicker and simpler.

Alistair Darling, the Chancellor, said rights issues could be shortened to as little as 16 days from the 39 days they can currently take. The Chancellor set up a group, headed by Hector Sants, chief executive of the FSA, and Kitty Ussher, economic secretary to the Treasury, in July last year, to look at ways to make rights issues easier.

The move came after several large companies, including HBOS

and Royal Bank of Scotland, struggled to get their rights issues away.

The group have published their recommendations, and called for a reduction in the time given to subscribe for a rights issue from 21 to 14 days. The group suggested a new type of open offer, which could provide compensation to shareholders who do not take up their rights.

In the longer term, the group suggested that the Prospectus Directive could be amended so that companies would not have to issue a full prospectus with every rights issue.

A wide-ranging package

Rights issuesReduction in subscription times

Pre-Budget Report




HM Revenue & Customs (HMRC) has launched a Business Payment Support Service, based on its existing “time to pay” scheme, that will listen “sympathetically” to requests from viable firms with cashflow problems. The agency has hired 60 extra staff to its 600-strong debt team and is planning to receive up to 3,000 calls an hour.

Financial secretary to the Treasury Stephen Timms said: “By speaking directly to an HMRC adviser they should be able to agree an affordable payment timetable without incurring any extra charges, saving hard-working businesses both time and money.”

HMRC will charge interest on any outstanding monies, these charges will stand at 5.5 per cent on National Insurance, income tax, capital gains tax, and stamp duty and 4.25 per cent on corporation tax from December 6, last year, a rate of interest HMRC acknowledged was “lower than the banks” typical lending rates.

An HMRC spokesman explained the main difference with the existing scheme was the decision to allow firms as long as they need to pay up. “Before we were a little stricter on how much time people had to pay,” he said. “Now there is no timeframe as such. What we want is people to pay their taxes and we are making it easier for them to do so.”

In essence the move is designed to help smaller companies, partnerships and individuals that are worried they

are not generating enough cash to pay the tax that falls due in the following months.

Just a week after the Chancellor announced the ‘’time to pay’’ support service, HMRC had reached agreements with businesses to spread more than £55m in tax payments over a longer period.

Most of the requests so far have been made by small companies. The Treasury says they range from fencing and roofing contractors to poster manufacturers and companies in the health and beauty business.

A Treasury spokesman said: “Any business can call HMRC to discuss options available to them and get an immediate response.”

Additional late payment surcharges on tax included in the arrangement have been waived. Companies calling the HMRC ‘’hotline’’ – 0845 302 1435 – are asked for details about their tax problems plus information on the state of the business.

Business Payment Support ServiceHelp for viable firms with cashflow problems

HM Revenue & Customs (HMRC) has launched a Business Payment Support Service, based on its existing “time to pay” scheme, that will listen “sympathetically” to requests from viable firms with cashflow problems.

Enterprise

An increasing number of households could be at risk of paying inheritance tax (IHT). The 40 per cent tax charge is payable on the value of an estate over the nil-rate band threshold, £312,000 for an individual and £624,000 for a married couple, based on the current 2008/09 financial year.

When you add up the value of your property, savings and investments and other belongings, you may be surprised by how much your estate is actually worth and you could therefore be looking at a sizable tax bill.

There are a number of ways in which, with some careful planning, you could mitigate or potentially remove an IHT liability against your estate, thereby ensuring that your heirs are not left with an avoidable tax bill.

Unfortunately, though, some families do not start thinking about IHT planning until it is too late. The first thing to do is to work out if the tax will be an issue. Start by adding up the value of your savings, investments, properties and other personal possessions. You also need to include funds held in an Individual Savings Account. Although the proceeds are tax-free during your lifetime, they are subject to death duties.

When an estate passes between a husband and wife, or from one civil partner to another, IHT is not payable. In addition, married couples or civil partners can transfer the unused element of their IHT-free allowance to their spouse when they die. By doubling up the allowance this financial year, a couple would escape IHT on £624,000.

During your lifetime, giving away assets is a simple and legitimate way to reduce the value of your estate, as long as you do it in time. You can gift up to £3,000 a year and it is immediately exempt from IHT, or £6,000 if you did not make a gift of this kind in the previous tax year.

A married couple giving for the first time could, therefore, hand over £12,000 to their children in one year. After that, the maximum for a couple is

£6,000. You could also escape IHT by giving £250 to any number of people every year, but you cannot combine it with the above exemption.

Parents can give £5,000 to each of their children as a wedding or civil partnership gift. Grandparents can give £2,500 and anyone else £1,000. Gifts of any size to political parties or charities are also exempt. If a gift is regular, comes out of income and does not affect your standard of living, any amount of money can be given away and ignored for IHT.

It is possible to make further tax-free gifts known as potentially exempt transfers (PETs), but you have to survive for seven years after making the gift. If you die within seven years and the gifts are valued at more than the nil-rate band threshold, it may be possible to apply taper relief. The tax reduces on a sliding scale if the gift was made between three and seven years earlier.

In most cases, IHT must be paid within six months from the end of the month in which the death occurs, otherwise interest is charged on the amount owing. Tax on some assets, including certain land and buildings, can be deferred and paid in instalments over ten years.


Estate planning

There are a number of ways in which, with some careful planning, you could mitigate or potentially remove an IHT liability against your estate.

Don’t leave your heirs facing an unexpected tax bill

Wealth protection



There is a range of policies and strategies you can use to plan for IHT, but this is a complex area of financial planning, so it’s important to receive good professional advice. Finally, don’t forget to make or update your will.

We serve a wide range of business clients...and we’re passionate about providing tailored advice.Our range of corporate services are extensive, including financial guidance and assistance for organisations.

Contact us to discuss your current situation, and we’ll make a New Years resolution to get your finances in good shape.


Implementing a successful employee benefits package should not only enable your business to meet its legal obligations in respect of making pension schemes available, it could also help to increase your successes when looking to recruit the best people.

In today’s business environment, with budgets under constant pressure, it is even more vital to deliver more cost-effective solutions. Employee benefits should be regularly reviewed to take advantage of new developments and improved terms offered by providers keen to compete for business.

Many employees today expect to have access to death-in-service cover or income protection as part of their financial package. Some also look to employers who give them the option of being part of a flexible benefit scheme that enables them to select their own benefits from a menu, using an agreed allowance that provides a more tailored employee choice.

A business that wants to retain or recruit directors or senior executives may find it much easier to achieve this if they provide them with a

suitably tax-effective remuneration strategy. This may also go a long way towards promoting loyalty and protecting them from the potential threat of the competition.

It’s also important to protect your business against the unexpected death or serious illness of your key employees, shareholders or partners. Many businesses recognise the need to insure their company property, equipment and fixed assets. However, they continually overlook their most important assets, the people who drive the business, and the impact their death or illness could have on the financial security of the business.

Receiving the appropriate professional advice can help to ensure that premiums paid are competitive and set up in a tax-efficient manner. Services offered to corporate clients include:

n Corporate investments n Individual pension plans n Key person insurancen Partnership insurancen Employee benefit plansn Business succession planningn Group retirement planning

Cost-effective solutions for today’s challenging business environment

Corporatematters

Corporate planning


Whatever the size of your business, if you require objective professional advice on corporate financial planning and employee benefits, please contact us for further information.

Many employees today expect to have access to

death-in-service cover or income protection as part of their financial package.


Take a look aT youR Tax Are you paying more than you really need to?

Tax planning


An economic slowdown could have considerable implications for most people’s taxes. Whatever your position, now is an excellent opportunity to take a look at your tax.

In some instances, people may be oblivious to the fact that they are paying more tax than they really need to and they subsequently never claim this sum back. Also, many will earn less and accrue lower investment income. Some self-employed workers could see profits all but disappear, while others will forego dividends from family businesses.

If you are employed and taxed under Pay As You Earn (PAYE), your personal allowance for the current 2008/09 tax year is £6,035, which is divided by 12 and then deducted from your monthly salary. However, if you do not work the whole year, you will have unused personal allowance which will be refunded to you. On that basis, you may also have paid too much higher rate tax.

Even larger sums could be at stake if you are self-employed or pay tax at the higher rate on substantial investments. If you pay tax in advance of finalising your returns and accounts by estimating what your income will be, you may have paid too much, given falling share dividends and the general economic slowdown.

If applicable to your situation you may be required

to pay tax in two amounts, each amount being half of the previous year’s tax bill. In some cases, this could now seem too high, given that the credit crunch began during the middle of last year.

If your earnings dropped sharply in the second half of last year, or if you did not receive the dividends expected, it’s important to take action now to make sure you calculate your assessment correctly and claim any money back that is due.

In January, not only do your 2007/08 tax affairs have to be finalised, but you begin making payments on account in respect of the 2008/09 tax period. Due to the economic downturn, it may be prudent not simply to pay the usual required half of the previous year’s tax bill. Before you make a payment, take a realistic look at your earnings and dividends and what they are likely to be by the end of the financial year. If they are lower, you can apply to make a lower payment than usual,

but you need to request this by filling in a form SA303.

You should also keep a close eye on the dividends you receive, especially once they fall below £10,000, as HM Revenue & Customs (HMRC) may sweep them up into PAYE. Not only are payments made earlier this way, but shareholders may be overcharged. It is possible to apply for dividend tax to be kept out of PAYE, as HMRC cannot compel you to pay tax on dividends via your coding notice.

Pensioners benefit from higher personal allowances in the current 2008/09 tax year: £9,030 at age 65 and £9,180 at age 75. But if applicable to your situation, you lose 50p in every pound of income above £21,800. However, this clawback stops once your income falls below this threshold. If a dividend slice means you fall below the £21,800 threshold, you will at least no longer suffer from the income clawback. But you should make sure you inform HMRC fully of dividend cuts, or you could be overtaxed.

There may be opportunities for small business owners to claw back overpaid tax. If small companies make a trading loss, it is possible to carry that loss back to the previous year and obtain a tax rebate, which could offer valuable cash flow advantages. Partnerships may be able to extend the current accounting year to, say, 15 or 18 months to reduce payments on account. This is a timing

difference rather than an actual tax saving, which can give hard-pressed professionals a bit of breathing space.

In an economic downturn, falling asset prices can also benefit those planning for the future. If you wish to pass on assets, whether property or shares, to members of your family for inheritance tax planning purposes, there are opportunities presented by lower property and share values.

You could opt to give the gifts outright. If you survive for seven years, they become tax-free. Alternatively, you could place them in a trust, which may still involve a 20 per cent charge. However, this can be circumvented by opting instead for a family limited partnership, which, although not as flexible as a trust, can still be worth considering.

In some instances, people may be oblivious to the fact that they are paying more tax than they really need to and they subsequently never claim this sum back.




The economic downturn has sharpened the focus of all business managers and owners, especially in the area of managing cashflow. Paradoxically, the profits generated from the success achieved in a previous year, could cause significant cashflow problems when it comes to paying a future corporation tax liability. So here are some areas you could consider to make your corporate life somewhat less stressful.

From 1 April 2008, the annual allowances for expenditure on plant and machinery capital allowances were reduced from 25 per cent to 20 per cent. Having said this, there is still an opportunity to maximise allowances by ensuring any qualifying expenditure is incurred during the period which straddles 1 April 2008. Companies planning to acquire new equipment should therefore ensure that it is incurred before the year end to accelerate and increase the deduction. It is important to see if higher rates of allowances can be claimed by using the £50,000 Annual Investment Allowance or claiming 100 per cent enhanced capital allowances on certain expenditure on green technologies.

Provisions should be carefully documented and evidence retained so that companies can demonstrate that they have been calculated with sufficient accuracy. A tax deduction can then be taken in the year when the provision is created. Otherwise, the tax deduction may be deferred until the payment is made. Broadly speaking Accounting Standards only permit the recognition of a provision where a legal or constructive obligation arises as a result of an event before the balance sheet date. Therefore companies who are in the unfortunate

position of having to reduce headcount may wish to announce and quantify the cost of the programme before the year end, even if the reorganisation will not be implemented until the following year.

Enhanced deductions and/or tax credits are available for revenue expenditure on research and development (R&D). The definition of R&D is wider than most companies realise; it is not restricted to research companies and claims have been made in most business sectors including retail, IT, media and transport. The relief itself can result in an additional tax deduction of up to 75 per cent for eligible expenditure. This could translate into a £21,000 additional tax saving for every £100,000 of expenditure or a payable tax credit of £24,500 for loss making companies.

In July last year HMRC announced changes to the timing of a deduction for interest payable to non-resident connected companies. In effect this has enabled companies to deduct interest on such loans as it accrues rather than wait until it is paid. This will accelerate the tax benefits available on these payments and companies should assess whether they wish to take advantage of the relaxation of the rules.

Relief can be obtained for the exercise of employee share options or share awards. A deduction is available for an amount equal to the difference between the market value of the shares and the amount paid by the employee.

Pension contributions are normally tax deductible on a paid basis. Therefore, contributions should be paid before the year end to accelerate the tax relief. Where a company is making an abnormally large contribution (perhaps

to fund a pension deficit), it should take care that it structures payments to avoid deductions being deferred under the pension spreading rules.

There is a two year window within which most claims and elections can be amended. It is worth carrying out a review of the claims before the time limit expires to ensure that the most beneficial reliefs have been claimed in the light of the profits/losses arising in subsequent years.

Be aware of the options available with regard to any losses. For example a previously profit making company could carry back losses to the previous year and secure a tax refund. The chancellor recently announced that up to £50,000 of trading losses can be carried back against profits earned up to three years ago. In addition to securing a cashflow advantage, losses may be relieved at the higher rate of corporation tax of 30 per cent rather than 28 per cent going forward.

Large companies, typically those with profits over £1.5m (reduced in proportion to the number of associated companies)) have to pay tax in instalments based on forecast profits for the year. Regular and accurate forecasting will enable a company to reduce its tax payments as soon as profits begin to fall. There may even be scope for companies to claim refunds for excessive instalment payments.

Planning for the year endDo you need to sharpen your business focus?

Corporation tax




45 PER cENT TAx RATE FOR HIGH EARNERS

The Chancellor confirmed in his Pre-Budget Report last November his intention to introduce a new 45 per cent tax rate from April 2011 for high earners earning more than £150,000, which is estimated to affect the top 1 per cent of incomes.

Such individuals will face a higher rate of 37.5 per cent on dividends, which is an effective rate of 30.5 per cent. These higher rates will also apply to most trustees. There is also a proposed increase in National Insurance rates of 0.5 per cent for employees, employers and the self-employed.

In addition, there would be a change to the personal allowances of high earners to end the anomaly of these being worth twice as much to higher rate taxpayers as those who pay basic rate tax. The personal allowance, which is £6,035 in this financial year, is the amount of earnings on which no tax is payable and all taxpayers receive the same allowance.

From April 2010, people earning between £100,000 and £140,000 will have their personal allowances halved so they receive the same benefit as those earning less. For taxpayers earning more than £140,000 the allowance will be withdrawn entirely.

From this April, the personal allowance for those under 65 will be increased to £6,475. Taxpayers aged between 65 and 74 will see their personal allowance increase in line with inflation to £9,490, while those aged 75 and over will get an annual allowance of £9,640.

The wealthy could face substantial tax rises

Government ministers have confirmed that they intend to proceed with the planned changes in VAT, which would make it more expensive to hire temporary workers.

The changes to be introduced in April this year, are expected to increase the cost of hiring temporary workers in the insurance, banking, education, charity and healthcare sectors.

The recruitment sector are collectively requesting for the changes to be postponed until 2011 when the jobs market is expected to have recovered.

In the 2007 Budget, Chancellor Alistair Darling said there would be a withdrawal of the staff hire concession, which allowed for companies to pay VAT on agency fees as opposed to the wages of temporary staff.

The small companies’ rate of corporation tax was due to increase from 21 per cent to 22 per cent with effect from 1 April 2009. This increase has now been deferred until 1 April 2010.

This will relate to companies with profits chargeable to corporation tax below the lower relevant maximum amount (‘LRMA’), currently £300,000. Also companies with profits chargeable to corporation tax between the LRMA and the upper relevant maximum amount (‘URMA’), currently £1,500,000. And companies with profits from oil extraction and oil rights in the UK and the UK Continental Shelf which are subject to the small companies’ rate.

The fraction used to smooth the differences between the main rate of corporation tax and the small

companies’ rate (marginal relief fraction) will remain at 7/400. The profit limits for which companies are subject to the small companies’ rate are also unchanged.

The small companies’ rate for companies with profits from oil extraction and oil rights in the UK and the UK Continental Shelf (‘ring fence profits’) remains at 19 per cent and the marginal relief fraction will remain at 11/400.

The financial thresholds are reduced where the company in question has one or more associated companies.

Deferral of rate increase a much welcomed reprieve

Employing temporary workers will cost more

Smaller companies

Sector seeks a postponement to VAT changes

Taxation Enterprise



Small businesses are looking to raise additional capital to cope with a lack of money, research finds, with traditional bank lending still their preferred option. The most challenging issue for small businesses in the current climate is late payment, according to a survey.

Research conducted by Hilton-Baird Financial Solutions on behalf of the Asset Based Finance Association (ABFA) found that cash control and managing cashflow were identified as the biggest challenge, with over half (55 per cent) highlighting this issue.

The study found that small businesses were currently being squeezed by both customers and suppliers.

Over one in three (37 per cent) said they had been asked for swifter payment terms by suppliers in the past six months while nearly half are also under pressure to extend credit terms to customers.

Almost one in four (24 per cent) firms said they have to wait more than 60 days for payment in some instances.

“While good cash control is central to the success of every business, through

good times and bad, small firms are at the sharp end when it comes to experiencing the pain that gave rise to the term ‘credit crunch’,” says Evette Orams, director of Hilton-Baird Financial Solutions.

As a result of the pressure on cashflow, 57 per cent of small businesses have looked into alternative sources of finance although for the majority the preference was to turn to traditional lenders for help rather than other options such as asset-based finance or factoring.

“What’s interesting is that although a relatively small number admitted to

utilising asset-based finance, factoring or invoice discounting, of those that did, 25 per cent said they would use asset-based finance again to finance the future growth of their companies,” added Orams.

“They indicated that once they have become familiar with the product and understood how it works, they are sold on the benefits as a viable, effective and cost-efficient alternative to traditional finance streams.”

Traditional bank lending still the preferred optionRaising additional capital to cope with a lack of money

Small businesses are looking to raise additional capital to cope with a lack of money, research finds, with traditional bank lending still their preferred option.

Finance




The majority of small businesses have been affected by the change in the rate of VAT. The change in the standard rate of VAT from 17.5 per cent to 15 per cent came into force on 1 December last year and for many businesses has been an administrative hassle.

This is the first change in the standard rate of VAT for over 17 years. It is up to you whether you reduce your VAT inclusive prices to reflect the lower VAT rate. The government has encouraged businesses to pass on the benefit of a lower VAT rate to customers by lowering prices, but you do not have to do so.

If you are a retail business that does not issue till receipts that identify VAT separately, you can continue to use these as before.

If you issue receipts that identify VAT, you have to change your systems (which might include changes to your tills and accounting systems) so that receipts reflect the new VAT rate. Similar changes will need to be made to any invoicing systems.

It is very important for businesses to correctly identify the date of sale for VAT purposes, or ‘tax point’. This is usually the earliest of the date the goods were

delivered to the customer; the date payment is received or the date the invoice was issued.

However, the delivery date and date of payment can be overridden by the invoicing procedures of the business. Under the VAT rules, if the invoice is issued within 14 days after these other dates, that date becomes the ‘tax point’ for VAT.

When it comes to paying VAT to HM Revenue and Customs, you need to split the calculation of how much VAT you owe. You should do one calculation, as you would normally, using the old rate of 17.5 per cent, for sales made up until 30 November and another calculation,

using the new rate of 15 per cent, for sales made from 1 December onwards. The totals are then added together and entered on the normal VAT return form in the usual way. The important thing is to keep track of what sales you make up until 30 November and then from 1 December onwards.

If you are using a flat-rate scheme, your VAT rate will also change.

Business groups have welcomed the decision to give hundreds of thousands of family businesses a temporary reprieve from the controversial new tax rules governing the way that they distribute their profits.

The planned clampdown on husband-and-wife companies that split the income generated from their businesses in order to reduce their joint tax bills by using their personal allowances will now not take effect until at least 2010.

The Treasury said in a statement: “The government firmly believes it is unfair to allow a minority of individuals to benefit financially from shifting part of their income to someone else who is subject to a lower rate of tax, known as income shifting. The government has consulted on this issue but, given the current economic challenges, the government is deferring action and will not bring forward legislation at Finance Bill 2009.”

Instead the government said it would keep the policy “under review.”

Standard rate VAT change, for the first 17 yearsHow has your business been affected?

The majority of small businesses have been affected by the change in the rate of VAT. The change in the standard rate of VAT from 17.5 per cent to 15 per cent came into force on 1 December last year and for many businesses has been an administrative hassle.

Distributing your profitsTemporary reprieve from controversial new tax rules

VAT





The current credit crisis and economic downturn have forced businesses of all sizes to be even more focused on their financial positions. The survival of many businesses will be dependant on their ability to address some key fundamental issues during these challenging times.

Firstly, financial reports are essential to ascertain the state of the financial health of a business. These reports should include a, profit and loss account, sales forecast and cashflow analysis. They will enable you to remain in control of your finances, and importantly will tell you where you are in relation to the level of sales you require verse’s your costs.

Never underestimate how much cash you need. Many businesses fail because they don’t have enough cash, not because they are unprofitable. Review cashflow regularly, and carefully balance any credit given to customers with the terms of your suppliers. Don’t be afraid to negotiate with suppliers.

The most effective way to manage your business cashflow is by budgeting, which will enable you to take advantage of any new business opportunities. It is prudent to have a contingency fund and, most importantly, be realistic.

Unless you review your financial reports regularly they are useless. So it is important to set time aside to assess your finances, at least monthly. This will allow you to identify any potential problems in advance and take the necessary steps to avoid bigger problems later.

Make sufficient provision to avoid unnecessary risks, for example, by using insurance wisely to avoid unexpected costs. Many businesses fail to think about what they would do if a key member of staff was suddenly unable to work. Think about using insurance where possible to mitigate these risks.

If you are a partner or a company director protect your business in the event of a partner or a co-director becoming ill or dying. Life assurance, for instance, is historically cheap. On the death of a partner or co-director it can be set up to provide funds to purchase shares or repay capital accounts and give bereaved families a fair share of the business.

Many businesses need a reasonable amount of cash in the bank, not least for their tax liabilities. Make your money work for you by always getting a competitive rate of interest. But don’t leave too much money in your current account, as most banks allow you to transfer funds quickly between current and deposit accounts allowing you to earn as much interest as possible.

If you need to borrow money to get the business started always consider all your options and check whether there is any financial assistance available, such as grants. It’s important not to just accept the first offer you receive, and taking professional advice is essential if you need guidance. Don’t avoid professional advice because you think its going to be expensive. Good advice often more than not pays for itself.

Focus on your financesSurviving the economic downturn

Enterprise


Focus on your finances

Financial services, taxes and wealth management for individuals...do you need a professional assessment of your situation? If you want to organise your financial affairs, particularly where it involves taxation – don’t leave it to chance.

Contact us to discuss your requirements, and we’ll help you navigate this complicated area.


A tough year ahead for businessMake sure you are one of the survivors

Enterprise


There is little doubt that 2009 will be a tough year for many businesses. So it is essential to ensure that you have the right strategy in place to make sure you are one of the survivors when the economy eventually recovers.

There are a number of areas to consider, in particular making sure that you are only paying for those services and items that are essential to the survival of your business. A caveat to this is that you should not cut back on the areas that will continue to give your business a competitive edge, so for example, completely stopping your marketing activities could even compound the problem and make matters even worse.

Be professional, but be firm with customers who are late paying. During difficult times, steady cashflow is the lifeblood of day to day business. Don’t leave it too late to chase outstanding accounts, the longer an account is left unpaid, the more likely it is to remain unpaid.

Your bank could play a vital role in getting you through the hard times. It makes sense to build a good relationship to increase your chances of success. Make sure you are getting the most from your accounts and are not paying excessive charges. If you are thinking about changing banks then always read the small print.

Make your money work for you by always getting a competitive rate of interest on monies held on deposit. Don’t leave too much money in your current account, most banks allow you to transfer funds quickly between current and deposit accounts allowing you to earn as much interest as possible.

If the business is falling behind on its liabilities, never ignore the situation. Go back to your budget and work out a plan of action. Get professional help if you need it.

Too many businesses fail because of a lack of cash, not profitability. Review cashflow regularly, and carefully balance any credit given to customers against your suppliers’ terms.

Getting the right balance between investing in the business’ future and surviving can be difficult. Be extra careful when evaluating investment opportunities in a downturn.

Bank and credit card penalties and fees waste money. Work out a system that reminds you when bills are due, and control your cashflow. Reclaim unfair penalties and if possible, increase your current account overdraft to a level you plan never to use. This will help buffer cashflow, and avoid paying unnecessary fees. But be disciplined. This is not an excuse to spend money you don’t have.

Apathy is your finance’s worse enemy and your suppliers’ best friend. Make sure you are getting the best value for money but don’t forget to check that the product or service meets your needs.

There is little doubt that 2009 will be a tough year for many businesses. So it is essential to ensure that you have the right strategy in place to make sure you are one of the survivors when the economy eventually recovers.

With firms struggling to survive as a result of restricted cashflow, there is a growing propensity to hold onto cash and delay payments. This combined with a reticence on behalf of the banks to offer credit, could drive many SMEs to the wall in 2009. In this current economic climate, don’t leave it until it’s too late before you seek professional advice.


Changes to small companies tax regimes has resulted in over 500,000 small firms in the UK having to pay an extra £2.4bn a year, according to Tory MP Justine Greening.

The shadow Treasury economic secretary has stated that the abolition of the zero starting rate of corporation tax in 2006 has resulted in the taxation of businesses that have profits below £10,000 at a rate of 21 per cent.

The Labour government are also planning to increase the small companies rate from 18 per cent in 2006/07 to 22 per cent in 2010, adding to the tax burden felt by small firms.

‘At a time when 1 in 10 businesses are reported as being on the brink of failure, these figures reveal the truth about how Gordon Brown has treated Britain’s small businesses over the last 3 years,” said Greening.

Small companies tax regimes

From April 2009, new laws will provide HM Revenue and Customs (HMRC) with the power to visit home-based offices. Tax inspectors can visit a home if part of the residence is being used for business purposes, which is likely to impact on thousands of people who now remotely work or run their small business from their home residence.

HMRC will still only be able to run an inspection at home-based offices if they think that it’s “reasonably required.” Understandably some people are concerned about one point that’s expected to come into force, that the home-business owner will no longer be able to object to the visit, even though they may only be given 24 hours’ notice.

Refusing to let a tax inspector into your business premises can result in a fine. So you should make sure that your accounts are up to date at all times and ready in case you are subject to a visit.

Keeping financial records current and accurate is essential for the daily operations of any business. It’s important that you know the exact current position of your finances.

The reasons your business might be chosen for an inspection are numerous

and wide-ranging. Whatever the reason, one thing’s certain, you need to make sure that your record keeping and accounting practices are in good order.

An inspector will want to know everything about your operations as well as viewing your records. You will need to produce original documents such as invoices, receipts and bank statements. But you should also be keeping a detailed record of calculations made when filling out tax returns.

The inspectors will aim to give you advice and help during their visit. This will later be backed up with written documentation. But, if you want to save yourself time and money, ensure that there are no faults to be found in the first place.

Is part of your residence being used for business purposes?

Tax inspector visits to home based offices

Taxation


Firms in the UK paying an extra £2.4bn a year


Tax inspector visits to home based offices

Financial planning is our business...we’re passionate about making sure your finances are in good shape for 2009.Our range of personal financial planning services is extensive, covering all areas from pensions to taxation and inheritance matters to tax-efficient investments.

Contact us to discuss your current situation, and we’ll help get your finances in good shape.


IS YOUR BUSINESS IN SERIOUS TROUBLE?

The number of companies going out of business in this economic downturn is being attributed to a toxic combination of markedly slowing demand, elevated input costs and very tight credit conditions.

Business owners need to be aware of the most common signals that may indicate their business could be in serious trouble, and apply the same criteria to customers and suppliers.

Although it can be difficult to know exactly when your business is insolvent, there are several warning signs that business owners need to consider. These include:

When the numbers don’t add up, if you are constantly pushing against your overdraft limit or you have no funds in the bank to pay suppliers and staff.

If you are gradually falling further behind with payments to your creditors, routinely pay on final demand or only once legal proceedings have started

If you have started to do all you can to avoid taking creditor phone calls because you know it might be from somebody you owe money

Your suppliers and customers are likely to be in the same tough situation as you, so it is critical to keep an eye on your cashflow and manage your debtors. The reality is that we face prolonged tough times, so it’s worth investing some time and effort in getting your business in shape now.

It’s good to talk

The number of companies thinking of shifting their tax base away from the UK has more than doubled since 2007, KPMG’s annual survey of tax competitiveness has found.

14 per cent of Britain’s 50 largest businesses were actively considering moving their tax residence in 2008.

The survey was carried out moments before the Pre-Budget Report at the end of last

November, which announced exemptions on foreign-earned dividends from UK tax.

“The UK is at a tipping point, and is in danger of losing investment and jobs because of its tax laws, “ Sue Bonney, head of tax at KPMG Europe said.

“If the trickle of companies leaving is to be prevented from becoming a flood, further action is needed, and quickly.”

Small businesses are increasingly seeking financial help from accountants rather than their bank on account of declining levels of customer service, the Forum of Private Business claims.

Small businesses are reluctant to seek financial advice that could help put their business on a safer footing, according to research conducted by the Forum of Private Business (FPB).

The poll, conducted in conjunction with commercial credit agency Graydon, found that only 20 per cent of small business owners sought advice on a quarterly basis or more, with 68 per cent saying they only did so when they thought it was necessary.

Despite the current economic conditions, 36 per cent of those polled said they had not received any advice in the past year on financial matters with 24 per cent saying this was due to a lack of

faith in advisers’ knowledge of their business or the fact they have received poor advice in the past.

When it came to sources of such advice, the research suggested small businesses are increasingly turning to accountants, with 70 per cent choosing this source as opposed to 47 per cent who looked to their bank manager.

According to the FPB, this is a reflection of a declining level of service being offered by the banks, with the increasing trend of established relationship managers being replaced by individuals in call centres, which leads to the loss of long-standing and profitable business banking relationships.

On a more positive note, 29 per cent of small firms said that they were seeking more financial advice now than they were a year ago, and 37 per cent said they expected to seek out more throughout 2009.

A reflection of declining levels of service offered by banks

More businesses are actively considering moving their tax residence

Tax competitiveness

More small businesses reluctant to seek financial advice

Enterprise

If you are concerned that your business could be in financial difficulty, it is important to take immediate action. Discussing your concerns with a chartered accountant or qualified insolvency practitioner is the start of dealing with the problem, and this will enable you to consider the options available to you.


According to an association of accounting firms, SMEs are still struggling to access credit despite business secretary Lord Mandelson’s multi-billion package to unblock the credit market.

The government’s enterprise finance guarantee, will underwrite 75 per cent of a bank loan made to companies with a turnover of up to £25m.

But Kevin Dickens, president of the UK200 Group, which represents 120 UK accounting firms, said some high street banks were unaware how to apply for the scheme.

He commented that banks had told him the packages will not be available until the end of February. This could result in businesses going bust and make it harder for accountants to help clients get credit.

‘The infrastructure is lacking behind the grandiose statements. I have been trying to work with banks to find out the details of the scheme,’ he said.

A spokesman for the Department for Business, Enterprise & Regulatory Reform commented that the money guaranteed by the measures had been available since 14 January, the day of the announcement.

Unblocking the credit marketBusinesses struggle to access credit despite the governments multi-billion package

In the current turbulent economic conditions, it is crucial that businesses police new customers and monitor the performance of existing ones to guard against the risk of bad debt.

Small businesses must be vigilant against the risk of clients defaulting on payment and should perform regular credit checks in the current conditions, the Institute of Chartered Accountants in England and Wales (ICAEW) warns.

According to Clive Lewis, head of SME issues, small firms should invest in new credit checks for all customers to ensure they are aware of any potential problems.

“Nobody can hide from the difficult credit situation any longer,” he said. “Critical to coping with it is rigorous credit control, and that means having up-to-date credit references.

“While many small businesses are diligent in carrying out credit checks on new clients, the information obtained is only of any use if it is up-to-date,” he added.

“In the current credit crunch climate, customers’ creditworthiness can change rapidly, so it has never been more important to ensure data on your customers is valid.”

The ICAEW offers the following tips on how to monitor the creditworthiness or otherwise of new or potential customers:

Get regular up-to-date credit information on major customers and periodic updates on smaller accounts

Make sure the credit limit (which shows how much money is owed by your customer at any one time) is in line with how much you sell to the customer and ensure you have in place robust internal procedures for dealing with customers who exceed their limit

Assess your payment terms. Make sure you have agreed when you will receive payments and remind your customers about the payment deadline

Don’t be afraid to chase your customer for payment, waiting politely will not help protect your business or your shareholders

Remember, a sale is not a sale until you have received payments

“Credit information is available online at the touch of a button, so there is no excuse for not being bang up-to-date,” added Lewis. “Avoiding a bad debt can more than justify the cost.”

Safeguard your business from the risk of bad debt

Rigorous credit control is essential for survival

Credit checks



Pre-Budget Report 2008Were you a winner or a loser?


The Chancellor’s message as he delivered his second Pre-Budget Report was to ’spend, spend, spend’, at least for the rest of this year, to benefit from the reduced 15 per cent VAT rate.

We shall all start paying for the tax reductions by 2011, assuming the government is re-elected. National Insurance contributions will rise by 0.5 per cent for both employers and employees, although the lower rate threshold will be increased to match the new personal allowance.

Higher rate taxpayers will see personal allowances cut (for those earning over £100,000) and eliminated (for those earning over £140,000). In addition, there will be a new 45 per cent rate for those earning over £150,000.

Pre-Budget Report highlights EconomicsFiscal package The government will inject £20bn into the economy in an attempt to stave off a deep recession.

Growth Growth forecast predictions have been downgraded for this financial year to between -0.75 per cent and -1.25 per cent from 2.5 per cent. The Chancellor predicted growth of between 1.5 per cent and 2 per cent in 2010.

Public finances Public spending Real terms capital spending will increase by 1.2 per cent a year. About £3bn of capital spending will be brought forward from 2010/11 to this financial year. The government will inject £535m into energy efficiency, rail transport and environmental protection.

Efficiency cuts The government confirmed that an extra £5bn could be saved in the public sector on top of the original £30bn of efficiency savings it had planned for between 2007 and 2010.

Borrowing The Chancellor said borrowing would reach £78bn this financial year, up from the previous forecast of £43bn. Borrowing will rise to £118bn in 2009/10, or 8 per cent of GDP. From 2010 it will fall to £105bn, then to £87bn, £70bn and £54bn. By 2015/16 the government will borrow only to invest.

Net debt This will rise to 41.2 per cent this financial year, then to 48.2 per cent

in 2009/10, 48 per cent in 2010/11 and 53 per cent in 2011/12, peaking at 57 per cent of GDP in 2013/14. The package confirmed that the government would suspend its rule that limits borrowing to 40 per cent of GDP.

Family and investment Debt advice The government will provide £15m for the provision of debt advice.

Tax havens A review of the regulatory arrangements surrounding the Isle of Man and the Channel Islands has been commissioned and will report this spring.

Pensions and child benefit State pension Pensioners will see their payment increase from £90.70 to £95.25 a week. Pensioners on modest incomes will get an increase in pension credit from £124 to £130 and for couples from £189 to £198 from this January.

Disability Pensioners and children with disabilities will gain an extra £60 to go towards energy bills from January this year. This will be £120 for couples.

EnergyEnergy prices The government may introduce statutory powers to cut energy bills.

Insulation Up to £100m will be spent to help people to insulate their homes.

EnvironmentVehicle excise duty New tax bands will be phased in. Vehicle excise duty rates for all cars will increase by up to £5 this year. Differential increases in duty will be introduced from 2010. More polluting cars will see duty increased up to a maximum of £30, while less polluting cars will see no increase or a cut of up to £30.

Climate change levy The renewables obligation, which requires energy generators to use greener methods of production, will be extended for an additional ten years to 2037.

Air passenger duty A four-band tax duty is to be introduced. Long-haul passengers will pay more.

Personal taxes Allowances Personal allowances will be scrapped for those earning in excess of

£140,000 a year from April 2010. Ten pence band The increase in the personal allowance to offset the scrapping of the 10p tax band is to be made permanent and increased to £145 a year from £120.

National Insurance From April 2010, National Insurance contributions will rise by 0.5 per cent for employers and employees, but those earning less than £20,000 will be exempted.

Value added tax VAT The tax on sales was cut from 17.5 per cent to 15 per cent on Monday 1 December 2008 until the end of this year, after which it will return to the original rate. That reduction will be offset by increased duties on alcohol, tobacco and petrol.

PropertyHousing support package The government will offer an overall housing support package worth £1.8bn.

Affordable housing An extra £775m will be brought forward to invest in new housing and modernisation schemes.

Mortgage rescue scheme The government said that the scheme would be extended to those with a second mortgage.

Mortgage interest scheme The limit on the mortgage interest scheme is to be raised from £100,000 to £200,000.

Repossessions Main lenders agreed to wait three months before starting a repossession order against struggling homeowners.

Jobs and unemployment Adult training Up to £1.3bn in funding will be provided for training. Tesco, Centrica and Royal Mail were named as being among businesses that would work with Jobcentre Plus to help with training.

Unemployment The government will extend its rapid response service for those who have been made redundant.

BanksCredit guarantee The government said that banks would have access to £100bn under credit guarantee.


Unlike a traditional personal pension, a Self-Invested Personal Pension (SIPP) may offer for appropriate investor’s far greater flexibility in terms of the assets that can be held within its wrapper. A SIPP enables investors to spread investment risk across various asset options, but also to select investments that meet any specific requirements and financial objectives set.

When you wish to withdraw the funds from your SIPP, between the ages of 55 and 75 (50 and 75 before April 2010), you can normally take up to 25 per cent of your fund as a cash lump sum, free from tax. The remainder is then used to provide you with a taxable income.

There are also significant tax benefits. The main benefit of contributing to a SIPP is the fact that basic rate tax payments on contributions will be rebated to the fund which effectively means that, within pension funding limits, you can invest part of your income gross. Initially SIPPs and other similar pension plans were exempt from not only tax on contributions but tax on income and capital gains. There have been a number of changes over the years and it is vital that professional

advice is taken before considering this retirement planning option.

A vast array of investments can be held in a SIPP to meet the objectives of your investment strategy. Some of these funds are more common than others, and some are very complex.

Investments include: n UK and foreign equities n Collective investments such as unit

trusts and investment trusts or OEICs n Offshore Funds n Cash n Gilts n Bonds n Commercial property (under review)

Types of funds availableBroadly, funds can be categorised into two main groups: Conventional, such as equity and bond funds, and Alternative funds.

They can also be categorised by other criteria such as:

Types:n Open-Ended Funds (OEICs)n Closed-Ended Fundsn Exchange Traded Funds (ETFs)

Investment themes:n Emerging Markets Fundsn BRIC Fundsn ‘Frontier’ Fundsn Specialist Fundsn Ethical Fundsn Goldn Oiln ‘Soft’ Commodities

Unlike individual shares or bonds, funds allow an investor quick access to a diversified portfolio, even with smaller investment amounts. They also allow investors access to illiquid asset classes, such as private equity, commercial property and commodities.

Types of fundsOpen-ended fundsUnit trusts and open-ended investment companies (OEICs) are the most common type of open-ended funds. Open-ended means that the number of units, or shares respectively, in these funds increases and decreases depending on the level of new investments and redemptions. When you buy into an open-ended fund, new units are created. Conversely, if you sell, those

Wrapping assets in a SIPPA solution for your specific requirements and financial objectives?

Retirement


units are cancelled. The value of these shares or units directly reflects the value of the underlying portfolio.

Closed-ended fundsInvestment trusts are an example of closed-ended funds. They typically issue shares which are then traded on a stock exchange. The number of shares is fixed. This means the value of the shares reflects both the “net asset value” of the fund’s underlying portfolio and the supply/demand for the fund’s shares. As a result, a closed-ended fund’s shares can trade either at a discount or premium to its underlying net asset value.

Exchange traded funds (ETFs)ETFs are funds designed to track indices. They are a hybrid between open-ended and closed-ended funds. They are open-ended as their number of shares is not fixed, but have characteristics of closed-ended funds, such as listing on an exchange and intraday dealing. They normally fully replicate the index they track, by holding all the constituents in their respective index weightings.

Emerging markets fundsThese funds aim to give investors exposure to stock markets in emerging markets economies either on a global basis or in specific regions, Eastern Europe for example. Emerging economies are considered those that have a low-to-mid per capita income, have ongoing economic development and reform programs, and are considered to be fast growing economies.

BRIC fundsIn fund management jargon ‘BRIC’ stands for Brazil, Russia, India and China. ‘BRIC’ funds generally have the remit of providing exposure to only these four emerging economies.

‘Frontier’ fundsFrontier funds allow investors to gain exposure to those economies classified as ‘frontier markets’. Frontier markets are generally defined as those markets that tend to have a smaller capitalisation, fewer traded securities and are less liquid than emerging markets. Countries within this frame can be at different levels of economic development, with gross domestic product per capita ranging from low, in countries such as Vietnam and Nigeria, to high, in the Gulf countries for example.

Specialist fundsFunds can provide a way of outsourcing to a specialist investment manager. Specialist funds are funds that invest in a particular area or sector. For example, instead of buying a number of holdings in UK banks, an investor can buy a specialist financials fund managed by someone who is better placed to select the best mix of bank and financial stocks from a global perspective.

Ethical fundsEthical, or socially responsible, funds typically either look for companies that are actively pursuing ways of improving health and the environment, or avoid companies that they consider have a negative effect on society.

Exposure to gold via fundsAn investor can gain exposure to gold via ETFs designed to track the

gold price, or via specialised funds investing in companies with gold exposure, such as mining companies.

Exposure to oil via fundsAn investor can gain exposure to oil via ETFs designed to track the oil price, or via specialised funds investing in companies exposed to oil, such as exploration, development, production and servicing companies.

‘Soft’ commodities‘Soft’ commodities is another term for agricultural commodities, such as wheat, cotton, palm oil and orange juice. An investor can gain exposure to soft commodities via ‘agricultural’ funds. These can either invest in future contracts on soft commodities, or in companies that are involved in, related to, concerned with, or affected by agriculture and farming related issues. Investors can also gain exposure to individual soft commodities by buying ETFs designed to track the price of single commodities.

Planning for a successful retirement requires professional advice to ensure that you fully achieve your retirement goals. For more information about the services we provide, please contact us.



Environmental issues are becoming important to all businesses as the amount and scope of environmental legislation increases. With stakeholders such as employees, customers, suppliers and investors taking environmental issues more into account in their decision making, there’s now every reason for seeing this as a business opportunity.

If you are unfamiliar with the environmental issues relevant to your business or you need more specialised advice, a number of organisations exist to help you. Some organisations and programmes provide free, in-depth advice to help you comply with regulations, improve the environmental performance of your business, and even improve your profitability.

The Carbon Trust helps businesses reduce their carbon

emissions and energy bills. The first step is to assess how your business uses energy. You could do this, for example, by carrying out a walk-round survey or measuring your carbon footprint.

Once you have completed the assessment, the Carbon Trust can advise you how to reduce your energy use. This can make your business more attractive to stakeholders such as employees, shareholders and business partners and could also save you money by reducing your energy bills.

Home-based businesses can find similar advice on the Energy Saving Trust (EST) website.

The Carbon Trust can also provide:

Free surveysIf your business uses more than £50,000 of energy per

year, the Carbon Trust can carry out an on-site analysis and offer tailored advice. If your business uses less energy than this you can use the website or the advice line for advice.

Interest-free loansThe Carbon Trust can also provide unsecured, interest-free loans of between £5,000 and £200,000 for the purchase of energy-saving equipment.

Enhanced capital allowancesBy investing in energy-saving plant and machinery you may be eligible for enhanced capital allowances.

ConsultancyThe Carbon Trust also advises new low-carbon businesses and may also give grants to research projects.

Environmental legislationHow much energy does your business use?

Environment

New research reveals small businesses in the UK are devoting more than a sixth of their overall expenditure to meeting tax requirements.

SMEs are spending an average of 15.7 per cent of their total expenditure costs in fulfilling tax obligations, according to new research.

Figures released by business information company Creditsafe also reveal that 18.5 per cent of SMEs with a turnover of £1m-£5m are attributing the greatest proportion of revenue to tax.

Tax ranks third in the league table of total business expenditure for SMEs, with wages accounting for almost a third (29 per cent) of total expenditure and investment in stock and materials (17.5 per cent). Fuel costs now account for 10 per cent of overall costs.

David Knowles, marketing director of Creditsafe, commented that the tax burden on SMEs impacts on profitability and the level of investment businesses can pour into other areas, such as expanding into new markets.

Fulfilling your tax obligationsBurden on SMEs impacts on profitability

Articles are copyright protected by Goldmine Publishing Limited 2008. Terms and conditions apply. Unauthorised duplication or distribution is strictly forbidden.

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Produced by Goldmine Publishing Limited • Prudence Place • Luton • Bedfordshire • LU2 9PE

There are a number of common errors that occur when filling in a Company Tax Return form (CT600). In particular, check that:n if there is a repayment, you have

put an X in the box under “about this return”

n you have filled in the box headed “turnover of the company” on page two, as this is often missed

n in the tax calculation, when apportioning profits chargeable to corporation tax to financial years, that they are calculated on a daily basis and not on a monthly basis

n in the same section, you have not “tweaked” the corporation tax rate to get the right amount

of corporation tax chargeable, and have used only the rates appropriate for your company as shown at the back of the CT600 Guide

n you have completed boxes 39 or 40 and 41 if you have associated companies

n you have calculated any marginal rate relief correctly and included the calculation with your tax computation

n you have completed supplementary pages CT600A if a loan has been made to participators by a closed company

n you are aware of the date on which corporation tax is due, to avoid late payment

Company Tax-ReturnsOne-minute check list of the most common errors

Environmental legislation

The Federation of Small Businesses (FSB) has called on the government to allow small firms to have a say over the proposed Business Rate Supplements Bill.

The Bill will impose an extra tax burden on businesses, and the FSB is seeking a number of amendments to ensure that the supplement will only be spent on economic development.

As well as calling for businesses to be consulted and have a vote on all supplements the FSB propose that properties liable for business rates with a rateable value of £50,000 or less be exempt and that the £50,000

threshold is reconsidered once the property market improves.

“With small business failures entering their hundreds each day and taking thousands of jobs with them, it seems counter productive to introduce a new tax,” said John Wright, chairman of the FSB.

“However, if business owners are to pay this supplement it is important that they have a say on where it goes. This revenue must be ring-fenced for economic development rather than to shore up government infrastructure projects and local council budgets.”

Business Rate Supplements Bill

THE UKEcONOMY

SHAREHOLDERwARNING

Small firms should have a say

Businesses have been warned that criminals have a list of over 11,000 UK shareholders to whom they are trying to sell over-priced or non-existent shares.

The Financial Services Industry (FSA) has written to the individuals on the list, which includes personal data such as full names, addresses and telephone numbers, to warn them over the scam.

“The details on the database provide fraudsters with valuable information that can be used to convince people that they are dealing with legitimate stockbrokers,” said Jonathan Phelan, head of retail enforcement at the FSA.

It’s official, we’re in recession

Database provides fraudsters with valuable information

Official statistics have confirmed what we already knew last year, the UK economy is officially in recession. This has also fuelled speculation that the Bank of England could eventually reduce interest rates to zero.

n UK economy shrank by 1.5 per cent in final quarter of 2008

n Official figures have confirmed that Britain is in the grip of recession, with the worst economic output figures since 1980

n Gross Domestic Product shrank by 1.5 per cent in the last quarter of 2008 on top of a 0.6 per cent fall the previous quarter, according to figures from the Office of National Statistics

n The last time GDP fell by more was in 1980 when it contracted 1.8 per cent


Insolvency issues designed to guide you through the maze of options...is you business facing serious financial difficulties?Professional advice for directors considering the options for restructuring and turning around their business.

Contact us to discuss the best way to deal with your responsibilities, don’t leave it until it’s too late.

Documents

E Smart Tax 6