| Enews - April 2006 | ||||||||||
Introduction As normal in the world of tax and business, April has been a busy month. Last month Gordon Brown presented his tenth Budget and further detail has now been published. We take this opportunity to report on some significant changes which could affect a considerable number of people with regard to changes to the inheritance tax (IHT) rules. Please browse through this month’s articles using the links below and contact us if any issues or questions arise.
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| Benefits in kind forms P11D are due It is time to start gathering together the information to complete the forms P11D which report to HMRC details of benefits and expenses provided to employees and directors in the tax year to 5 April 2006. The forms have to be submitted to HMRC by 6 July so you have some time to track down the relevant information and to complete the forms. Some things to be aware of: Company cars The benefit is based on a percentage of the list price plus accessories – not what the business paid for the car. The percentage is linked to the CO2 emissions of the car. Provision of fuel Employees provided with free fuel for private as well as business motoring will be assessed on a further benefit calculated as a percentage linked to the CO2 emissions of the car and a set figure of £14,400. This is a good time to check whether or not the individual would be better off paying for their own private fuel. Don’t forget that the employer also pays 12.8% employer only Class 1A NIC on the value of broadly all benefits in kind so there is a saving for the business as well. Vans During 2005/06, for the first time, we had the situation that where the private use of van is restricted to ordinary commuting (home to work) then the scale charge of £500 can be avoided. Make sure that contracts and staff handbooks have been amended to reflect the change as well as employees abiding by the rules before deciding not to include the benefit. Incidentally the £500 benefit is set to increase six fold to £3,000 from 6 April 2007 so it may be time to think about planning for this change as you will need to consult with employees and put contractual changes and monitoring procedures in place. Incidental overnight expenses HMRC allow employees to be paid £5 a night (£10 if overseas) for personal expenses frequently extras on hotel bills which are tax-free. Unfortunately if the limit is exceeded the full payment becomes taxable. Make sure you are monitoring these expenses carefully and reporting any amounts that should be taxed.
Are your VAT details up to date? HMRC have issued a reminder to businesses to ensure that their registered details are up to date. Details to check are principal place of business, bank sort code and account details (used for repayment purposes). Changes need to be advised to the relevant regional registration unit. HMRC will advise businesses of the relevant office on calling the National Advice Service on 0845 010 9000.
Charities - dedicated one stop shop helpline for VAT and tax queries HMRC have set up a specialist office providing advice to charities – and those dealing with charities (individuals and businesses). The HMRC Charities helpline phone number is 08453 02 02 03.
Data protection guidance for mailing lists Additional guidance on complying with the Data Protection Act 1998 when buying or selling databases containing personal information has been published. The guidance suggests that where the information comes from a business which is closing down or being sold, that individuals whose names are included must be told about the change of ownership.
Family-friendly policies take off Research into the effects of the family-friendly legislation introduced in 2003 has found a big increase in the number of working parents taking advantage of benefits such as flexible working. Nearly 50 per cent of mothers and 31 per cent of fathers worked flexible hours last year, compared with 17 per cent and 11 per cent respectively in 2002, according to a survey by the DTI and the Department for Work and Pensions (DWP). The legislation also extended maternity leave and introduced paid paternity leave. The survey also showed that last year, mothers took an average of six months' maternity leave compared with only four months in 2002. Interestingly the number of fathers taking two weeks' paternity leave also increased from 22 per cent in 2002, to 36 per cent last year. The DTI and DWP also claim the legislation has improved retention rates. The number of women who changed employer when they returned to work after maternity leave dropped from 41 per cent in 2002 to 20 per cent last year. Alan Johnson, minister for trade and industry, said "Employers recognise the benefits of better enabling employees to balance work and home lives. It saves time and money on recruitment and training while ensuring they keep the staff with the skills they need."
Confusion over workplace training scheme A £400 million government scheme designed to improve opportunities for workplace training has been launched. But according to the Daily Telegraph, vital details of the scheme, called 'Train to Gain', have not been published, and the detail about the level of compensation available to small businesses participating are unavailable. The scheme aims to involve 50,000 businesses and 300,000 workers in its first year.
Delay on Sunday trading decision The government has delayed its decision on whether to extend superstores’ Sunday opening hours until next year. Retail giants have been campaigning to have the law changed to allow them to trade for nine hours on a Sunday, rather than the six currently permitted. The DTI is holding a second consultation amid opposition to the plan from small businesses. The Association of Convenience Stores (ACS), backed by more than 200 MPs, has been campaigning against the proposed change and claims that 68% of the public oppose longer Sunday hours.
New inheritance tax rules The chancellor, Gordon Brown has revised his proposed Budget measures in respect of trusts, following protests by the life assurance industry and MPs amongst others. HMRC have published additional guidance with the draft Finance Bill, which states that there will be no ‘retrospective tax charges’ to trusts. What the guidance fails to explain is that there will be new charges to certain existing trusts if the terms of the trust are not changed. All future as well as existing bare trusts are not affected by the changes. An example of a bare trust would be a life insurance policy set up to pay off a mortgage if a person dies, and this remains outside the new rules. The Finance Bill sets out the details of how the rules for Accumulation and Maintenance (A&M) Trusts and Interest in Possession (IIP) Trusts announced in the Budget, will be applied. Lifetime transfers into accumulation and maintenance trusts or interest in possession trusts have always been exempt from inheritance tax (IHT) if the settlor lived for the next seven years. These trusts have also not been subject to the periodic or exit charges suffered by other trusts. Legislation has been proposed to make these types of trust immediately chargeable to IHT. The new rules will apply from 22 March 2006 to new trusts and to additions of new assets to existing trusts. There are transitional provisions which will apply to existing trusts in the period up to 6 April 2008. The new rules will apply the provisions currently relating to discretionary trusts to both A&M and IIP trusts. So there will be:
Existing A&M trusts which provide that the assets in trust will go to a beneficiary absolutely at 18 - or where the terms on which they are held are modified before 6 April 2008 to provide this - the current IHT treatment will continue. Where the entitlement rules are different, the trust assets will become ‘relevant property’ from 6 April 2008 and the periodic and exit charges will apply. The current rules for existing IIP trusts will run on until the interest in the trust property at 22 March 2006 comes to an end. Any subsequent trust will broadly fall to be assessed to the periodic and exit charges. Where a trust is set up by a will, then the trustees will have two years to alter the terms of the trust to comply with the new rules. In this period any changes they make will be treated as if made in the will itself.
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