| Enews - May 2006 | ||||||||||
Introduction Summer may seem to be a long time coming this year but the World Cup is only just around the corner which will hopefully keep most people’s attention off the rain. We report on the business winners and potential problems that employers may face during the tournament. We include our usual round up of news. Please browse through this month’s articles using the links below and contact us if any issues or questions arise. |
||||||||||
| Proposed Trust and Tax Return changes Last month we reported on the proposed inheritance tax (IHT) changes for trusts. The professional bodies are lobbying HMRC and the government to reconsider the rules and we will keep you in touch with developments. If you have a trust, created before Budget day, there is no need to take any immediate action as the IHT charges will not generally take effect until 2008. You will no doubt remember we also reported the surprise announcement, made at the same time as the Budget, of the proposal to bring forward the tax return submission deadline from 31 January to 30 September for paper returns, and 30 November for electronic ones. Once again the professional bodies are campaigning against this proposed change. We will keep you informed of developments concerning both of these issues.
Restaurant tips and troncs HMRC have issued revised guidance on the treatment of tips and troncs. This issue has been the subject of debate for some time with HMRC changing their guidance. Part of their recent attack was aimed at troncs, schemes operated by employees (and not the employer) to collect and distribute tips to other employees and, in particular, the National Insurance Contributions (NICs) due on tips distributed through troncs. HMRC now appear to have backed down and have amended their booklet, E24, Tips, Gratuities, Service Charges and Troncs, to make changes to the section on the NICs due on tips and gratuities. The booklet had advised that if the contract of employment indicated that the employee would be able to participate in the tronc, any payments made by the tronc were liable for NICs because they were contractual payments. HMRC now accept that these sorts of payments are to be disregarded from earnings and are not liable for NICs provided that the employer is not allocating, directly or indirectly, the tips. It is important to make sure that you are complying with the current guidance as you do not want to be paying expensive NICs unnecessarily.
Small companies and their associates A decision in the High Court has overturned HMRC’s usual interpretation of the rules on associated companies. The small companies rate of tax of 19% is payable where a company’s profits are less than the upper limit of £300,000. Where the company has associates (broadly companies under common control) the upper limit has to be divided equally between the companies, resulting in the companies paying higher rates of corporation tax if they breach this reduced limit. The case concerned a company, which had at one time been a trading company but now only owned former trading premises, some of which were being let to an unconnected business. Although the company was indeed receiving income it was held not to be trading or in business for the purpose of the associated company test. This meant that it was not treated as associated for the purposes of dividing the upper limit. If your company has associates it may be appropriate to review the situation to see if it can benefit from this change and save some tax.
P11D dispensations Last month we reported that forms P11D which report details of employees’ benefits in kind and expenses have to be with HMRC by 6 July. Some of you will no doubt be trying to collate the necessary information to prepare these forms which is a time consuming process. Employers who obtain a dispensation from HMRC only generally need to report taxable benefits without having to report details of expense payments. These expense payments such as payments for travel (taxis, train fares and parking) and subsistence costs (hotel bills and meals) which would normally not result in a taxable benefit as they are ‘incurred in the performance of the duties of employment’. Unfortunately the tax rules state that these payments have to be reported by the employer on forms P11D and then claimed as tax deductible personally by the employee. HMRC have issued a new form to enable employers’ to apply for a dispensation which is far more detailed than the previous version. A dispensation should only be applied for where your expenses procedures would stand up to close scrutiny and we can help to check if this is the case. If you already have a dispensation it may be time to review it to check it still accurately reflects your businesses procedures.
Businesses get disaster planning help Under the Civil Contingencies Act local authorities are now obliged to help businesses plan for disasters such as fires, terrorist attacks and bird flu. The new services, launched recently, are designed to ensure that disasters cause as little damage to the economy as possible and businesses continue to trade. A survey by the Cabinet Office and the Chartered Management Institute of 1,150 firms and public sector organisations found that while disaster planning was seen as important by the majority, less than half had actually put together a plan. The most common business disruptions are currently the loss of IT, followed by the loss of key staff and then phone system failures.
Will your business win during the World Cup? Independent shopkeepers are expected to score a higher percentage of alcohol sales than the big supermarkets during this summer’s football World Cup. Scottish and Newcastle UK predicts that independents will account for two thirds of the extra sales of beer to be drunk at home during the tournament. The World Cup may also cause your business problems, according to the Federation of Small Businesses, which says that increased trade may be offset by staffing crises caused by employees skipping work to watch matches. They advise that employers should be reminding employees of holiday booking procedures and consider flexible working arrangements.
How much spam? Did you know that more than 1,000 emails were sent every second in the UK last month. Nine out of ten were spam according to research by search engine provider Lycos. The worst offenders are finance and pharmaceutical firms. Record numbers mean some people are reaching ‘email overload’, with 12% of users receiving more than 200 messages a day. If you want to cut out some of this spam, and some of the time it wasted in dealing with it, make sure you and your business have the necessary spam controls in place.
Practical guidance on Age Discrimination ACAS have published a free guide for business owners to help them prepare for the regulations which take effect from 1 October 2006. The guide looks at key areas such as recruitment, appraisal, promotion, redundancy and retirement. The guidance is being produced now so you can review your procedures before the legislation takes effect. The guidance answers questions such as Can I ask for dates of birth on job applications?
HMRC and offshore assets There has been a lot of recent publicity about HMRC formally requesting financial institutions, including Barclays, to deliver up details relating to offshore bank accounts. This is clearly a major offensive by HMRC, who seem to feel that many UK residents ‘hide’ monies offshore. HMRC have published some guidance about how additional income should be reported to them.
New funds available Two new Enterprise Capital Funds (ECFs) are to be created under a multi-million pound government scheme to boost innovation, jobs and growth for small businesses trapped in the equity gap, Small Business Minister Margaret Hodge has announced. ECFs invest a combination of private and public money in small high-growth businesses seeking up to £2 million of equity finance. It is expected that the funds will help to address the scarcity of equity capital in the £500,000 to £2m funding bracket. Small Business Minister, Margaret Hodge MP said: "These new funds will help many small businesses that might otherwise have been unable to develop their potential because there was no equity finance available to them. These funds demonstrate how the government is actively working with private investors to create an environment where British businesses are given the world-class support they need to succeed.”
|