| Enews - November 2006 | ||||||||
Introduction This month we report that the Chancellor has announced the date of the Pre-Budget speech and also that the new Companies Act has received Royal Assent. We also 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. |
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Pre-Budget Report
Gordon Brown has announced that he will make his Pre-Budget speech on Wednesday 6th December. Interest in the Chancellor’s speech is heightened this year as this may possibly be his last before Tony Blair steps down as leader. We will let you know the highlights of the Report in next month’s enews.
New Companies Act now law The Companies Act 2006 has finally received Royal Assent. The Act aims to simplify and improve company law and will take two years to implement. Running to some 1,300 sections the Act sets out the way companies are formed, managed and the legal requirements including new responsibilities for directors. Trade and Industry Secretary Alistair Darling said that there would be ‘widespread and effective communication’ to ensure that businesses understand the new Act. We will of course be in touch with those businesses that are affected by the changes in the law but do get in touch if you have any immediate queries or concerns.
Late payment problems Late payment by customers is a serious issue for any business. According to research by BACS Payment Schemes Limited (BPSL) there has been a significant rise in the number of small businesses experiencing late payment problems. In 2005, 59% of small businesses experienced problems with late payments - almost double the percentage for the previous year. To help businesses avoid the problem in the first place BPSL has put together some tips on how to avoid late payments.
Construction Industry changes HMRC have recently launched their advertising campaign to inform contractors in the construction industry of the new monthly returns which have to be made from April 2007. The new scheme will mean that contractors will have to file monthly returns detailing the payments made to subcontractors and details of the tax deductions made, where appropriate. Contractors also have to sign the return to say that they have considered the status of the subcontractors that have been engaged by the business and that they are not employees. Penalties apply for late and incorrect forms.
Retirement Annuities Those individuals who receive income from a retirement annuity contract (an old type of pension) should expect a change to the way in which these are taxed from April 2007. Currently these pensions are generally paid after 22% tax has been deducted from them or gross where the taxpayer has signed the necessary form R89. Gross payment is only appropriate in certain limited circumstances where the taxpayer has personal allowances available to cover the full amount of the annuity. From April 2007 the income will be taxed as pension income, subject to PAYE tax deductions. Those affected will receive a coding notice form P2 showing the tax treatment going forward. The change to PAYE treatment means that there is more flexibility with the amount of tax deduction made. This should stop under or overpayments of tax arising on this type of income. If you think you may be affected by these changes please get in touch.
Reforms to ISA and PEP schemes The Individual Savings Account (ISA) is a tax exempt savings account which allows individuals to invest up to £7,000 per annum. Income from these accounts is tax free. Speaking at the Annual Conference of the PEP and ISA Managers’ Association (PIMA) in London recently, the Economic Secretary to the Treasury, Ed Balls, announced the conclusion of the Treasury’s review of the ISA. He said ‘I can announce that we will make the ISA a permanent feature of the savings landscape. This open-ended commitment to the ISA will provide stability for savers and certainty for the industry – all of you who provide ISA products. It is a crucial development in the Government’s savings strategy and will give us a firm platform on which to promote saving in the future. In addition, the Pre-Budget Report will confirm that the overall annual contribution limit will continue to be at least £7,000 for each individual’. He went on to announce that the intention is to remove the mini/maxi account distinctions which currently apply to ISAs. He also announced that Personal Equity Plan schemes (PEP) are to be brought within the ‘ISA wrapper’. The detail to the changes is to be made in the Pre-Budget Report.
Romania and Bulgaria join EC Romania and Bulgaria join the EC from 1 January 2007. HMRC have issued some guidance for those individuals and businesses which may be affected by the changes from a National Insurance (NI) perspective. The NI rules that apply to people moving between Member States in the European Economic Area will apply from midnight 1 January 2007. The guidance covers those coming to the UK to work, those already working in the UK and those going to work in Bulgaria and Romania. Please get in touch if we can help.
VAT on mobiles and computer chips A couple of months ago we reported that HMRC published guidance for businesses which buy and sell mobile phones, computer chips and certain other goods. The intention is to change the way in which VAT is dealt with on these items by making the purchaser responsible for paying the VAT using a system known as ‘reverse charge’. This means that the purchaser will be responsible for paying the VAT on the purchase of the goods and then will generally be able to claim a deduction for the input VAT suffered on the goods purchased. This change in treatment is due to carousel fraud or missing trader fraud which is estimated to cost one to two billion pounds a year in lost VAT. HMRC had proposed to implement the changes with effect from 1 December 2006 but have now put the change on hold because EU discussions about the necessary change in law are still continuing. HMRC still intend to introduce reverse charge accounting for these goods as soon as agreement has been reached. They propose to give businesses about eight weeks notice of its introduction, and will provide further information as soon as possible. We will continue to keep you informed.
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