• Growth is slower than expected but only by a small amount but the future forecasted increases are still expected
• Inflation will hold at around 4-5% this year but then fall to 2.5% next year then the Bank of England target of 2% in the following year

The starting point for the areas which will affect us all was the statement that UK taxes are too complicated and 42 taxes and reliefs are being abolished and there is going to be a consultation on merging the Income Tax and National Insurance which will reduce bureaucracy for employers and HMRC in administration.  Then onto the actual details:

• Main corporation tax rate will reduce by 2% from April then 1% per annum until it reaches 23% (small companies rate reduction from 21% to 20% from April has already been announced)
• The banker bashing continues as banks will not benefit from this but be subjected to an increase in the bank levy to counteract this!
• To aid the construction industry, encourage jobs and reduce costs of planning, the planning rules will be simplified, the general rule will be planning “will” be granted

Entrepreneurs, business and 50% tax

• Entrepreneurs lifetime relief on gains to be increased from £5-10m
• New and small businesses (less than 10 employees) will be exempt from regulation for three years – further details will follow
• Enterprise Investment Scheme rate of income tax relief to increase from 20-30%
• 50% tax rate is temporary, HMRC have been asked to find out how much this measure actually raises

Property, R&D and Enterprise Zones

• HMRC also looking at tax avoidance on high value properties – both of these measures are looking at making sure all members of society contribute to the tax take.
• £250m commitment to first time buyers of new build property funded from the bank levy, should help 10,000 people
• To encourage R&D, the tax credit will rise to 200% for small businesses from April
• 21 New Enterprise zones will be created in England, 11 were announced and 10 more to follow in the summer.  Following my meeting with Gravesham BC this morning they are hoping Thames Gateway will be one of them

Individuals, charities and motorists

• For pensioners the state pension increase will have an automatic mechanism for annual increases rather than relying on inflation as at present.  Also there will be a simplified state pension system offering a £140pw basic pension
• For charities gift aid claims will be simplified from 2013 to make it easier for them to claim the relief they are due
• To encourage a giving society if you leave more than 10% of your estate to charity your rate of IHT will be reduced by 10% (ie 40-36%)
• For families – council tax has been frozen across the country and child tax credit will increase.
• The already announced £1000 increase in personal tax allowance will offset the increase in NI for lower earners announced by the Labour government.  For 2012/13 the allowance will increase by £630 to a little over £8k and this will not push more people into higher rate tax.
• Smokers and drinkers – Tobacco duties will increase as previously announced and there will be no changes to alcohol duty increases to those previously announced

Motorists and fuel

• Motorists – vehicle excise duty will increase by inflation for cars but frozen for HGVs
• Approved mileage allowance increases to 45p from 40p per mile and also applies to volunteers for charities, this is the first change since 2002!
• The fuel duty increase which was planned for 1 April has been removed and there will be  a 1p reduction from 6pm today funded by a fair fuel stabiliser levied on the petroleum industry
• The full HMRC Overview of Tax Legislation and Rates can be found at http://www.hmrc.gov.uk/budget2011/overview.pdf

The summary above is based on our understanding of the Budget and you should seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”

• You may claim £150 including VAT per person per annum
• This may cover more than one event providing the total does not exceed £150
• The cost should be claimed as staff welfare for corporation tax purposes
• There is no charge to the employee as a benefit in kind
• Corporation tax is allowable in full
• Input VAT may be reclaimed on the event

However this may go wrong in the following circumstances:

• The total cost must include all costs of the function, including travel and accommodation
• All staff must be invited (ie no restriction, except by branch/office if applicable)
• The average cost is based on who attends the function so beware if there is snow, half the people cannot make it and the average cost doubles
• £150 is an allowance, so if the average cost works out at £151 the full £151 will be charged to the employee as a benefit in kind
• VAT cannot be claimed for non-employees (ie guests and customers)

Our recommendations

• Keep full records of all costs incurred in the event
• Keep a record of the attendees
• Ensure all staff are invited
• Make staff aware that if they do not attend there may be a benefit in kind charge

This article highlights some of the main points to consider but may not apply to your specific circumstance so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting, Gravesend – Accountants who “speak your language”

Small companies benefit from paying a lower rate of corporation tax on profits upto £300k so there is a danger that a wily director could set up a number of companies under his control to make the maximum benefit from this tax band.  For this reason the associated company rules were introduced to block this loopholeby dividing the tax band down by the number of companies controlled by the same person.  So if you had 3 companies they would each only get £100k at the lower corporation tax which would be fine if each had profits of £90k, but not if one had £300k profits and the other two only £10k.  It would be better to release control of the smaller companies to maximise the benefit of the low tax rate.

What about handing control to close family members?  This has also been blocked and is actually of more concern as often family members run completely independent companies, but they will still be caught by these rules.  There is a concession where there is no substantial commercial interdependence the rules can be released. Family members include husbands and wives, brothers, sisters, parents and children so beware of this danger.  Business partners are also included within this definition.

There is pressure for change in these rules as more and more people set up in business, but it is unlikely that there will be a great change.  The cost of the transition to the main corporation tax rate will diminish over the next few years as the rate reduces down from 28% to 24% as forecast in the last budget.

This area is involved and every situation is different.  While the basic principles have been covered there are other aspects such as loan creditors and terms on winding up which may also affect the control of the company. This article may not apply to your specific circumstance so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

The Chancellor George Osborne started by painting the picture of the poor state of the economy and among various political comments stated that due a cautious approach fiscal goals would be met one year earlier than expected in 2014.  The inflation target will remain at 2% which has already been exceeded, this will peak at 2.7% later in the year and then reduce.  In terms of the approach to the deficit a lower spending rather than higher tax route is being taken, supporting the stand taken by the IMF and OECD, which will be done in the ratio 80/20, clearly showing the public sector will suffer.  The relationship with Europe will continue with a commitment not to join the Euro, and the government group looking at this area will be disbanded and used for more “useful tasks.”

Turning to the actual decisions, cuts are to be made to existing budgets but there was a commitment to capital spending, particularly if there is economic benefit.  This will be greeted with some optimism by the schools and infrastructure in North Kent which was rumoured to be cut to reduce the deficit.  The Royal Family have accepted that the Civil List will be frozen , and will be subject to annual National Audit Office reviews.  There will be an overall reduction of 20% in departmental budgets but due to commitments to maintain or increase NHS funding and overseas support the actual effect on departments hit by the cuts will be that of a 25% cut.  We will not know the full impact of the cuts until the Spending Review for which the date has been released for the first time as Wednesday 20^th October.

The public sector will face the biggest cuts and the most noticeable to the man in the street is the 2 year pay freeze for staff paid over £21k.  The government wants to encourage the back to work culture and the tax credits system is being used to facilitate this.  Tax credits will be more targeted particularly at the lower paid and will reduce for families with a combined income over £40k.  Child benefit is also to be frozen, the government acknowledging a number of approaches including means testing and taxing the benefit but finally settling on a freeze.  In other areas medical tests are to be introduced for those claiming disability benefit.

For business the main corporation tax rate will reduce by 1% per annum for the next 4 years reducing from 28% to 24% over that time, which will be the lowest rate in the G20.  For small businesses the rate will reduce by 1% only to 20% from next year.  There is also to be a small reduction in the rates of capital allowances, of main interest to small businesses the Annual Investment Allowance will reduce from £50k to £25k, which will still meet the needs of many SME businesses.

Among the miscellaneous changes, the Chancellor is introducing a levy on banks as recommended by the IMF, and this will take the form of a tax based of the size of the bank, small banks will be excluded from this arrangement.  The landline duty to fund broadband expansion is being withdrawn before even being introduced, this will be funded by links with the private sector and local initiatives.  In order to encourage business growth outside London and the South East there will be an NI exemption for new businesses being set up.

The biggest news of the budget and not entirely unexpected was the increase in VAT from 17.5% to 20% from 4 January 2011, but exempt and zero rated items such as childrens clothing and food will be unaffected.

There will be no increases in the previously announced duties for alcohol/fuel etc, but the additional cider increase has been withdrawn from the end of the month (apparently in time for the final 8 in the World Cup!)

In personal tax capital gains tax will remain at 18% for basic rate taxpayers but increase to 28% for higher rate taxpayers, the £10,100 limit will remain.  This may appear good at first sight but gains on property for example may well push basic rate taxpayers over the threshold so will pay 28% anyway.  To continue to encourage entrepreneurship the limit for lifetime gains will be increased to £5m at which an effective 10% rate applies.

Personal tax allowances will increase by £1000 to £7475 from next year, one step towards the £10k limit proposed by the Lib Dems.  The NI thresholds are to be increased and the cost to employers of employing staff paid less than £20k will not increase.  For pensioners the basic state pension will be relinked with earnings after a gap of several years, and in a further attempt to support low income families the Child element of Child tax credits will increase by £150pa.

This is by its nature a summary of the main points we consider of interest to readers, there was alot more content in the whole speech but we hope this will be more easily understood.  The main announcements are on HMRC website http://www.hmrc.gov.uk/budget2010/index.htm .  We hope this will be informative but if you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

He was looking at the Honda Insight with a P11D list price of £16,270 and CO2 of 101g/km.  The other well known hybrid the Toyota Prius has lower emissions of 89g, but higher list of £19505.

Benefits in kind

The car benefit to the employee is based on 10% of the list price (£1627 for the Honda) and is £325.40 for a basic rate taxpayers and £650.80 for a 40% rate taxpayer.  The additional benefit if fuel is provided is £1800, costing an additional £360 or £720 in tax for 20%/40% taxpayers respectively.

The equivalent for a 2.0 TDCi Mondeo Zetec list price £16770 and 139g CO2, benefit is £3186 and cost £637.20 and £1274.40 for 20%/40% taxpayers, and with fuel an additional £3420 benefit costing £684 and £1368 respectively.

In conclusion the Mondeo works out at about twice as much due to higher emissions for a similar priced car.

Capital allowances

There are also savings for a company, if a car has emissions of less than 110g then the full cost of the vehicle can be claimed against profits in the year of purchase so at 21% a saving of £3416 in corporation tax.  The Mondeo with emissions of <160g attracts a 20% allowance, and only £670.80 tax saving

There is a price to pay in terms of performance and size but clearly significant savings in tax in the year of purchase, but well worth considering for the green driver.

I hope this will help you decidwhat would be the best option for you but if you are unsure about this or would like advice in other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

1. The very back page or two is the detailed profit and loss account which as the name implies shows the profitability of the business after expenses but before tax.  The first figure will be sales or turnover which is the income for the year based on sales actually completed, but not necessarily paid for.  From this is deducted the direct costs in making those sales, ie the materials or costs which directly result in the sales being made, but will exclude any stock or work in progress which has not resulted in sales by the year end.  This results in a gross profit which should be the profit made on all the individual jobs completed during the year.
2. From the gross profit are deducted expenses or overheads which are all the costs of running the business which are not directly involved in generating sales, which will include salaries, rent and advertising for example.  There will also be other adjustments for depreciation on assets and finance costs resulting in a net profit before tax.
3. The tax is shown on a less detailed profit and loss account which is half way through accounts, normally the first page of figures from the front.  This summarises the headline figures from the detailed profit and loss then shows the tax (which will be approximately 20% of the net profit) being deducted to leave a profit after tax from which dividends are paid.
4. You will need to turn to the notes to the accounts which are towards the back to see dividends, the actual dividend paid is shown in a note at the beginning and the effect on the company reserves shown as one of the last notes.  This will show how much the company was worth at the beginning of the year, how much value was added during the year in profits and how much paid out by way of dividends.  This shows the value of the company at the end of the year which takes us to the balance sheet.
5. The balance sheet is found just before the notes pages and measures the value of the company by netting off the assets of the company against it’s liabilities.  Fixed assets are shown first including vehicles, plant and equipment, each year their value is reduced by depreciation as a measure of their age and usage.  This is shown as an expense on the profit and loss account.
6. Following fixed assets are current assets which include items more easily convertible into cash such as stock, monies owed by customers and others (debtors) and bank balances themselves.  From this are deducted current liabilities which include monies owed  to suppliers and others (creditors) and in taxes: corporation tax, VAT and PAYE.  The net of current assets and liabilities reflects the liquidity of the company, in general this should be a positive amount in order to service the running of the business.
7. If there are long term liabilities such as bank loans or HP these are deducted from the value of fixed and net  current assets to show the asset value of the business.  This will equal the value of shares owned plus the reserves balance shown in point no #4, hence the name “balance sheet”.
8. Some of the figures in the profit and loss and balance sheet, particularly of note the debtors and creditors, are not broken down into their constituent parts and the detail can be found within the notes to the accounts.

The layout of the accounts is laid out in statute and includes parts that may be of little relevance.  Your accountant should be able to explain the bits of relevance to you at the end of the year.

We hope you find the contents of this blog useful; you should of course always seek professional advice for your specific needs.  Alastair Wood, AW Accounting – Accountants who “speak your language”

• 19 April – PAYE must be paid for the period up to 5 April (usually just the March payroll) – and monthly on 19^th for each subsequent month
• 30 April – VAT Returns must be submitted and paid for quarter to 31 March (and 31 May for quarter to April etc)
• 6 May – Election day will decide who is going to use our taxes for the next few years
• 19 May – end of year P35 return must be submitted and any additional tax paid
• 31 May – give each employee a copy of their year end P60
• 4 July – American Independence Day
• 6 July – Benefit in Kind annual P11D return must be submitted and copies given to employees
• 14 July – Bastille Day in France, a good excuse for a bottle of wine and fireworks
• 19 July – Class 1A NIC paid to HMRC for P11D benefits
• 31 July – 2^nd payment on account of your 2009/10 tax bill
• 31 October – File your paper tax return (individuals and partnerships)
• 18 November – Beaujolais Nouveau wine released
• 31 January 2011 – File your tax return online (individuals and partnerships), make any final payment of 2009/10 tax and make a payment on account of 2010/11 tax if applicable .

In addition Limited companies will need to pay their tax and file accounts at Companies House 9 months from their year end, and file a corporation tax return 12 months from their year end.  Individuals do not forget you will need to advise the tax credits office of your income for last year separately despite being a part of HMRC as this will finalise your claim for the year.

We hope you find the contents of this blog useful; you should of course always seek professional advice for your specific needs.  Alastair Wood, AW Accounting – Accountants who “speak your language”

• The Annual Investment Allowance (AIA) will be increased to £100k pa for expenditure incurred on or after 1 April 2010 (companies) and 6 April 2010 (unincorporated businesses).
• No changes have been made to the main and small companies’ rates of corporation tax which for 2010 remain at 28% and 21% respectively.
• A 100% first year allowance will be available for new zero-emission goods vehicles for a five year period from 1 April 2010 (companies) and 6 April 2010 (unincorporated businesses)..
• Business rates cut for one year from October meaning a tax reduction for more than 1/2 million small businesses in England and 345,000 will pay no business rates at all.

For individuals

• The lifetime allowance for entrepreneurs’ relief has been increased to £2m and may be claimed for disposals made on or after 6 April 2010.  Capital gains tax rate remains at 18%.
• No further changes were made to income tax or NI rates beyond those announced in the Pre-Budget Report.  A summary of tax rates and allowances can be found at www.hmrc.gov.uk/budget2010/pn02.pdf
• Relief from stamp duty land tax is available for first time buyers on residential properties up to £250k. This applies for purchases completed between 25 March 2010 and 25 March 2012.
• Stamp duty land tax will be payable at 5% on residential properties over £1m for completions on or after 6 April 2011.
• The IHT nil rate band will now be frozen at £325k for four years (until 2014/15).
• The car scale benefit rates for very low CO2 emission vehicles will be reduced to 5% for cars or vans with emissions of less than 75g per km and nil for vehicles which produce no CO2.

Other measures

• Above inflation increases in alcohol and tobacco
• A phased increase in fuel duty of 1p in April, October and January
• A £35 million university enterprise capital fund, to provide direct support for university innovation and spin-out companies.
• Additional £84 million for repair of local and regional roads damaged by recent adverse weather and £250m investment to improve the motorway network.
• From this April, a new 50 per cent rate of tax will apply to incomes above £150k and from April 2011 tax relief on pension contributions will be restricted for those incomes of £150k and over.
• Employee, employer and self-employed rates of National Insurance contributions will increase by one per cent from April 2011. However, the 15 million people on incomes below £20k will not pay any extra National Insurance contributions.
• Personalised Services for Start-ups and SMEs through Businesslink.gov.uk – By autumn 2011, a new personalised area for start ups will provide easy access to enhanced guidance and tools to help businesses find the support they need when setting up including an HMRC tax registration ‘wizard’ that enables registration for multiple taxes, online services and payment plans using a single interactive online form.
• A tax incentive for the UK video games industry, following consultation and approval from the European Commission

This budget is a short term measure in view of the forthcoming election and there are likely to be more significant measures made in the post election budget, both in tax avoidance, reduced public expenditure and increased taxes.

We hope you find the contents of this blog useful, you should of course always seek professional advice for your specific needs.  Alastair Wood, AW Accounting  – Accountants who “speak your language”

1. For the wife to be paid a small amount, she was involved in a number of administrative roles within the business.  This has to be restricted to £95 per week otherwise the Carer Allowance would be restricted.  A matter of note is that if you are in receipt of Carer Allowance, all of your basic NI contributions are covered.
2. As the client made large contributions under Gift Aid his basic rate tax band was already in excess of £37400 limit.  His income could therefore go up to this greater limit without paying tax at the higher rate.  Clearly if he wished to and had the finances he could increase the amount given under gift aid to increase this further.
3. He wished to make a pension contribution and having planned in advance of the end of the tax year, I was able to advise him of how much he could pay to avoid having to pay higher rate tax by extending his basic rate band further.
4. He did not necessarily want to make too large a pension contribution as he is approaching retirement age so he now has the choice to make a smaller pension contribution and potentially fully utilise his ISA allowance of £10,200 for 2009/10.
5. He had not been advised on what expenses he could claim on his company and I was able to assist him in this area, covering items such as use of home as office, and claiming the mileage rate.  He had also just gone over the VAT limit, a fact he could easily have missed as he had excluded part of his income.
6. He has now secured a full time PAYE position so the company may or not be retained but the moral of the story is to get advice early to make sure you:
   1. do not miss out on opportunities and
   2. also avoid the pitfalls.

We hope you find the contents of this blog useful, you should of course always seek professional advice for your specific needs.  Alastair Wood, AW Accounting  – Accountants who “speak your language”