Tax Planning Bulletin
With an election in the offing and a huge budget deficit to be corrected, further change in the UK tax system is inevitable. With change comes opportunity, and with opportunities come costs. There are also uncertainties. In this Tax Planning Bulletin, we aim to cut through the complexity and explain the options in clear and straightforward language.
Irrespective of which party forms the next government, one of the first changes we expect to see is an increase in the rate of capital gains tax, currently set at 18%. When compared with a top rate of income tax of 50% from 6 April 2010, there is a huge incentive for high earners to restructure income as gains wherever possible. This results in an equal and opposite incentive for Parliament to increase the capital gains tax rate. Indeed, the incentive is so great that this rate may even be increased in the March 2010 Budget.
There are opportunities for companies too. Tax is much like any other cost that has to be met by a business. Simplifying group structures, maximising claims for research and development tax relief and making effective use of share-based payments are among the possibilities for reducing the burden. New rules aimed at encouraging companies to provide staff with more fuel-efficient vehicles may also help employers and employees alike.
If you’d like to learn more,
please contact one of our team of tax experts.
How much of a burden will this new rate place on high earners and what are the implications of a possible future rise in capital gains tax?
HMRC is moving inexorably towards online filing for all taxpayers. It’s a change that will support a new system of penalties as electronic submissions will make it easier for the taxman to identify any mistakes or misleading information.
Relocating a company abroad is a strategy open to businesses of all sizes, but exactly what are the tax benefits in doing so? What are the logistics involved? And what are the pitfalls?
Company
- International debt capping rules come into force
New debt cap rules introduced in the 2009 Finance Act could mean higher tax for UK companies who borrow internationally.
- Relaxed rules on R&D tax credit for SMEs
As flagged in the Pre-Budget Report, the 2009 Finance Act will make it easier for small and medium-sized companies to claim a tax credit for research and development spending.
- Share-based payment rule
Some advisers have argued that companies issuing share options should be able to claim a tax deduction on the charge that appears on the profit and loss account, yet the situation remains far from clear.
- Reviewing corporate structure
A regular review of group structure can play an important role in reducing the tax bill of companies and individual shareholders.
Employee
- Company car
Driven by an agenda aimed at cutting vehicle emissions, new tax rules are designed to encourage companies to supply staff with more fuel-efficient vehicles.
- Fuel allowance
Employees who benefit from a fuel allowance on top of a company car will also be hit by changes coming into force in April.
- New National Insurance rules for secondees
This year sees the introduction of new rules affecting the national insurance status of employees moving from one country to another within the EU.
- Getting salary sacrifice right
Salary sacrifice schemes offer tax benefits for staff and employers alike, but there are a number of pitfalls that could see your company’s arrangements being rejected by HMRC.
- Pension planning
The Government has amended pension contribution capping rules for high earners. Those hit by caps may want to consider alternative retirement investments
VAT
- Fundamental change to VAT rule
On 1 January 2010 a number of measures were introduced that will affect almost all businesses and organisations that supply to, or receive services from, overseas businesses.
- Claims for compound interest possible
Last year the High Court ruled that compound interest is payable in principle on overpaid VAT. In many cases, this will mean that the interest receivable will exceed the value of the erroneously paid VAT.
Private client
- Leaving the UK for tax purposes
Overseas jurisdictions may offer an escape from rising UK taxes, but anyone planning to take up residence abroad should be fully aware of the rules.
- Getting used to non-dom tax rules
For wealthy individuals resident in the UK but legally domiciled overseas, every investment decision involves consideration of their UK tax position. But it isn’t only investment changes that can have a tax impact.