| Enews - January 2006 | ||||||||||||
Introduction Welcome to the first enews of 2006. We hope you had a great break over Christmas and the New Year and are now refreshed and ready to face the challenges that 2006 brings. For those of you who like to leave your personal tax affairs to the last minute, the Tax Return deadline of 31 January is looming large. Perhaps you can take comfort from the Revenue's statistics which back up the fact that you are not alone. Here's hoping the Revenue's computer system can cope! We also report some bad news in that after reporting last month's favourable judgement in the Arctic Systems case, the Revenue have sought leave to appeal to the House of Lords, so the saga continues, bringing renewed uncertainty for some husband and wife companies.
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| 31 January Tax Return deadline The Revenue have issued a reminder to all those taxpayers who haven't yet sent in their Tax Returns. Those individuals issued with a self assessment return have until 31 January to get their returns in and avoid a £100 penalty for missing the deadline. According to government statistics more than 10% of taxpayers issued with a return last year incurred a penalty, almost a million of them. The Revenue is encouraging people to file before midnight on 31 January and pay any tax they owe, as late returns carry a £100 penalty and interest is charged on any outstanding tax. For those individuals still working on their Returns, the Revenue have confirmed that as long as the form is in the Revenue’s post box when it is opened on Thursday 2nd February then, although technically late, they will not charge the £100 filing penalty. Those forms received from the morning post onwards on Thursday 2nd will incur the penalty. For those individuals filing electronically the deadline is midnight on Tuesday 31 January 2006.
Changes to the VAT treatment of conferencing Customs have issued revised guidance on the VAT treatment of conference facilities provided by hotels. The guidance affects the situation where a hotel provides conference facilities on a 24 hour delegate rate. The guidance now means that only part of the 24 hour delegate rate should be subject to VAT. The element of the costs which relate to the room hire should be exempt from VAT unless the hotel has elected to tax the premises, known as an ‘option to tax’. These changes will mean that some hotels may be entitled to a VAT refund and Customs have also issued guidance on how this claim should be made. Customs have confirmed that hotels that wish to continue charging VAT on the full cost of 24 hour delegate rates may do so. This may well be the simplest option for some hotels but may mean they loose out on some bookings from businesses which are unable to reclaim the input VAT they incur.
Arctic Systems - Revenue to appeal to the Lords
Last month we reported on the Court of Appeal decision in the Arctic Systems case. Just in case you need a reminder, the case concerned a company owned by a husband and wife and hinged on whether dividends paid by the company to the wife (who was not a higher rate taxpayer) could be taxed instead on her husband (who was a higher rate taxpayer). The case was won by the taxpayer in the Court of Appeal and we had hoped it had reached its final conclusion. Unfortunately the Revenue have requested leave to appeal to the House of Lords, so those taxpayers whose affairs bear a striking similarity to that of Mr and Mrs Jones, the shareholders of Arctic Systems, are again facing uncertainty as to how they should complete their tax returns. The professional bodies and the Revenue have published further guidance on the current situation.
Bird Flu Avian flu continues to make the headlines and appears to be getting closer to the UK, causing worry and uncertainty. Bird flu, known as H5N1, currently lacks the ability to transfer from human to human, but, like ordinary flu, it is steadily changing and health officials are concerned it will develop that ability. If this happens, the consequences could be catastrophic. More than eight out of ten large UK companies have made emergency plans, according to a survey by The Telegraph. However, many smaller employers have not yet recognised the financial consequences that bird flu could have on their business were it to become a pandemic. Businesses should consider whether they need to make contingency plans. Some of the potential risks are:
Are your customers creditworthy?
Small businesses should check potential customers’ creditworthiness before starting to trade with them and then continue to monitor them to avoid payment problems developing, advises the Better Payment Practice Group (BPPG). An effective way of doing this is to apply for a status report on the customer from a credit agency. These include full customer details and financial results, along with the payment experience of other suppliers, county court judgments registered against them and a recommended credit rating. The BPPG recommend carrying out credit checks on customers that make up the top 80% of your sales. These businesses should be given a full credit check. Less detailed checks can then be carried out on the others. The BPPG also offer advice on whether or not you should offer customers trade credit in the first place and give tips on how to improve the credit rating of your own businesses.
Car benefit calculations The Revenue have produced updated guidance in the Employment Income Manual on how car benefits are calculated. The guidance sets out the basis for the calculation using the list price of the car and an appropriate percentage normally based on the CO2 emissions of the car. There are lower benefits, and therefore less tax to pay, on energy efficient or ‘green’ cars and the guidance for the benefit calculation for these cars is also included. The revised guidance is welcome as there are significant changes to the calculation rules for energy efficient cars and also for Euro IV or ‘clean’ diesels from 6 April 2006.
No future for the corner shop
A gloomy future awaits the traditional corner shop, according to predictions from a parliamentary committee. The pressure from the big four supermarket chains will prove so great that, by 2015, wholesalers which specialise in supplying the smaller retailer are likely to have disappeared too. The predictions are contained in a report leaked to The Times, which is due to be published later this month.
Unfair dismissal compensation set to rise The government has announced the revised compensation limits that will come into effect from 1 February 2006. From that date, the maximum amount of compensation awarded for cases of unfair dismissal will increase from £56,800 to £58,400. The maximum award of 'a week's pay' as defined when calculating redundancy payments will also rise from £280 to £290. This is the maximum amount of weekly pay that can be included in statutory redundancy payments regardless of actual earnings.
Civil Partnerships - a sensitive issue
We reported in a previous newswire the introduction of Civil Partnerships. Acas has since issued guidance on how to comply with the Civil Partnership Act, which gives same-sex couples the same rights as married heterosexual couples in terms of employment rights such as pensions, parental leave and health insurance options. Acas is asking businesses to review their current policies, forms and guidance to ensure that they are up to date. It claims the changes are easy to implement but points out the need for sensitivity and discretion when dealing with such matters.
VAT Receipts and employee mileage claims In last month’s enews we reported on the changes to the procedures for input VAT recovery by employers on employees’ mileage allowances. Customs have issued further clarification of the evidence required to support a claim for input VAT recovery. We set out below a summary of the procedures:
It is nice to see that Customs will initially be operating a ‘light touch’ approach to these new rules.
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