The deadline for filing online tax returns for the year ended 5 April 2008 is 31 January 2009.
Returns not filed on or before this date will be subject to an automatic £100 penalty.
31 January 2009 is also the payment deadline for both balancing payments for 2007/08 and the first payment on account for 2008/09.
Interest will be charged on late payments of tax.
If any of the 2007/08 balancing payment is still outstanding at 28 February 2009 a surcharge will be imposed of 5% of the amount unpaid at that date. This surcharge will increase to 10% of any amount still unpaid at 31 July 2009.
In the Pre-Budget Report the Chancellor announced the launch of the Business Payment Support Service (BPSS) and stated that:
“HMRC will enable firms facing difficulties to spread their tax on a timetable they can afford. This will cover not just VAT, as some have suggested, but all business taxes – VAT, corporation tax, income tax and national insurance – and not for six months but for as long as they need”
If a taxpayer wishes to avail of the service they should contact their professional advisor, or the BPSS, before the tax they require time to pay becomes due. It should be noted that it is not possible to defer tax payments, but it is possible to obtain an agreement to spread tax payments over a period of time. If agreement is reached late payment surcharges will not be imposed, however, it should be noted that interest will be charged from the due date for payment.
In effect, the service is not very different from the procedures that have always been available to those who have difficulties meeting their tax payment obligations but it may prove useful for those with significant cashflow difficulties.
HMRC has stated that if a subcontractor enters into a Business Payment Support Service (BPSS) arrangement in relation to Construction Industry Scheme (CIS) tax before payment becomes due, they are unlikely to lose their gross payment status.
If, despite having come to such an agreement, they receive a letter advising them that HMRC has cancelled their gross payment status, they should immediately appeal, explaining that a BPSS arrangement is in place. In most cases their gross payment status will be restored, unless there were other unrelated failure reasons.
HMRC's advisory fuel only mileage rates are to be reduced. The new rates must be used for journeys on or after 1 January 2009.
The new rates will be as follows (previous rates in brackets):
| Engine Size | Petrol | Diesel | LPG |
| 1400cc or less | 10p (12p) | 11p (13p) | 7p (7p) |
| 1401-2000cc | 12p (15p) | 11p (13p) | 9p (9p) |
| Over 2000cc | 17p (21p) | 14p (17p) | 12p (13p) |
These rates apply where employers:
- reimburse employees who pay for fuel for business travel in their company cars - if the rate per mile paid by the employer is no higher than the advisory rate, there is no taxable profit and no class 1 NIC liability
- require employees to repay the cost of fuel used for private travel, where the employer pays for all fuel - if the rate per mile paid by the employee is at least the advisory rate, there is no fuel benefit liability.
The advisory rates will also be accepted for VAT purposes.
HMRC reviews the rates every six months, with any changes taking effect on 1 January and 1 July. However, a change will also be considered if fuel prices fluctuate by 5% or more during each six month period.
Savings in an individual’s registered pension scheme that qualify for tax relief are subject to an overall limit called the lifetime allowance (LTA). This was set at £1.5 million when it was introduced in April 2006 and will rise to £1.8 million by 2010/11. The annual pension contributions limit on which tax relief can be claimed is called the annual allowance (AA). This was set at £215,000 when it was introduced in April 2006 and will rise to £255,000 by 2010/11.
It was announced in the Pre-Budget Report in November that the LTA and AA will be frozen at the 2010/11 rates for a period of five years, i.e. up to and including the tax year 2015/16.
This may give rise to a real problem to high income earners close to retirement, along with those whose Pension Schemes have invested in property with gearing. This is because relatively modest increases in inflation and property prices could see fund values increase to exceed the LTA, resulting in significant tax charges.
Anyone worried that this may affect them should contact their pension scheme advisor.
When an individual crystallises benefits valued at more than the lifetime allowance (currently £1.65 million) they will be liable to a tax charge called the lifetime allowance charge.
It is possible to obtain lifetime allowance protection so that part or all of an individual’s benefits that are worth more than the lifetime allowance will be protected from the lifetime allowance charge.
There are two main forms of protection:
- Enhanced protection – protects all pension rights from the charge – strict conditions apply.
- Primary protection – protects value of pension rights built up before 6 April 2006, e.g. if on 5 April 2006 pension rights were worth £3 million that amount of benefits can be taken without being liable to the lifetime allowance charge. This value is increased each year in line with the increase in the lifetime allowance, so that the £3 million as at 5 April 2006 would now be worth £3.3 million.
Only individuals who already had pension rights worth more than £1.5 million on 5 April 2006 can qualify for primary protection. There is no monetary limit for enhanced protection.
The deadline for submitting a notification of a wish to claim lifetime allowance protection is 5 April 2009.
It is therefore imperative that anyone wishing to make a claim for this protection contacts their financial advisor immediately.
For more than 20 years, UK businesses have been denied recovery of VAT incurred on the entertainment of overseas businesses. However, recent judgments of the European Court of Justice indicate that the UK law which blocked VAT recovery is ultra vires European law.
HM Revenue & Customs (HMRC) also introduced a block on the recovery of VAT on the costs of domestic accommodation provided to directors, even where this was provided as an alternative to providing hotel accommodation when on business trips. Again, this blocking appears to be beyond their powers. Similarly, VAT on hospitality incurred and provided to clients purely for business purposes – and not for the purpose of entertaining them – has been blocked by reason of it being included within a legal definition of “business entertainment”. The European Court has cast doubt on the validity of this definition.
Although HMRC has yet to comment on the judgments in question, early in 2008 it issued a general invitation for businesses to claim back any VAT which they may have overpaid during the period from 1 April 1973 to 30 April 1997. This resulted from another judgment – one of the House of Lords – which ruled that HMRC had acted unlawfully in the way it had imposed the three year cap on claims for overpaid VAT.
The rush is due to the fact that claims for repayments of VAT – howsoever the claims may arise – must be quantified and lodged with HMRC by 31 March 2009 at the latest.
Subject to the outcome of other ongoing litigation, claims for periods after 30 April 1997 are limited to the VAT which has been overpaid during the last three years. Accordingly, the sooner your claim is submitted, the more VAT your business could potentially recover.
Even if accounting records are not available, claims can still be lodged to HMRC on an estimated basis.
If you require assistance in preparing a claim on an estimated basis, or with submitting a claim before 31 March 2009 for a competitive price, please contact us.
You can, of course, make contributions into your SIPP by monetary contributions, but this is not always convenient. That is why we advise on “in specie” contributions.
This means that you can boost your pension even if you do not have available cash, using various forms of assets such as shares and other investments or commercial property.
Contributions made in the form of assets are usually allowable against tax and can be made by you or even an employer as there is no longer any prohibition on associated party transactions. The benefit of this option is that the assets remain within your control but are sheltered against future liability to tax on capital gains or rental income. In addition up to 40% tax relief on the contribution could be obtained.
Please note that the usual contributions limit will continue to apply, so personal contributions are limited to 100% of salary/self employed earnings.
It is also possible that stamp duty and capital gains tax could apply on the “disposal” of the asset to your SIPP, depending on your circumstances. BDO Stoy Hayward can offer advice on potential savings.
Be aware, not all SIPP providers allow “in specie” contributions. BDO Stoy Hayward have a panel of suitable providers specialising in this area.
Contributing a Property
Mr & Mrs P own a commercial property jointly valued at £250,000. The property was purchased for this amount a few years ago and the value is currently showing no capital gain.
Mr P is a high earner with approximately £200,000 of earnings in the current tax year. He would like to consider contributing his share of the property as an “in specie” pension contribution. This would work in practice as follows:
£ |
|
| Mr P’s 50% share of contribution of property | 125,000 |
| Basic rate of tax relief reclaimed by SIPP | 31,250 |
| Gross contributions | 156,250 |
| Higher rate of tax reclaimed via tax return | 21,250 |
 |
|
62,500 |
As you see from the above example the SIPP is able to reclaim tax relief of £31,250 and a further £31,250 is deducted from Mr P’s January income tax payment.
Furthermore, any future rent from or growth in value of the property will be sheltered from income tax and capital gains tax respectively.
Please note that properties of a higher value can also be contributed with existing bank debt, subject to bank approval.
For further information please contact our Wealth Management department.
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Alternatively you can contact Donna Hand on 028 9043 9009 or email donna.hand@bdo.co.uk
please do not hesitate to contact us.
| Contact Details: | ||||||
| For further information on any of our services please contact: | ||||||
| Peter Burnside Head of Tax peter.burnside@bdo.co.uk |
Maybeth Shaw Tax Partner maybeth.shaw@bdo.co.uk |
Carol Malcolmson Wealth Management Director carol.malcolmson@bdo.co.uk |
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| Frank McCartan Tax Partner frank.mccartan@bdo.co.uk |
Aileen Paterson Personal Tax Director aileen.paterson@bdo.co.uk |
Maurice Arthur Wealth Management Manager maurice.arthur@bdo.co.uk |
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| Sean Lavery Tax Partner sean.lavery@bdo.co.uk |
Marie Mallon Personal Tax Director marie.mallon@bdo.co.uk |
Peter Wood Senior VAT Manager peter.wood@bdo.co.uk |
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| Alex Ward Wealth Management Partner alex.ward@bdo.co.uk |
Paul McCourt Corporate Tax Director paul.mccourt@bdo.co.uk |
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