Pre Owned Assets
May we remind you that 2005-2006 was the first year that the pre owned asset rules came into effect. To recap; the purpose of the legislation is to tax individuals on the value of assets which they previously owned but then gave away - whilst still retaining some benefit of use at little or no cost.
In these circumstances, the individual will be liable to income tax each year on the benefit of using the pre-owned asset. The amount of the deemed income will be the market rent from the asset (arbitrarily fixed at 5% of the market value for chattels), less any rent actually paid.
The most common, but not the only, case where this additional liability to tax (which must be reported on the 2006 tax return) occurs is where a relative - such as a parent - has provided funds in whole or in part for the purchase of a property (or may have actually provided the property itself) which is now owned and lived in by their offspring - with the parent subsequently also residing therein. If you believe this could affect you then please contact us to enable this issue to be properly addressed.
The Taxman has announced some new ways he will be using to investigate taxpayers (interventions). These ‘interventions’ are currently on a trial basis. At any time you could get a letter or phone call from the Taxman asking you to answer a few questions, arrange a home visit, or possibly agree to changes he has already made to your tax return. Some of the letters include questionnaires to complete, or ask you to look again at your business expenses. All of this is in addition to the normal enquiry system.
In the FAQs on his website he says of interventions that; "We expect that the area we are looking at can be easily resolved without an accountant".
The implication in these letters and phone calls is that you've got something wrong - so there is more tax to pay! If you are contacted by the Taxman, please tell us as soon as possible - don't be drawn into agreeing anything over the phone. At present his informal requests in letters and phone calls do not have legal backing. If you don't assist him he will either back-off or he will use his existing legal powers to start a formal full investigation. This is not a bad thing as in doing so you have a corresponding legal recourse (appeal system) if he gets things wrong.
If you do decide to answer the Taxman's questions, but find you are discussing issues you don't fully understand, you can pull out at anytime. Just tell the Taxman you don't wish to continue with the voluntary trial and suggest he contact us direct.
Following the Carter review conducted earlier this year it is apparent that all forms of self assessment filing look set to change from 2008, with the intention that by 2010 most, if not all, taxation forms will be required to be filed electronically. This will apply to all the taxes ie VAT, Payroll, Personal and Corporation tax returns. We, as a practice, are registered with H M Customs and Excise authorising us to submit such documentation on behalf of our clients in this manner. In fact all Payroll and Personal Tax Returns completed by us on behalf of clients are already submitted in this way – as are a number of VAT Returns. If you would like us to assist you in this respect, please contact us to discuss the issues involved.
In addition it is anticipated that all tax payments will also be required to be made by electronic means.
Although it is unlikely that the Inland Revenue will be able to meet the targets set; the changes are inevitable.