In his pre-budget report on 5 December the Chancellor of the Exchequer, Gordon Brown announced some measures that may be of relevance to you.
Direct tax anti-avoidance measures
A package of measures aimed at tackling tax fraud and avoidance was announced by the Chancellor, as part of his aim to wipe out tax avoidance schemes. The new measures have been devised as a result of schemes identified by the FA 2004 disclosure rules.
This is unlikely to have any major affect on you or your business other than the possibility of an increase in the number of tax investigations undertaken by Revenue and Customs. We would remind you that we are able to offer insurance to cover the costs of such investigations if required.
Pensions – The new rules and ‘A Day’ (6 April 2006)
The chancellor has now prohibited investment in residential property, art and other collections such as fine wines and antiques through any pension scheme that is self-directed.
Again it is unlikely these recent changes will affect you, however it serves as a timely reminder to see your financial advisors in good time before the new pension rules come into force.
As we foresaw, the 0% corporation tax starter rate for companies with under £10,000 annual profits is to go. However some compensation is intended via higher capital allowance rates.
This change puts us back to where we were a few years ago. Whilst this slight tax advantage enjoyed by some smaller companies has now been removed, the tax payable by small limited companies is still significantly lower than under any other business structure.
Changes to tax credit limits
People who claim tax credits will soon be able to see their incomes rise by £25,000 (previously £2,500) before they have to tell the government of the change. The new limit should cover 95% of all pay increases currently experienced by claimants.
The Revenue & Customs will also put automatic limits on the amounts which can be recovered if there has been an overpayment.
As a matter of interest, the official website for online applications was recently suspended because Revenue & Customs discovered it was being used by criminal gangs to make bogus applications, and the computer firm EDS agreed to pay the government £71 million in compensation for the poor performance of the tax credit computer system it designed.
For all those that the ruling could affect, you are no doubt already aware that Mr & Mrs Jones of Arctic Systems have been successful in the third round of the legal battle with the Inland Revenue over husband and wife dividends. One for the tax payer!! Let's hope it all ends here.