Hornbeam Highlights 39

June 2010

Having a mid term budget makes it very hard to keep up with the changes, we are therefore pleased to enclose a tax card which summarises the main tax rates and allowances, after George Osborne’s budget of 22 June 2010.

We have tried to think about how this budget might effect you;

1. I am horrified that most of the tax loss from reducing Corporation Tax rates will be made up by reduced rates of capital allowances and reduced annual investment allowance. Across the economy and across our clients, for the next few years a small number of capital intensive businesses are going to suffer much higher taxes to pay for headline tax cuts across the board. This will not encourage investment!
2. The increased rate of VAT is particularly hard on small businesses selling services to the public. We have a number of legal strategies for businesses trying to stay under the registration limit. Also, for a number of small service businesses selling to other businesses, we have been quite successful in using the flat rate scheme to improve profits. Talk to Phil or Andy on 01603 720424 about schemes to make the best use of VAT legislation.
3. There are some interesting changes with regard to pensions; the compulsory purchase of an annuity at 75 is being abolished, which presumably makes pension saving more attractive, and a cap on maximum contributions is being contemplated, which makes large top up payments (by those that can afford it) worth serious consideration.
4. Capital Gains Tax. The increase in the headline rate to 28% ends an exceptionally low rate of tax for buy to let landlords and others. On the other hand the increase in Entrepreneurs relief to £5,000,000 creates an exceptional opportunity for the owners of some larger trading businesses.
5. In general we welcome the increased starting points for Income Tax and Employers National Insurance next year.

Since the last Hornbeam Highlights it has come to our attention that in deciding to defer his state pension a man may affect his wife’s entitlement. In particular she will not be able to claim any state pension based on the husbands contributions, and if she is claiming her own state pension, she will not build up extra state pension or lump sum as a result of the deferral. Watch out for this if you are considering deferring a state pension, it can seriously reduce the economic benefits. For further help and advice contact James Sharpe at Hornbeam.

Our team keep passing exams and we have to expand our practice to accommodate them. Most of our new work comes from recommendations from existing clients, from readers of Hornbeam Highlights. To help you we have enclosed a couple of copies of our leaflet “Why Hornbeam?” which we hope you will:

• Pass to anyone who may be interested in appointing us as their accountant.
• If you have the facility to display a leaflet please do so.

If you would like more leaflets please ask us, we will be delighted to send you more. We can also supply a leaflet dispenser.

We would also be delighted to have a referral from your website and would be happy to talk to anyone about a mutual referral system.

An old Friend of Hornbeam, Peter Bailes, has recently established a branch of HR Dept in East Anglia. We like a number of things about Peter’s set up and after working closely with him are pleased to commend him to our clients:

• He is a fully qualified fellow of the Chartered Institute of Personnel & Development.
• He is able to access grants for many of the services that he provides. Up to £500 with no contribution from you, or £1500 of HR services for £500 cost.
• Whilst he is able to offer a very reasonably priced retainer service, he is also willing to deal with specific issues on a one-off basis and does not require clients to sign up to long term contracts.

We are pleased to enclose a leaflet from Peter for you to keep safe, but Peter can always be contacted on 0845 863 0652 or peter.bailes@hrdept.co.uk.

We have had the new regime for a year now and thought it time to record some general advice.

Cars still remain penally taxed as benefits for employees – to be avoided in most cases.

For the self-employed and companies that must buy them, cars now attract capital allowances related to emissions:

• Up to 110g/km = 100% first year allowances
• 111g/km to 160g/km = 20% annual allowances
• More than 160g/km = 10% annual allowance.

Disallowances for private mileage remain as before. Advice - Don’t forget that any type of car will obtain a balancing allowance or charge when disposed of. Cars with emissions over 160g/km should be swapped fairly regularly to get the balancing allowance, especially if the sale can take place between group companies.

There is now 100% tax relief for most other capital expenditure (including vans) of up to £100,000 per year (reducing to £25,000 from April 2012); and with vans attracting only modest scale charges for employees and modest add backs for self-employed, they remain very attractive from a tax perspective.

Back to Newsletters