Changes to VAT fuel scale charges
01/06/2007
The basis of the VAT private use charge changes from engine size to CO2 emissions for accounting periods starting after 1 May.

New CIS scheme
09/05/2007
The Construction Industry Scheme changed on 6 April 2007. One of the key features of the new scheme is the verification process for subcontractors which replaces the old CIS registration cards and tax certificates.

From 6 April 2007 before you pay your subcontractors you will need to contact HMRC to check the employment status (either by telephone or online [if you are registered])to

• check that the subcontractor is registered for CIS and
• find out whether you should pay them gross or net

There are three possible rates of tax

• Registered self employed – can be paid gross without deduction of tax
• Registered self employed – deduct tax at 20%
• Unregistered self employed – deduct tax at 30%

Subcontractors must be provided with payslips each month.

Monthly returns need to be completed for all subcontractors by the 19th of the following month detailing the employment status and all payments made. All tax deducted should be paid to HMRC at the same time.
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2008 budget highlights

• The basic personal allowance is increased to £5,435 (£104.52 per week) from £5,225.
• The 10% starting rate has been abolished. Basic rate tax is now 20%.
• There will be a new 10% starting rate for savings income only, with a limit of £2,320.
• Higher rate tax of 40% applies to those with taxable income exceeding £36,000 i.e. gross income above £41,435
• The capital gains tax annual exemption is raised to £9,600
• The inheritance tax threshold is raised to £312,000 and rises to £325,000 by 6 April 2009
• Employer national insurance contributions are 12.8% on earnings above £5,460 per annum. (For more information, see National insurance contributions in our Fact sheets)
• The VAT threshold is increased to £67,000
• An annual investment allowance of £50,000 pa is available to small companies
• With effect from 1 April 2008 Corporation tax rises to 21% on all profits up to £300,000 and increases further to 22% on 1 April 2009. Despite these changes there can still be advantages in incorporating. (For more information, see Business incorporation in our Fact sheets). The mainstream rate of Corporation Tax is cut to 28% with effect from 1 April 2008.

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VAT Cash Accounting
29/03/2004
Do not forget that the annual turnover limit for accounting for VAT on a receipts basis rather than an invoice basis is now £660,000.
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£825 tax free
21/11/2003
You could qualify for up to £825 tax free if you start to file your PAYE end of year returns (P35 and P14) online before 2010.

File your 2004.2005 return online and get £250.
File your 2005.2006 return online and get £250.
File your 2006.2007 return online and get £150.
File your 2007.2008 return online and get £100.
File your 2008.2009 return online and get £75.
File online for all 5 years to get maximum £825.

Employers having less than 50 employees do not have to file online until 2009.2010.
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Late payment law
22/05/2003
As of 7 August 2002 all business can claim statutory interest in respect of any commercial debts which remain unpaid by the contractually agreed date, or (in the absence of an agreed date) within 30 days. Businesses can also claim recovery costs incurred in claiming the interest. Debts of less than £100,000 can be claimed electronically via www.courtservice.gov.uk.

The statutory interest rate is 8%, this is added to the banks base rate to give the chargeable interest rate. Interest is charged on the gross (VAT inclusive) amount of the debt, but no VAT is paid on the interest.

Example. Base rate is 4%. Debt is £800 plus VAT £140 = £940. If the debt is 90 days late then the interest charge is £940 x 12% x 90/365 = £27.81.

Personal service companies (IR35)
22/05/2003
The IR35 regulations have now been in place for 3 years. This has a major impact on tax and national insurance liabilities of many one man companies. The administration procedures are complex and the tax year end timescale very short.

Fuel benefit charges from 2003.2004
06/04/2003
New fuel benefit charges came into effect on 6 April 2003.

The new charge replaces the old fuel scale charge and applies where an employee has a company car and is supplied with petrol for private use.

The new charge, will, like the company car benefit charge, be based on the CO2 emissions of the vehicle. The same percentage figure will be used for both purposes.

To calculate the benefit the percentage will be multiplied against a set figure for the year. For 2003.2004 the set figure will be £14,400.

For example, a car has CO2 emissions of 195g/km. The percentage used to calculate the car benefit in kind for 2003.2004 is 23%. The fuel scale charge will be £14,400 x 23% = £3,312. (This compares with the old rates of £2,850 for cars with an engine size of between 1400 and 2000cc and £4,200 for cars with an engine size over 2000cc.)

The £14,400 will be applied pro-rata where the provision of private fuel starts / ends part way through a tax year.
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VAT Relief on Bad Debts
02/09/2002
VAT relief is available on bad debts but there are a number of conditions that must be met if Customs are to accept the claim.

The debt must be unpaid for at least 6 months

The debt must have been transferred out of the day to day debtors ledger into a separate bad debt account

As of 1 January 2003 it will no longer be a requirement to send a notice of intent to claim to the customer. However, the customer will have to repay the input VAT he has claimed, if he has not paid the supplier within six months of the date of supply.
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Private petrol tax charge
17/05/2002
The private fuel benefit tax charge has increased substantially in recent years. If your company increases your salary by the amount of your private fuel (adjusted for national insurance), you could be better off paying for your own private fuel and saving the tax charge. You need to do your sums.
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National insurance
17/05/2002
Employee national insurance is charged on the increment over £89 per week rather than the total. In the past many business proprietors have paid their spouse a wage just under the national insurance threshold. Now by paying a wage of £90 per week (the tax threshold) the national insurance cost is only £0.33 per week and a national insurance credit for pension purposes is created. Remember that the wage payment must be for a legitimate business employment and commercially realistic (and not contravene the minimum wage legislation). You will also need to ensure that there is a PAYE scheme in place

For the self-employed the Class 2 rate is now £2.00 per week and the Class 4 rate is 8% starting at profits of £4,615.

Pension premium relief
18/12/2001
For basic rate tax payers there will be no more relief in the self assessment calculation for 2001.02 due 31 January 2003 (although the premiums must still be entered on the SA return). This means that, other things being equal, the eventual tax liability will be greater than the payments on account.