This year’s Budget proposed changes to the regime for tax relief on pension contributions. Essentially the proposal are that from 2011 higher rate tax relief will not be available to those with income over £150,000. To prevent a rush of people making large contributions before 2011 the Budget also proposed some anti-forestalling measures. These effectively capped the amount on which you could get higher rate relief to £20,000 unless you were already making regular contributions of more than that. 

One of the problems with this was that 'regular' meant contributions being paid quarterly or more frequently. As a result many, such as the self employed, who paid annual contributions stood to lose out. It seems that the Government has listened to the arguments and moved their position a little. The Finance Bill has now been amended so that, for infrequent contributions (ie less than quarterly), an average can be taken over the last three tax years subject to a cap of £30,000 instead of £20,000.

The Financial Secretary to the Treasury (Stephen Timms) said in the Parliamentary debate that he would be consulting with the pensions industry about introducing regulations to be more flexible in respect of those who had set up new pension arrangements on or just before Budget day and those who change pension providers and carry forward exactly the same pension arrangements.

It is expected that the Finance Bill will receive Royal Assent later this month.

Barry Hallam is a tax adviser and a Senior Manager at Mercer & Hole. The views given in this blog are personal to the author.

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Today’s Budget saw the publication over a hundred Budget notes, press pelease and other documents. One of these supplementary documents relates to the taxation of Furnished Holiday Lettings (FHL).

Currently, let properties in the UK, which fulfil the conditions, attract a beneficial tax treatment which means that the profits are counted as earnings for pension purposes and losses can be offset against other income.

The Government believes that the fact that this treatment is given to UK properties may not be compliant with European Law and so have decided that this should be repealed with effect from 2010/2011.

The good news is that the beneficial treatment should be extended to properties within the European Economic Area (EEA) until it is repealed. This means that that it is possible to submit amended tax returns and claim refunds in some cases.

• Returns that are still within the normal time limit for amendment can be made within that time limit.
• HMRC will also accept late amendments to personal tax returns for 2006/2007 and corporation tax returns for periods ending after 31 December 2006.

The deadline for making a late amendment is 31 July 2009.

Comment on this blog in the space provided below. Barry Hallam is a Senior Tax Manager at Mercer & Hole. 

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It was a fairly uneventful VAT budget.

The Chancellor confirmed that the standard rate of VAT will revert back to 17.5% on 1 January 2010 as previously announced. Draft “anti forestalling” legislation has already been published and will be introduced in the Finance Act 2009 to prevent certain exempt businesses from planning to benefit from the rate increase.

There was speculation beforehand that the standard rate of VAT would increase to at least 18.5% and/or that the Chancellor would make use of new powers to extend the reduced rates of VAT but neither of these has happened.

Other VAT changes announced are:

• The annual VAT registration threshold has been increased from £67,000 to £68,000. The annual threshold for deregistration has been increased from £65,000 to £66,000.
• Revised fuel scale charges will apply to VAT returns on or after 1 May 2009.
• VAT exemption will apply to gaming participation fees (bingo and other games of chance) with effect from 27 April 2009.
• The rate of bingo duty will increase to 22% for any accounting period beginning on or after 27 April 2009.
• Other miscellaneous changes to the rules for bingo and games of chance.
• A package of changes to harmonise cross border supplies of goods and services and to reduce fraud, will be introduced on 1 January 2010 as part of an EU wide exercise. The UK has announced new rules in relation to EC Sales Lists for goods and services, overseas VAT refunds and the time and place of supply of certain cross border services.  
• A reduced VAT rate of 5% will apply to bases for child car seats.
• A minor simplification of the option to tax 'permission' rules where previous exempt supplies have been made.

Comment on this blog in the space provided below, or visit my profile for details of how to contact me.

Jane Stacey is a VAT Manager at Mercer & Hole.

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With less than a week until Chancellor Alastair Darling’s second Budget statement the speculation as to what may be announced on Wednesday 22 April 2009 is mounting.

Political  commentators such as www.politics.co.uk suggest that on one hand it should be a neutral Budget, but on the other hand spending is now part of the Government’s DNA. The British Retail Consortium (BRC), is reported in The Telegraph as saying that, “the high street is in need of some retail therapy”.

The Times reports that, “the Budget will make or break renewable energy” and the BBC is giving its own predictions here.

From a tax perspective much has already been announced in respect of the current tax year, but there may be changes announced for later years. Those dealing with the taxation of non-domiciled UK residents would welcome some simplification of the horrendously complex new rule introduced in Mr Darling’s first Budget last year. 

As usual, we will just have to wait and see! 

We will of course be blogging on SME Plus Blog and Tax Plus Blog, providing analysis on the key highlights next Wednesday.    

If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens. 

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HMRC have now published the promised detailed guidance on the taxation of Non Domiciled UK Residents and the Remittance Basis following the changes in last year’s Finance Act 2008. The guidance can be found on the HMRC Website and runs to over 400 pages. It is slightly disconcerting to note, from the introduction to one of the documents, that….

“….extra examples will be added to illustrate the working of the rules in less straightforward circumstances.”

So, we’ve just got the simple stuff for now!

It is expected that there will be some amendments to the rules announced in the forthcoming Budget.

We will be blogging on Tax Plus Blog and SME Plus Blog on Budget day.  If you do not already subscribe to our blogs click here for Tax Plus Blog or here for SME Plus Blog to ensure you get our comment and analysis as and when it happens.

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In advance of this year’s Budget which is expected to make some changes to the complex new rules for Non Domiciled UK Resident individuals (Non Doms), HM Revenue & Customs (HMRC) have announced that most individuals who pay the £30,000 Remittance Basis Charge will be transferred to a specialist office in Nottingham.

HMRC have also announced that they will no longer process Forms DOM1 (withdrawn) or P86 (to be replaced without the domicile questions) which are designed to provide a “ruling” on an individual’s domicile status. In future it is entirely up to an individual to decide their own domicile status when submitting their Self Assessment tax return and HMRC will be able to challenge this via the normal enquiry process. It appears that HMRC may be looking closely at individuals who have lived in the UK for a number of years but still claim to be a Non Dom even though HMRC gave a “ruling” previously. Their website states:

“For example if an individual had advised HMRC on their arrival in England a decade or so ago that they planned to leave the UK after five years but had since married, had a family and decided to make England their permanent home then they will have adopted a domicile of choice within the UK.”

They have also stated that even where a claim for the remittance basis has not been challenged for a particular year

“…..it does not mean HMRC necessarily accepts the individual’s domicile is outside the UK and does not prevent HMRC from later opening an enquiry to consider the domicile status of the individual in relation to that, or any earlier year. “

It is now more important than ever that adequate disclosure is made on the Self Assessment Tax Return to ensure a fighting chance against any challenge by HMRC.

HMRC have promised more detailed guidance “soon” – watch this space

We will be blogging on SME Plus Blog and Tax Plus Blog on Budget day.  If you do not already subscribe to our blogs click here for SME Plus Blog or here for Tax Plus Blog to ensure you get our comment and analysis as and when it happens.

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The Chancellor will make his Budget statement on Wednesday 22 April 2009.  We will be providing analysis of Budget announcements on the day.
 

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This year’s Finance Bill is close to gaining Royal Assent and the Chartered Institute of Taxation (CIOT) has already submitted its “wish list” for the 2009 Budget. One of the suggestions put forward is that income tax and National Insurance Contributions (NIC) should be merged into one tax. Failing that “radical” change, the CIOT suggests that there should be further alignment between the two taxes.

The wish list forms part of a submission by the CIOT to Dave Hartnet the acting head of HM Revenue & Customs. Other items on the wish list include:

• A Statutory Residence Test,
• A small benefits exemption (£25) so that trivial employee benefits are tax free and need not be reported,
• An “Elderly Care Vouchers” exemption based on the current Child Care Vouchers system,
• An extension of the Gift Aid system to include non-UK charities, and a similar extension for inheritance tax purposes, and
• A suggestion that the proposed “income shifting” provisions, currently postponed until next year should be “quietly dropped”.
  

Full details of the CIOT’s submission can be found here

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