Buried in one of the consultative documents that accompanied the Pre-Budget Report are proposals to charge penalties of up to 200% in respect of offshore bank accounts. This is a clear message from the Government that those with undisclosed tax liabilities should consider taking advantage of either the New Disclosure Opportunity or the Liechtenstein Disclosure Facility.

Consideration to a disclosure must be given to this now as one of the deadlines for telling HMRC that you intend making a disclosure is 4 January 2010. Further details can be found here.

Barry Hallam is a senior manager at Mercer & Hole. If you would like to discuss the contents of this post with Barry you can call him on 020 7353 1597.

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Until this morning, in common with many of my colleagues, I was anticipating a comprehensive Pre-Budget Report which would set out Labour's stall in advance of the General Election next year. We were let down. The opportunity which Darling and the Labour Party had to establish the fiscal foundations for a potential fourth term has not been taken.

I had foreseen an increase in capital gains tax and changes to the main inheritance tax reliefs, but this did not happen.

Darling and Labour have played safe so as not to alienate the electorate.

What we have instead is a reduction in bingo duty and a tax on bankers' bonuses which may well prove ineffective and not make the desired contribution to our debt reduction. It has been a wasted opportunity.

Commentary from Robert Jamieson, partner with Mercer & Hole and past President of the Chartered Institute of Taxation.

The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Robert you can contact him at robertjamieson@mercerhole.co.uk or call 020 7353 1597.

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The Chancellor has confirmed that the furnished holiday lettings rules will be withdrawn from 2010/11.

This means that a furnished holiday let will be treated as any other property business. Some of the tax consequences of this will include the following issues:

• Losses incurred before 6 April 2010 that have not been relieved at that date will be treated as losses from a property business. These will then only be available to set against future profits of the property business as will any future losses.
• Capital allowances will not be available for expenditure incurred on or after 6 April 2010 on plant and machinery for use within the let property.
• The business is no longer a trade for capital gains purposes which will result in the potential loss of some valuable capital gains reliefs.
• From 6 April 2010 income from letting furnished holiday accommodation will not be relevant UK earnings for pension relief purposes. 

Liz Cuthbertson is a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Liz you can contact her at lizcuthbertson@mercerhole.co.uk or call 020 7353 1597.

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It had already been announced that there would be a half percent increase in National Insurance Contributions (NIC) from next April. Today’s Pre-Budget Report has announced that there will be a further half percent increase from April 2011. This means that from April 2011 the main rate for employees will be 12% and for the self-employed will be 9%. The rate of employer contributions will be 13.8%.

To compensate lower earners the starting threshold will be raised by £570.

Costs are going up more steeply than otherwise expected from April 2011.  The rates for the self-employed, employees and employers will all rise by 1% (previously expected to be at 0.5%).  This will mean an effective highest rate of tax of 52%

Barry Hallam is a senior manager at Mercer & Hole. If you would like to discuss the contents of this post with Barry you can call him on 020 7353 1597. 

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The Chancellor has announced in his Pre-Budget Report the expected measures to claw-back some of the large bankers’ bonuses for the tax payer.  The key details are as follows:

• Legislation in Finance Bill 2010 will introduce a new bank payroll tax. This will be set at 50%.
• It will be payable by a bank, on the amount of a bonus to which a banking employee is entitled, to the extent that the bonus exceeds £25,000.
• A bank will also be liable to the bank payroll tax where the bonus entitlement arises in respect of services performed for the bank regardless of who awards the bonus.
• The bank payroll tax will have effect from the time of the announcement on 9 December 2009 until 5 April 2010 for all discretionary and contractual bonus awards.
• There is an exception for contractual bonus entitlements where the payer has no discretion as to the amount of the bonus because of a contractual obligation existing at the time of the Chancellor’s announcement.

Barry Hallam is a senior manager at Mercer & Hole. If you would like to discuss the contents of this post with Barry you can call him on 020 7353 1597. 

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The Chancellor has just sat down after presenting his 2009 Pre-Budget Report. We are awaiting the details being released on the Treasury website but the key points from his speech for private clients appear to be:

• VAT will return to 17.5% on 1 January 2010
• Stamp Duty holiday will end on 1 January
• The time to pay scheme will continue for as long as needed
• State pensions will rise by 2.5% from next April. Child benefit will also rise
• A new boiler scrapage scheme for 125,000 households plus extra energy efficiency help
• 50p tax on landlines to finance superfast broadband
• 50% one off levy on bankers’ bonuses over £25,000 paid by the bank in addition to the tax paid by the employee
• Freezing of Inheritance Tax Nil Rate band at £325,000
• Freezing higher rate tax threshold
• Anti avoidance measures following on from the information received from offshore banks
• National Insurance starting threshold raised.

As is invariably the case there will be more important changes buried in the detail of the documentation. More information will be posted during the afternoon.

Barry Hallam is a senior manager at Mercer & Hole. If you would like to discuss the contents of this post with Barry you can call him on 020 7353 1597. 

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The Chancellor has just announced that the inheritance tax threshold will be frozen at £325,000 until 2011.

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The Chancellor announces that a one off 50% supertax will be imposesd on bankers bonuses over £25,000.

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The Chancellor tells us he is determined to support growth, predicting 1% growth in 2010 and 3.5% in 2011 and 2012.
 

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Chancellor Alistair Darling confirms that the VAT rate will return to 17.5% on the 1 January 2010 as anticipated.

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All eyes will be on Chancellor Alistair Darling in the House of Commons as he delivers his Pre-Budget Report 2009 at 12.30pm on Wednesday 9 December 2009.  The Pre-Budget Report comes as Britain struggles to emerge from recession and a General Election nears.

Stay in touch with our blogs after the Chancellor’s speech to find out the views of Mercer & Hole’s experts.

We will be blogging on SME Plus Blog and Tax Plus Blog on Pre-Budget Report 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.

Lisa Spearman is a partner at Mercer & Hole. If you would like to discuss the contents of this post with Lisa you can call her on 020 7353 1597. 

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Although I think the 2009 Pre-Budget Report will not contain any shockers ahead of the General Election next year, I do feel that the tax take has to be increased somehow and this could lead to 'tweaks'. My own 2009 Pre-Budget Report prediction could be a change to the tax rule on 'flipping second homes' to mitigate Capital Gains Tax (CGT). This rule was widely publicised in the press earlier this year, following the criticism of MPs and their expenses, but actually is available to everyone with two or more homes and not just MPs!

Broadly speaking, a main residence (sometimes referred to as a Principle Private Residence) is CGT-free on a disposal provided the property was not purchased for the sole reason of making a profit and the dwelling was an individual's only or main residence throughout the period of ownership. Exemption also extends to gardens and grounds of up to half an hectare. The last 36 months are also always exempt. All fine so far but what happens where you have two or more main residences? The rules allow you to secure at least the last 36 months of any gain tax-free by flipping your main residence election to your second home for 1 month. You lose the benefit of 1 month of relief on one property but gain 37 months relief on another. This can represent a real tax saving.

If another residence is acquired, you have an opportunity to make an election for which property you wish to be covered for which periods otherwise the Revenue will choose for you. The election must be made within two years of the date the new situation arose and if one house is replaced then a new two year period begins. You must actually reside in both properties, for some time at least, and any period of ownership not elected as the main residence will be chargeable to CGT. There are also rules relating to the fact that a husband and wife, or civil partnership, can only have one main residence between them.

Please get in touch if you would like to know more about whether you can take advantage of these rules.

We will be blogging on SME Plus Blog and Tax Plus Blog on Pre-Budget Report 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.

Helen Mckie is a partner at Mercer & Hole. The views given in this blog are personal to the author, if you would like to discuss the contents of this post with Helen you can call her on 01727 869141.

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