Tax News

We have included an article this month which highlights the dangers of missing filing and payment deadlines regarding submission of year-end payroll returns to the Inland Revenue. There are also articles covering Civil Partnerships and Venture Capital Trusts.

Out with the old, in with the new
Welcome to the April newsletter. I hope you it interesting. Many thanks to those of you who have passed on the names of business contacts, friends etc. who require accountaing and tax advice. We are always happy to help them.

The Budget already seems a distant memory but now that the Finance Bill has been published the detail behind the headlines and Chancellor's soundbites is becoming apparent. With the current tax year drawing to a close and the new tax year providing new allowances etc. the Finance bill will provide more information on the closing of loopholes and opportunities to save tax. More on this in future newsletters.

Business Rates
You may be aware that businesses are shortly to receive their business rate bills in the next few days. Recent revaluation of business premises by local authorities has led to a huge increase in rateable values particularly in wealthy areas. This increase disproportionately hits small business owners. However, small firms with a rateable value of less than £10,000 can apply for discounts, up to 50% for values less than £5,000. If you fall into this category I would urge you to take advantage of these rebates.


Venture Capital Trusts
Venture Capital Trusts or VCT's were introduced by the Finance Act 1995 to increase the supply of finance to small unquoted higher risk trading companies.

VCT's are broadly similar to investment trusts - must be listed on the Stock Exchange and can invest up to £1 million per year in each qualifying company in their portfolio.

VCT's offer investors attractive tax concessions.

Subscribers of new shares in VCT's can claim tax relief on their investment provided the shares are held for at least three years.

The rate of income tax relief allowed was increased from 20% to 40% for the two year period starting on the 6 April 2004.

There is a maximum annual investment for which income tax relief is available of £200,000. (This applies from 6 April 2004.)

No income tax is payable on dividends from ordinary shares held in VCT's.

No capital gains tax is payable when individuals dispose of their ordinary shareholdings in VCT's.

Up to the 6 April 2004 it was possible to defer capital gains tax on gains reinvested in VCT shares. From the same date that concession is no longer available.


Payroll - avoiding penalties and interest payments.
April sees the beginning of a hectic period for payroll managers. During April and the following three months a series of deadlines occur regarding returns to be made to the Inland Revenue for the year to 5 April 2005. Late payment of any outstanding tax or national insurance will trigger interest payments, and late filing of returns will in most cases trigger a penalty or fine.

Please note that not only must you file returns on time, but you must also ensure that the returns are completed correctly. A common cause for rejection of the P35 annual payroll return is that P14's show incorrect national insurance numbers. In particular use of TN temporary numbers will be rejected from 2004-2005.

We have set out the major filing and payment events as an expanded tax diary, with a note when interest and penalty payments will be applied.

All dates are 2005:

April 19 - Payments for month 12 PAYE and Class 1 NIC's to be paid by this date. (If you pay your dues electronically this date is extended to the 22 April)

April 19th is also the last day for payment of all outstanding PAYE or Class 1 NIC's for the year to 5 April 2005. (Interest will be charged on any payments received by the Inland Revenue after this date)

May 19 - The payroll form P35 and P14's must be filed by this date - employers late in filing this form may receive a penalty.

May 31 - Last day for giving form P60 to your employees who were employed by you at the 5 April 2005.

July 6 - Last day for giving employees a copy of the form P9D/P11D. These forms set out details of any benefits in kind which you have provided for your employees during the tax year ending 5 April 2005. This is also the last day for filing form P11D(b) with the Revenue - this is the return that sets out the amount of Class 1A NIC's due for the year to 5 April 2005. Penalties will be charged for returns filed after the 19 July.

For those contacts and clients who look after their own year end payroll filing, please get in touch if you would like any practical help or guidance.


Civil Partnerships
From 5 December 2005 same-sex couples can choose to be treated as married couples for tax purposes.

If an election is made under the provisions of the Civil Partnership Act 2004 same sex couples will achieve a legal status to be known as a Civil Partnership.

Essentially the parties to a Civil Partnership will benefit, or suffer, from the following married couple tax advantages and disadvantages.

(Bullet points prefixed by "-" denotes a disadvantage, prefixed by "+" denotes an advantage)

Capital Gains Tax.
- partners will qualify for just one principal private residence.
+ no gain no loss treatment on disposals between partners of chargeable assets.

Inheritance Tax.
+ partners will qualify for a spousal exemption - transfers of property from one partner to the other on the first death will be totally exempt for Inheritance Tax purposes.

Settlements.
- partners will be subject to a tax charge if they try and transfer income from a higher rate taxpayer to a lower rate taxpayer.

Stamp Duty and Stamp Duty Land Tax
+ partners who dissolve their Civil Partnership will qualify for the exemption offered to married couples when a marriage is dissolved. i.e. certain transfers of shares and property can be made without a stamp duty or stamp duty land tax charge.

Child Tax Credit.
- same-sex couples can presently base a child tax credit application on the sole income of the applying partner. If the same couple make an election for a civil partnership to apply, both incomes will be taken into account in a child tax credit application.

Payroll - electronic filing year end 5 April 2005
Please don't forget that employers with more than 250 employees must file their year end payroll returns electronically.

Smaller employees with less than 50 employees have until the year ending 5 April 2010 to sort out electronic filing.

There are financial incentives which the Revenue are offering to firms who register early for e-filing.

Interestingly there is a provision in the 2005 budget which denies these incentive payments to firms who are simply registering to claim the cash payment. We shall have to see how these restrictions are applied in practice!

Visit our Personal and Business Tax Accountancy section if you need any help with your online filing.

Tax Diary April/May 2005

1 April 2005 - Due date for corporation tax due for the year ending 30 June 2004.

19 April 2005 - Last date to pay any outstanding PAYE and Class 1 NICs for 2004/05 to the Revenue. (If you pay your tax electronically the due date is 22 April 2005).

1 May 2005 - Due date for corporation tax due for the year ending 31 July 2004.

19 May 2005 - PAYE and NIC deductions due for month ending 5 May 2005. (If you pay your tax electronically the due date is 22 May 2005)

31 May 2005 - Ensure all employees have been given their P60s.

Quick links: Personal and Business Tax Accountancy