FEBRUARY 2010

TAX HIKES, ELECTIONS AND E-FILING FOR VAT

We live in interesting times.  Two prominent Labour ministers, Lord Myners and Lord Mandelson (we do appear to be short of elected ministers, don't we?), both say that the 50% rate should be withdrawn as early as possible but George Osborne refuses to say he will consider reversing it.....I digress, but the hot topic just now is the election ahead of us.  The question is, just what tax policies do the Tories have?  Perhaps that is unfair but we know what we can expect from Darling-  more quiet rises slipped into the Budget and PBR - mainly to gain political momentum to be seen to "soak the rich" rather than actually balance the books.  Perhaps that is unfair, but on track record it's true.  The 50% rate, for example, will yield little.  When the higher rate was reduced from 60% to 40%, receipts rose - as people become more relaxed about declaring higher income to the UK taxman.  I just don't "get it" - we've come a long way since the 80s and 90s - where wealth creation was seen as a core part of the UK success story.  We appear to once again have a Government that is determined to make us all equal citizens and to impoverish the nation by driving the wealth of the City of London overseas - our last great cash cow is to be sentenced to a long, possibly permanent, exile in some far flung former colony.

What does this mean for those of us in Scotland?  Possibly quite a lot - as it seems that a "bonfire of the quangos" is looming and if my own suspicions are correct, such measures will affect Scotland quite badly in terms of jobs-  we being more dependent upon state activity than those in "the other place" south of Gretna.

THP - "TAX HEALTH PLAN"

Some of you may have spotted the HMRC has launched a partial amnesty for medical practitioners who have sins to report.  In essence HMRC have information that suggests some naughty doctors don't report certain income from insurers and the like on their tax returns, or they over-claim for travel to and fro their place of work (commuting) because they have more than one job (e.g. that journey to the private clinic for the evening session).  Doctors and Dentists might want to have a read of the summary in the documents section of our website (look to the right hand menu on our web) or might type "HMRC THP" into google - or call us.

VAT RETURNS ON LINE

It's been mentioned here before - but paper vat returns are to be phased out  - guidance from HMRC is here-

http://www.hmrc.gov.uk/VAT/index.htm

TAX CODING NOTICES

Your tax code determines how much tax comes off your payslip (employees/directors).  Many of those issued recently for 10/11 tax year are WRONG.  Contact us if you think yours looks incorrect.

THE 50% SUPER-TAX and PENSION CHANGES

A small number of taxpayers will be "soaked" at 50% tax from 6/4/10.  If you are worried about this (income over 150K) or the loss of personal allowances (100k pa) then why not come to our seminar on 3rd March?  It's free, starts after work and is held in the Reid Kerr lecture hall in the "other side" of our office building.  I'll be talking (always!) and Kate Brown, my head of financial services will provide some ideas on using pensions in the current climate.  We do anticipate some clients having to take urgent steps to ensure they accelerate dividends etc. before the end of the tax year.

Email margaret.mackenzie@milnecraig.co.uk to reserve your place.

END OF TAX YEAR

If you think this blog is dull.... have a look in the documents at our rather more glossy tax year end review.  Actually, it is rather a snazzy document (if I say so) and well worth the colour ink on your printer to run it off. 

PAID YOUR TAX ?

Most individuals have some tax to pay at 31st January (personal) and companies have their annual corporation tax bill at varying dates.  HMRC are still offering a "Business Support Service"  - a special team who will usually agree a payment plan if you are struggling with a deadline.

AND FINALLY.....

It remains my view (and that of others) that the current 18% capital gains tax rate is too low if income tax is 40%-50%.  Indeed, for entrepreneurs, the 10% rate on the first £1M of gains on trading business disposals / qualifying shares seems ludicrously generous.  Darling left this alone last time - but I do wonder if one final "nip and tuck" on this pre-election might be in his sights-  after all, he can dress it up with some complicated (always) rules which would ensure the wealthy with large gains pay a higher rate and the 10%/18% remains for those at the lower end of our food chain.  So, if you've a gain looming - think about the Budget (date not set). 

And it Darling doesn't change capital gains tax, Osborne surely will - if he is elected!  My top tips for the Osborne emergency budget have to be a stiff hike in the VAT rate pre-announced for 2011, a possible temporary rise in the basic rate of tax (some honesty -  rather than endless National Insurance hikes-  same effect!), a temporary rise in the upper rate (45%?) and the announcement of a complete replacement of the "discredited tax credits" - they leak £2Bn a year in over-payments - surely that's reason enough to replace them.  Corporation tax to stay the same overall but with some changes in reliefs and allowances (restrict the use of old losses further maybe - to ensure corporation tax starts flowing quickly once profits return!).   Just thinking out loud.

As ever, this blog is my own commentary, not that of my fellow directors or Milne Craig-  take advice if you are thinking of using the comments in any way.

Regards

Donald Parbrook

donald.parbrook@milnecraig.co.uk

0141 887 7811