MORE OF THE SAME?

Some of our clients might be wondering how I have managed to let more than a month elapse without updating my tax blog.  Well, there were various reasons for this including a busy period of work, some 'flu and a desire to see various final documents from the HMRC on the changes to capital gains and other matters before writing more.

For those wanting to catch up on some of the more serious technical points I do urge you to look at our new glossy quarterly update - see link - it's also on the right hand side of our web page menus under Quarterly Updates.  These updates are rather generic i.e. lots of good accountants source these updates from some major tax publishers-  but they are none the worse for it - and they might be what a lot of readers expect-  worth a skim.  I don't do it in paper any more - hope you agree that would be overkill -

http://www.milnecraig.co.uk/view_documents.asp?fld_document_section_ID=7

MAIN NEWS IN TAX

Aside from the continued huge deficit in receipts facing the Chancellor (lack of tax income) ahead of the Budget, the highlights have to be -

1. As expected, from 6th April all capital gains are to be taxed at 18% except for the first £1M when you sell up in a trading business which is still at 10% - the change isn't quite as simple as it sounds so take advice if you wish!  BUT there is still no relief for inflation so although 18% sounds good, it is 18% of the pure gain i.e. over time the effective rate grows as you get no discount for the effect of inflation. 

2. Non-domiciled individuals are being attacked  - from April it looks like an individual with birth/strong foreign connections who might previously have been able to pay tax only on their UK sourced income and gains will have to pay tax on global income and gains OR face a £30,000 per annum charge.  This change will affect many immigrants who have modest overseas savings and assets not just the "City Bankers" from abroad. It is feared this additional charge/obligation will make the City unattractive for immigration by reference to other financial centres.

3. Income Splitting - the law is still not finalised for sure but it looks like you won't be able to divert or pay profits/dividends to a spouse or other family member to use up their lower rate tax bands.  This area is of real interest to family business and is a huge problem for many people - it confirms my own view that this Government's view of the "Fair" or "right" amount of tax is the maximum under any structure - the woolly new proposed rules confirm they WANT subjective law so that intent, motivation etc. can be brought into the Revenue's practical tools i.e. they can pressure more funds from the unwary.

4. Capital Allowances (tax depreciation) for trading businesses is changing too.

In summary, the Budget may clarify much but the Government is busy closing more and more doors.  Clients are consistently telling us that the UK is no longer a "good place to do business" - to be fair that's a theme that's run for a while - there's so much regulation with employment law and tax being two massive headache areas.  The system appears to favour the large corporates somewhat - those with profits that can cover the admin overhead to meet the rules. 

Without wishing to divert myself towards a rant it seems that the consensus is Scottish property growth is slowing with only the more desirable catchments recovering quickly, bank credit is tightening and that the picture for tax and the economy is gloomy.  This is probably the right time for clients to think hard about debt levels and future profitability - as ever, we're here to help as much as we can.

No March blog is complete without a couple of end points on tax -

1. Think about extra pension contributions and ISAs NOW!  - it's "use it or lose it" now  - so make your savings plans now so Kate Brown and her team here can help you well in advance of 5th April.  Call Kate Brown on 0141 887 7811 !

2. Budget Day is 12th March (1230pm) - tune in to hear more bad news sound like good news (with a pat on the back for a good job well done) but....then open the HM Treasury website afterwards and read the press releases for the full horror story of what lies ahead!  I have the usual tips - expect more taxes aimed at Carbon Dioxide output and alcohol I think - the latter to balance the effect of the longer drinking hours in England.  However, in the usual fashion of politicians don't expect any hard hitting CO2 reduction measures for the airlines or shipping - so, basically, you should buy a smaller car and a windmill for your garden becuase it makes sense to play the game - but don't think it'll save the planet - until we cut down on aircraft, power station and shipping CO2 - AND tackle the rapid CO2 growth in Asia - we're just changing our UK tax system to collect tax on the wealthy via motoring costs and nothing more.  Sorry if that is cynical - there are all sorts of very good and valid reasons not to drive a big car and leave your heating up high when you are out but saving the planet is, very worryingly, an unlikely byproduct.

3. CIS.  We note that HMRC are now applying their new statutory rules  - if you are a Construction Industry Contractor with a gross payment facility they will remove it if you are late with your PAYE by either more than 14 days OR more than 3 times within a 14 day lateness.  So, stay up to date if your gross payment facility is important!  The test used to be guidance in nature-  it's now in the law - so stay in line or lose out - it's a draconian bit of law and a nasty thing to see in action  -if your PAYE is 15 days late once - the gross payment system is gone!

There we go, rant over.  I'll email my next blog on the 13th of March...not long!

Regards

Donald

***These comments are the personal comments of the tax partner, Donald Parbrook, and are not necessarily the view of the firm (Milne Craig and Milne Craig Limited).  If you require tax advice please contact your usual contact at the office or call Donald on 0141 887 7811.***