2005 - Festive Season

TIPS FOR THE FESTIVE SEASON

Welcome to our latest quarterly newsletter, may we first of all take this opportunity of wishing all our readers a Happy Christmas and a Prosperous 2006.

As the festive season rapidly approaches, our minds turn towards presents, parties and spending time with family and friends, once again, we are supporting those of us who are not so fortunate. This year, we will be making donations to the Young Carers Initiative which is part of The Children's Society (Charity No. 221124), the Manchester Young Carers Forum (Charity No.1103535) and Streetsmart (Charity No. 1071657).

Taxation of limited companies

In his pre-Budget statement, the Chancellor simplified the system of non-corporate distribution and zero rates of tax for small companies. From 1 April 2006, small companies will pay a flat rate 19% tax on the first £300,000 of profits. Therefore, those companies that were previously making less than £50,000 profit, will no longer enjoy the zero rate of tax on the first £10,000 of profits.

National minimum wage increase

From 1 October 2005, the National Minimum Wage increased from £4.85 to £5.05/hour. For 18-21 year olds, the rate increased from £4.10 to £4.25/hour. The rate for 16 and 17 year old workers is to remain the same at £3/hour.

Construction industry scheme

In our last newsletter, we highlighted the changes that HMRC were planning to make for those involved in the Construction Industry.

These changes were due to come into force from 6 April 2006 but have now been delayed by one year and will not come into force until 6 April 2007.

Changes to new pension rules

In previous issues, we have discussed the pension simplification process that comes into effect from 6 April 2006. In his pre-Budget statement, the Chancellor made an amendment to the new Rules with regards to residential properties.

Whilst it will still be possible to buy residential properties within a pension scheme from next April, such investments will not now attract the normal tax perks of pensions. It is, therefore, unlikely that people would now consider acquiring residential properties within their personal pension schemes. If you need further advice on this issue, we will be more than happy to arrange a meeting with a Pensions Adviser.

New rules for road fuel recovery

New legislation is being introduced affecting all businesses who want to reclaim VAT on road fuel for mileage expenses reimbursed to staff after 1 January 2006. A proper tax document must be held in accordance with the provisions of Notice 700 to support the claim for recovery. The document held in support of the claim for reimbursement should evidence, as a minimum, sufficient fuel purchased to cover the journeys being reimbursed.

Pension contributions before 'A' day

Once the new pension rules come into effect from 6 April 2006, it will no longer be possible to make a contribution and use the carry back facility to get tax relief in previous tax years. For those people with personal pensions, the latest date to pay a contribution and carry back is 31 January 2006, carrying back to the 2004/2005 tax year.

For those people with retirement annuity contracts, the latest date to pay a contribution is 5 April 2006, carrying back to the 2004/2005 tax year.

Clients that have not previously made maximum contributions into their pension schemes and would like to make additional contributions now, should contact us to seek further advice on this matter.

Health & Safety

All businesses that employ 5 or more people, whether incorporated or not, are required by law, to have a Health & Safety Policy that enables the business to meet all Health & Safety Regulations. This is an extremely complex area of law which can lead to businesses suffering large fines or criminal prosecution if they find themselves in default of the law.

We have, therefore, teamed up with Themis, a specialist Health & Safety Company, and are able to provide all our clients a free audit of their health and safety policies. If you would like to take advantage of this opportunity, please contact us to arrange your free assessment.

Staff Bonuses

Bonuses paid to staff, whether in the form of cash or vouchers exchangeable for goods at a named store, are taxable under the normal PAYE system. The only exception to this is Christmas bonuses paid to retired ex-employees which are exempt from PAYE.

Charitable Giving Through Payroll

Under an approved Payroll Giving Scheme, an individual may make charitable donations without limit by deduction from earnings. The employer will withhold sums from gross pay as “donations”. The amount of the donation is allowed as a deduction from gross pay for PAYE purposes and in calculating the individual’s taxable income. A donation made under a Payroll Giving Scheme is not a qualifying donation for Gift Aid purposes.

Whilst all due care and attention has been taken in the preparation of this review, we cannot accept responsibility for loss occasioned by any person acting or refraining from action as a result of material contained in it. There is no substitute for professional advice specifically tailored to your personal circumstances. We can give that advice and welcome the opportunity of assisting you. If you would like to discuss any of the issues raised further, or for us to arrange a review of any of your employment procedures, please contact Alan Cohen or Darren Swann on 0161-249 5040.