Spring 2007 – Pre-Tax Year End Matters

Welcome to our latest quarterly newsletter which contains items of news affecting all our clients and this issue in particular considers some pre-tax year end matters.

ISA’s and Other Tax Efficient Investments

If you have not made full use of your ISA, then this should be done before 5 April. The maximum investment in an ISA is £7,000 of which up to £3,000 may be in cash, £3,000 in Stocks and Shares and the rest in Life Insurance. Any income earned in ISA's is free from income tax.

For children or grandchildren aged 16-18 years consider funding a cash only ISA up to a maximum of £3,000. If you wish to make tax efficient investments beyond ISA’s, then consider National Savings or Premium Bonds.

Inheritance Tax

Each tax year, individuals can make gifts of up to £3,000 out of their Estate without incurring any potential charge to inheritance tax. In addition, if you have any children that are going to be married, then there is the opportunity to make a gift of up to £5,000 in respect of their wedding.

Pensions

Higher rate taxpayers looking to reduce their 2006/2007 tax liability should consider making additional contributions into a pension.

Any contribution will extend the amount of income taxable at the basic rate of 22% rather than the higher rate of 40%.

Persons aged 55 and over can also potentially have 25% of any contribution repaid to them as a tax-free lump sum.

To qualify for tax relief against 2006/2007 income, contributions must be paid by 5 April 2007.

Capital Allowances

Any businesses with a year end of 31 March or 5 April that are looking to reduce the tax liability on this year's profit, should consider bringing forward any plans they have for capital expenditure.

Small businesses, i.e. businesses with a turnover up to £5.6M can qualify for up to 50% first year tax relief on capital expenditure. The assets need to be acquired before the business reaches its accounting year end. For details of the specific rates of tax relief available for any expenditure you may have in mind, please contact us for further details.

Benefits-in-Kind and Company Vans

From 6 April 2007 any employee who is taxable for private use of a van will be taxable on an increased amount of £3,000 rather than the current £500 irrespective of the van’s age.

There will also be a fuel benefit charge of £500 where the van is to be used privately. However, under the new rules there will be no charge to taxation unless an employee makes significant personal use of the van.

For example, if a van is made available to an employee who takes it home each night/weekend but does not use it otherwise, then there is no van benefit charge. However, if the employee takes the van home and uses it for private purposes, then the van benefit will be £3,000.

Smoking in the workplace

The Government has announced that with effect from 1 July 2007, smoking will be officially banned in all workplaces and enclosed public places.

All UK offices, factories, shops, pubs, restaurants and membership clubs will become smoke-free.

It will also be illegal, under the new Health Act 2006, for employees to smoke in work vehicles used by more than one person.

Companies Act 2006

With effect from 1 January 2007, under new regulations, all companies and LLPs must include the following information on websites, electronic communications and order forms, or risk a fine:-

• Full corporate name
• Place of registration
• Registered number
• Registered office address

Electronic communications include faxes, emails and text messages if sent in a business context.

For websites, the specified information does not need to appear on every page but it is recommend that it should be included in the 'Legal information' or 'About us' section.

Increase to annual leave entitlement

The Government has announced its proposals to increase the minimum holiday entitlement and proposes to increase the current statutory minimum holiday entitlement from 4 weeks to 28 days. Currently the minimum entitlement is 4 weeks including public bank holidays. The increase to 28 days means that the minimum will become 4 weeks plus public bank holidays.

It is proposed that holiday entitlement for employees will be increased in two stages, rising to 24 days on 1 October 2007 and from 24 to 28 days on 1 October 2008. There is to be further public consultation in April 2007.

Key Dates

Do not forget the following deadlines in order to avoid any unnecessary penalties:-

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 therein. 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 procedures, please contact Alan Cohen or Darren Swann as follows:-

Tel: 0161 249 5040 Fax: 0161 448 9287
Email - alanc@leonherman.co.uk or darrens@leonherman.co.uk