Autumn Tax Update 2006
Prepared by Melvyn Gandz FCA
BSG Valentine Chartered Accountants Return to BSG Valentine homepage
Welcome to the latest update report prepared for clients and contacts alike.
The summer may be over but the Inland Revenue (HMRC) will continue with their policy of turning up the heat on taxpayers. HMRC continue to devote more time to Investigate with the express aim of targeting wealthy individuals and companies.
The advent of the Complex Personal Returns team is resulting in greater work for all Accountants in ensuring that clients pay the correct amount of tax following enquiries and that, refunds properly due are obtained.
HMRC are correctly combating aggressive tax schemes but we are very concerned that genuine Investments in structures that result in tax breaks including tax deferrals, completely commercial and non aggressive are receiving attention from HMRC.
In particular the Revenue policy to raise enquiries with the effect of delaying tax refunds that are properly due under the system of self assessment is grossly unfair .
At BSG Valentine we will continue to work with your IFAs and consider all planning structures being mindful of HMRC current practice.
Tax Planning:
Film tax relief is now within the structure of Companies but the previous relief available to Individuals continues for films commencing principal photography by 31/3/06 and completed by 1/1/07 and for films acquired by 1/10/07.So there is some scope for Film investment but product is limited. The Revenue policy on repayments brought out several months ago is having a particular impact on this style of investment. At BSG Valentine we are working with financial advisors and tax specialists where applicable to speed up the Enquiry process with the Inland Revenue.
Clients may therefore be advised to consider Enterprise Investment Scheme (EIS) style film relief and general EIS investments. We are also reviewing structures on Wind Farms and Renewable Energy resources offering tax breaks on commercial investment opportunities.
So what should you be doing in planning your taxation and financial affairs?-
In addition to the above:
1. From April 2006 first year capital allowances are extended to 50% for a one year period for small businesses (by 31/3/07 for Companies and 5/4/07 for individuals). So look to accelerate capital expenditure on plant and equipment by those dates and increase tax relief available.
2. Watch out for the new Real Estate Investment Trusts (REITS).the press are carrying significant editorial on this.
3. Look to claim relief within your company on Research expenditure where applicable. The rules are complex but worthwhile.
4. Watch out for the effects of UITF 40, the accelerated accounting of profits and increased taxation resulting from this accounting policy. Various elections and relief are available to include the spreading of the additional taxable income. HMRC will be looking closely at the accounting for the additional income.
5. VCT relief was extended in the 2006 Finance Act to 30%.Venture Capital Trusts carry significant risk warnings
6. EIS investment relief is doubled to £400,000 from April 2006. Income tax relief at 20% is available. For investments made by 5/10/2006 up to £50,000 may be carried back to the 05/06 tax year. EIS may be attractive in restructuring your existing business affairs for capital gains tax planning opportunities.
7. Pensions simplification and the use of sipps. Consider your existing policies, restructuring and maximising relief available. The annual allowance is a maximum £215,000.
8. Make use of your Capital gains tax allowance by 5/4/07 of £8800.Realise losses to offset against realised gains
9. Structure gifts and your estate for IHT purposes.
10. Review your borrowings and restructure to maximise interest relief in respect of Investment property and loans to your businesses
11. Structure your residential and commercial property acquisitions to ensure you benefit from the generous taper relief provisions available.
Every tax payers’ circumstances require detailed review and the above does not detail the substantial and complex rules applicable in all tax planning so clients please consult with the BSGV partner before undertaking any planning first to ensure it is right for your particular circumstances.
We will be pleased to work with your Financial Advisors (IFA) and if you require a recommendation to an IFA please let us know.
Please bear in mind all risk warnings on financial products and consult with us as required
Please contact us on any aspects of the above.