January 2008 Newsletter

FOREWORD

Happy New Year from Prime Chartered Accountants, we wish you a successful 2008.

What does 2008 have in store for the economy and how will that impact on your business?

The simple truth is we don’t know. But, through our E-News and Newsletters, we will endeavour to keep you informed on the key legislative changes and issues that you should be aware of throughout the year.

The majority of economic commentators predict that 2008 will be a "difficult year" for the British economy and the Global economy. Indeed at the time of writing (Tuesday 8th January, 2008), Merrill Lynch has stated that recession in the US “isn’t even a forecast, it’s a reality”.

The fall out of “Le Crunch” is starting to have an impact.

Citigroup, the world's biggest financial bank, is reportedly planning to axe up to 32,000 of its workforce in an effort to stem mounting losses.

With the slow down in the UK housing market consumers will be more cautious when looking to spend their hard earned cash and more cautious of credit. Indeed, UK retailers had their worst Christmas in three years, according to the British Retail Consortium (BRC).

But it is important not to exaggerate the risks and talk ourselves into a more serious downturn.

Richard Lambert, the CBI's Director-General, states that the most likely outcome is a "soft landing" as the economy slows. And, despite the uncertain times ahead, he also listed five reasons for feeling more cheerful.

To read more about Richard Lambert’s forecast for 2008 click here: CBI’s New Year Message

Whatever challenges 2008 brings, Prime Chartered Accountants are here to help so, if you have any questions about the issues impacting on your business, please feel free to contact us.

Regards

Laurence Moore

Chairman, Prime Chartered Accountants

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Changes in postage charges

Due to changes in the size and amount of postage now paid, we have recently had to pay a large amount of unpaid postage due to incorrect amounts being put on mail sent to us. This includes signed tax returns and accounts. Please be aware that the unpaid postage causes delays in the documents being received by us and may result in missing important deadlines.

The minimum postage required for the smallest tax return or set of accounts is now 48p.

The following link will assist you in checking the postage due before sending.

Internet Links: Royal Mail Website

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HMRC announce fall in interest rates for overdue tax

….. but make sure you don’t pay any! Ensure that your 2007 tax return is submitted by 31 January 2008 and your tax paid. If we are still waiting for information from you – let us have it now!

If you have any questions or need our help contact Sarah Nickols in our Coventry office on 024 7655 4310 or Jan Hornby in our Solihull office on 0121 711 2468.

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Capital gains tax reform

Last month we reported that the Chancellor, Alistair Darling, had said at the CBI conference he would ‘publish final proposals’ in December 2007. There have been many rumours of changes to the proposals, including the introduction of some form of retirement relief, with the figure of £100,000 being mentioned by several sources.

Unfortunately the Chancellor failed to issue his final proposals before the end of December and so we now hope to see them this month. The failure to publish them so far has disappointed many, as it gives little time to plan effectively before the introduction of the new rules on 6th April 2008.

The proposed changes will generally increase the amount of tax payable by individuals who own assets that currently qualify for full business asset taper relief but everyone has different costs and entitlements to reliefs, so it is difficult to speak in generalities.

If the government does introduce a form of retirement relief then it may be beneficial to retain business assets and dispose of them on or after 6 April 2008 depending on the amount of the relief, the conditions which have to be met and how it is calculated.

We will continue to keep you informed of developments. However if you have any concerns please do get in touch.

Internet Links: CBI press release

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Advisory fuel rates

To reflect the increases in fuel prices, HMRC have issued new advisory fuel rates for company car drivers (not those who use their own car for business purposes). These take effect for all journeys undertaken from the 1st of January 2008, so employers wishing to use the new rates should advise affected employees and update any expense forms as soon as possible.

Engine size	Petrol	Diesel	LPG
1400cc or less	11p (10p)	11p (10p)	7p (6p)
1401cc – 2000cc	13p (13p)	11p (10p)	8p (8p)
Over 2000cc	19p (18p)	14p (13p)	11p (10p)

Other points to be aware of about the advisory fuel rates:

• employers do not need a dispensation to use these rates
• employees driving company cars are not entitled to use them to claim a deduction if employers reimburse them at lower rates. Such claims should continue to be based on actual costs incurred.
• the advisory rates are not binding where an employer can demonstrate that the cost of business travel in company cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your company car policy, please contact the partner who looks after your affairs.

Internet Links: Advisory fuel rates

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Inheritance tax nil rate band

Chancellor Alistair Darling announced in his Pre-Budget speech a change to the way in which the inheritance tax (IHT) nil rate band of £300,000 can be used for married couples.

Before the introduction of this change, where an individual died and left some or all of their property to their spouse, that transfer was exempt from IHT. However, on the death of the second spouse, only one nil rate band was available, meaning that a nil rate band had been effectively wasted. This is because of the IHT exemption for transfers between spouses.

The Pre-Budget change means that the proportion of any nil rate band unused on the first death may be used when the surviving spouse dies.

This change is effectively backdated for situations where a spouse died before the announcement of the change, as long as the ‘surviving’ spouse dies on or after 9 October 2007.

This is a significant change that will affect many families and HMRC have now issued the relevant form IHT216 to claim a transfer of any unused IHT nil rate band.

All references to spouse also apply to civil partners.

Please do contact Sarah Nickols in our Coventry office on 024 7655 4310 or Jan Hornby in our Solihull office on 0121 711 2468 if you would like more advice on this issue.

Internet Links: IHT216 form

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Year end planning

As we move towards the end of the tax year it is time to consider whether we have made best use of all the reliefs and allowances that we are entitled to.

Here are a couple of issues that should be thought about:

ISAs

Gains and most income in Individual Savings Accounts (ISAs) are tax-free, and they are ideal for saving small, regular amounts.

You have until the 5th April 2008 to make your 2007/08 ISA investment. ISAs are available from banks, building societies and a variety of other providers. The maximum annual deposit is £7,000 overall, of which no more than £3,000 can be in cash.

The 6th of April 2008 sees the introduction of significant changes to the ISA regime, which includes making ISAs available indefinitely, and removing the designations of ‘mini’ and ‘maxi’ ISAs. The 2008/09 investment allowance will be increased to £7,200, of which up to £3,600 can be invested in a cash ISA.

There are also proposals to allow Child Trust Fund accounts to rollover into ISAs on maturity. Contact Wendy Tipler on 024 7622 0208 to arrange an appointment with Phil Goodman, of Prime Financial Advisers Ltd, for further information on the changes and how they may affect you.

Do you need help planning for your retirement?

Although it may not currently seem your most important financial goal, it is essential to put in place sufficient measures now to ensure that you will be able to enjoy your future retirement without any financial worries.

In our experience, too many individuals are still heading towards retirement without adequate savings, and personal debt is a significant problem in the UK. Meanwhile, life expectancy is continuing to rise, contributing to a general shortage in the state pension pot.

Investing in a pension scheme, whether a company or a personal scheme, allows you to enjoy tax breaks on your pension savings. These are tax reliefs as you invest, and a partially tax-free regime for your savings.

Your employer can also contribute and obtain tax relief. Scheme managers can provide pension forecasts to help you judge whether you are saving enough, and what additional savings you might have to make in order to generate the income you will need in retirement.

Pension contributions based on 2007/08 earnings must be paid by 5 April 2008. Tax relief is available on annual contributions limited to the greater of £3,600 or the amount of UK relevant earnings, but subject also to the annual allowance.

While you are waiting for your pension forecast from your pension provider, why not begin to put together a forecast of your spending needs, post-retirement - starting by looking at what you are really spending now?

We can help you to plan for a financially secure retirement. Contact Wendy Tipler on 02476 220208 to arrange an appointment with Phil Goodman, of Prime Financial Advisers Ltd, for further advice and assistance.

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Should you become self-employed?

On a lighter note …..

Take the test here!

If you are still undecided, this might help …

Five things that might make you stay at work!

1. I can buy out when the boss retires – so will end up with my own business anyway.

2. I've a life threatening condition and the company will be generous – although illness can give you a 'happy go lucky' approach, it may be best to seek fulfilment in your home life rather than become an entrepreneur.

3. I qualify for a bumper pension in two years – so why not hold fire and try to negotiate an early release? It'll be easier to start a business if you're receiving a pension.

4. I actually like work, but my partner is pushing me – is an all too common comment made by reluctant entrepreneurs. Should your partner start the business instead?

5. They're currently funding my MBA – which means that a start-up venture has never looked so appealing. Write the plan but wait until you get the piece of paper before resigning. Is there an opportunity to start a joint venture with your employer?

Five things that might make you decide to leave

1. The boss is a control freak who'll never let go – if work is uncomfortable and you think you can do better on your own, it’s often worth giving it a go.

2. I think the firm's going down the tubes – ask if it's true. If it is, you might be able to buy the assets from the receiver and get off to a flying start with the business you know.

3. I have a personal pension scheme – so however old you are you won't lose out financially when you're old.

4. Work is depressing me – life really is too short to spend it doing something you don't enjoy. Understand what it is about work you want to change first though.

5. I've been trading on the side and am getting busier – many businesses start because moonlighting is proving successful. Make sure you're not breaching your employment contract.

Source: The Entrepreneur's Book of Checklists

Entrepreneurial quality check:

• Self-confidence
• Self-determination
• Being a self-starter
• Judgement
• Commitment
• Perseverance
• Initiative

Source: Business Link

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And finally – some New Year’s resolutions

Consider these New Year's resolutions from PEP Productivity Solutions. When it asked its clients, "What's on your Top 10 list of things you would like to improve, learn, or change in your work habits for 2008?” the answers included:

• No scroll bar in my e-mail in-box at the end of the day
• Turn off or quiet my cell phone or Blackberry when in meetings
• Set and keep appointments on my calendar to do my own work
• Get organized so I stop wasting time looking for things I can't find
• Schedule the priorities, instead of prioritising the schedule
• Don't over distribute e-mails
• Decide when I will end my work day and stick to it
• Make continuous improvement part of my routine
• Do the worst things first to get more done in my work day
• Treat my calendar like a road and check more what is coming up ahead.

Uhmm, food for thought!

Once again, we hope you find this E-News of interest and please get in contact with us should you need advice regarding any of the issues raised.

As we move into 2008, Prime Chartered Accountants continues its commitment of working in partnership with our clients. So, if you need some advice regarding any business issue, we’re happy to help. If we can’t advise you, we will point you in the direction of someone who can.

Happy New Year!

Laurence Moore

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Disclaimer
This newsletter is published for the information of clients and other recipients of our email newsletters. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the firm.