July 2009 Newsletter

FOREWORD

WELCOME TO PRIME CHARTERED ACCOUNTANTS JULY E-NEWS.

With swine flu cases on the increase in the UK and the Government predicting it will take approximately another six years before the economy returns to the way it was before the recession hit, businesses certainly have a challenge ahead of them.

With costs now a major consideration for businesses, the news that the national minimum wage is to increase in October this year and the landmark ruling that employees can accrue holiday pay while on sick leave, will undoubtedly in some cases, add to the strain on budgets. Both of these issues are addressed in articles included within this e-news.

If you are currently looking at potential new revenue streams and are considering expanding your business overseas, see our article below about support available from UKTI for SMEs.

Finally, and relating to the Budget, we’ve included details of the concession made by Government regarding pension changes and the second offshore disclosure facility which you should be aware of.

As always, we are happy to advise on any of the issues covered, so please do not hesitate to contact us.

Laurence Moore, Chairman, Prime Group

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Support from Department for Trade and Industry (UKTI)

We have been made aware that UKTI is providing support for businesses in the West Midlands. They will provide …. “an R&D/ innovation mentoring and business support package for SMEs This shall concentrate on R&D/innovation for SMEs looking to either internationalise or further develop their current internationalisation strategy”.

If you want more details please contact us.

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National Minimum Wage increases

The adult rate of the National Minimum Wage (NMW) will rise to £5.80 (£5.73) an hour in October 2009. This is payable to those age 22 and over.

The hourly youth development rate will increase to £4.83 (£4.77) and for 16 and 17 year olds to £3.57 (£3.53) an hour.

HMRC are able to charge penalties to those employers found to be in breach of the NMW rules.

Internet links: HMRC guidance on penalties

Tips and the National Minimum Wage

A recent report confirms that employers must pay their employees at least the NMW without taking into account tips, gratuities, service charges or cover charges, unless they are paid to employees through the employer's payroll.

UK opt out on 48 hour working week

The ability of UK employers to allow employees to opt out from the European Working Time Directive is set to continue. This means that, where employees wish, they will still be able to work more than 48 hours a week.

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Employees accrue holiday pay while on sick leave

The House of Lords has ruled in the case of Stringer v HMRC that workers who are refused holiday pay while on sick leave can make a claim to an employment tribunal for an unauthorised deduction from wages (under the Employment Rights Act 1996).

This decision follows the ruling in January, by the European Court of Justice (ECJ), that employees do accrue paid holiday for their entire sick leave, and must be allowed to take it on their return to work or be paid in lieu of their entitlement if their employment ends. The ECJ ruling did not comply with the UK’s existing Working Time Regulations, which require employees to use their four weeks statutory leave in the holiday year or lose it. The House of Lords has now ruled that the ECJ decision does indeed apply in the UK.

This is a complex area so please do email Monima Smith or call 024 7622 0208 if you need any clarification.

Internet links: Personnel Today article and Employee Benefits article

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Enterprise Management Incentives

A particular problem for businesses in the current financial crisis is how to stop their best employees deserting them. An EMI scheme may be the answer. There isn’t the space to go into all the details and options here but they can give employees a tax and NI-free inducement, tie them in and also enable the company to pay them dividends rather than bonuses so saving more NI…. All while still allowing the company owner to retain full control. If you would like more information please email Laurence Moore or call 024 7622 0208.

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Don't wait for the second offshore disclosure facility!

Second attack on offshore account holders

As expected the Budget contained a formal announcement that there will be a second offshore disclosure facility (ODF), or new disclosure opportunity (NDO), as it will be known. This will run from Autumn 2009 to March 2010, and will enable offshore account holders to provide details of previously undisclosed income or gains to HMRC. In return, HMRC will charge a fixed penalty which may be at a lower rate than would normally apply.

The terms of the NDO have yet to be announced, but account holders will need to calculate any additional taxes plus interest for late payment, potentially going back up to 20 years. We recommend seeking professional advice to minimise the tax exposure - for example, to ensure any losses, reliefs and allowances are fully utilised.

A fixed penalty of 10 per cent was offered under the first ODF and we understand a similar fixed penalty will apply under the NDO. We expect HMRC will argue that a higher penalty will be appropriate under the NDO if your account is with one of the five high street banks covered under the first ODF (Barclays, HSBC, HBOS, Lloyds and RBS), because taxpayers did not take advantage of the first opportunity to come forward.

Our advice to anyone who feels that they may have a tax disclosure to make is not to wait until the detailed terms of the NDO are announced, or until HMRC obtains details of an account direct from a bank, but to seek advice immediately with a view to approaching HMRC voluntarily. If we can help, please email Ian Frost or call 0121 711 2468 / 024 7622 0208.

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Double Cab Pick ups are now vans for tax relief

The treatment of these vehicles has been confusing with the taxman treating them as Vans for benefit in kind purposes but as cars when giving the business tax relief (capital allowances). This confusion has now been lifted with a retrospective re-definition back to April 2008. 100% tax relief is now available in the year of purchase. To find out more email Ian Frost or call 0121 711 2468 / 024 7622 0208.

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Financial Services Compensation Scheme

Are each of your bank or building society accounts guaranteed up to £50,000? The answer is no! This is because some apparently separate and independent institutions are connected. If you want to see who owns who for these purposes, have a look at: fsa list of linked deposit takers.

It may surprise you!

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Govt makes concession on Budget pension changes

The Government has agreed to increase the maximum annual contribution allowed under its anti-forestalling measures from £20,000 to £30,000 a year, in the interim period before the pension changes come into effect.

The original rule meant those who did not have regular quarterly or monthly pensions contributions would only be able to receive full tax relief on the first £20,000 of contributions.

The amendment to the Finance Bill, tabled on Friday 3rd July, allows the smaller of either the average of an individual's last three years contributions, or £30,000.

This is still a very complicated area so please contact us if you need advice.

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Children and Tax

You, your tax and your children … have a look at our factsheet.

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Does it matter if they are sent to Shipley or Cumbernauld?

You will no doubt know that tax payment cheques are sent to one of two HMRC processing centres at Cumbernauld or Bradford (Shipley).

In the absence of payslips, businesses or individuals do not know where to send tax payments, and it wastes time finding out. We have contacted HMRC which has provided the following useful information.

All tax payments should now be sent to the following address at Shipley:

HM Revenue and Customs Accounts Office

BRADFORD

BD98 1YY

However, note that cheques will still reach HMRC if either:

• payment is sent to the Cumbernauld address, or
• the old pre-paid envelopes with slightly different postcodes are used.

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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.