June 2010 Newsletter

The new coalition government’s first Budget was held on Tuesday 22 June 2010. From statements issued before the Budget we had prior knowledge of some of the announcements that would be included. However, there were plenty of rumours circulating as to what other measures would be announced to help reduce the country’s deficit, making this one of the most talked about Budgets in recent times.

The speculation is now over and a summary of this Budget is now available on our website here.

Whilst the Budget has been covered extensively on the national news and in the press, we have prepared this summary to outline the issues that are most likely to be of interest to you. You will also find informative comments to help you assess the likely effect that the proposed changes may have on you personally and their significance. We have also added possible action points to help you focus on specific areas.

If you have a question concerning any of the issues covered in this summary, or would like advice on the best possible course of action in a particular area, please contact us.

Laurence Moore, Chairman, Prime Group

 

• As this is a reward to employees it is not available to self-employed sole traders or partners. It is available to directors who receive a salary for their services.
• The award has to mark at least 20 years of service.
• You must not have made a previous long service award within the last ten years.
• The value of the reward cannot exceed £50 per year of service - so the maximum value of an award to an employee with 20 years of service is £1,000.
• As pointed out in the opening paragraph of this article the award has to be made in a non-cash form. Cash awards are taxable as earnings in the usual way. You should also be wary about awards that can quickly be converted into cash, for example marketable stocks or shares or precious metals - these do not fulfil the non-cash criteria.

If a company makes a loan or loans to an employee or director and the combined outstanding value to an individual never exceeds £5,000 there is no personal tax or National Insurance contributions to pay. However, beware; loans to employees who are also shareholders and directors may create a corporation tax charge for the company even if the loan does not exceed £5,000.

If the combined amount exceeds £5,000 a potential benefit in kind charge may arise if no interest is charged to the loan account or interest is charged at a lower rate than the official rate published by H M Revenue & Customs.

The official interest rates for the last three years are:

From 6 April 2007 to 28 Feb 2009 - 6.25%
From 1 March 2009 to 5 April 2010 - 4.75%
From 6 April 2010 - 4%

As we are now approaching the deadline for filing forms P11D, the forms that declare employees' and directors' benefit in kind, it is essential that loans are examined to reveal any benefits due. Overdrawn directors' loans can create difficulties where the amount of loans fluctuates during a tax year.

If you would like clarification on the amount of benefit in kind you may have to pay please contact us as soon as you can. P11Ds have to be filed by 6 July 2010.

 

Company cars that have CO2 emissions of 110g/km or less qualify for a 100% write-off for tax purposes in the year of purchase.

The list of vehicles that come within this range of CO2 emissions is expanding. Take a look at the following website that displays a fairly comprehensive list:

http://www.comcar.co.uk/newcar/companycar/poolresults/110tax.cfm

A few of the more surprising sub-110g/km cars are listed below:

Audi A1 and A3;
BMW 3 series saloon - 320d EfficientDynamics;
Mini Hatch, Clubman, Cambden and Mayfair;
Peugeot 207 - 1.6 HDi Economique;
Smart - fourtwo coupe and cabrio
various VW Golf models;
various Volvo C30, S40 and V50 models.

Please click here to download our PDF of the current tax rates