Inheritance tax – transfer of unused nil rate band

Guidance is now available on how the rules will work governing the transfer of unused nil rate inheritance tax band.

This measure was announced in the 2007 Pre-Budget Report and applies from 9 October 2007. The essence of the proposal is that proportion of the nil rate band that was not used on the death of one member of a couple will be available when the second member of the couple dies. (A couple is a married couple, or those in a civil partnership)

For married couples the first death may have occurred many years ago – even in pre-inheritance tax days. For civil partners the first death must have occurred on or after 5 December 2005. Legislation will be brought in as part of the 2008 Finance Act.

The guidelines, which cover 24 pages, cover such issues as:

What constitutes a valid marriage
Dissolution or separation
Procedure and time limits (usually 24 months from the end of the month of the second death)
Detailed examples of the calculation of relief available

Full details can be found at http://www.hmrc.gov.uk/cto/iht/tnr-draftguidance.pdf or you can contact us for more information and see what we can do to help reduce the tax burden.

Employed or Self-employed? New fact sheet

There is a new fact sheet for workers on the issue of employment and self-employment. The guidance highlights key issues and special circumstances. Workers are reminded that employment status is a question of fact rather than choice.

The leaflet can be found at http://www.hmrc.gov.uk/leaflets/es-fs1.pdf

There are specific issues for certain groups of individuals. For example, you can be an employee if you work for a relative in their business; but family members working in a domestic context such as a carer or cook etc are not employees.
(See http://www.hmrc.gov.uk/manuals/esmmanual/esm4156.htm). Unrelated individuals who work in a domestic context can be employees (or self-employed). The dividing line here can be difficult to draw, but working set hours on a fixed rate exclusively for one person as, for example a cleaner, with the householder providing all material would seem like employment. On the other hand, a cleaner who worked for 5 or 6 different people might be more likely to be self-employed.

Individuals working as office cleaners, by contrast, will normally be employees (see http://www.hmrc.gov.uk/manuals/esmmanual/esm4018.htm).

A full list of other ‘special cases’ can be found at http://www.hmrc.gov.uk/employment-status/index.htm#3

Have you renewed your tax credits claim?

Renewing claims
If you have been claiming tax credits you should now be familiar with the need to renew claims by 31 July. Failure to renew claims on time is a reason for many substantial overpayments. The overpayment arises because payments between

5 April 2008 and 31 July 2008 are ‘on account’. There is no valid claim until the renewal pack information is given to HMRC. If a claim lapses, a new claim is needed and this can only be back dated for 3 months.



So even if a fresh claim is made immediately, one month’s entitlement has been lost. This is so even if your circumstances have remained the same.

Renewal may be made by phone or by post. It is important not only to renew the claim, but to check that the Tax Credit Office has actually processed the renewal. When you have renewed your claim you should receive a final award notice for 2007/08 and a revised award notice for 2008/09. If you do not receive these you should contact the Tax Credit Office to check if the renewal has been properly processed.

To reduce the dangers associated with late renewals, HMRC has introduced some additional procedures this year:

Claimants who are considered to be at risk of failing to renew will be pro-actively contacted by the Tax Credit Office.


A 30 day waiting period has been formally introduced. This means that claimants who contact the Tax Credit Office within 30 days of the deadline and provide all the necessary information will have their claims re-instated. But with payments stopping and starting, there is a lot more scope for things to go wrong – so renew before 31 July to be sure!

If you renew by post close to the deadline it is wise to send the papers by recorded delivery. If you renew by phone, take details of the date and time of the call (and if possible the adviser’s name) so that a recording of the call can be located easily if there is a dispute later.

Do not delay your renewal because you do not have confirmed income figures. There are two particular circumstances which we have come across where provisional figures might need to be included before confirmation:

Self employed individuals whose accounts have not been finalised
Employees earning less than the taxable earnings threshold – who are not entitled to a P60 (as there have been no deductions of tax or National Insurance). A statement of earnings from your employer may be the only information you have

Do not delay your renewal in these cases. Instead provide the best information you have and tell the Tax Credit Office if the figure is estimated. If you give an estimated figure, you must contact the Tax Credits Office by 31 January 2009 to give the final figures.

Why don't they answer the phones?

My sympathies with the employee of HMRC who posted this comment, about call centre problems, 3 days ago on Audio Talk.

"What fucking next. I work for H Em Arse Sea.

'This is our busiest year so far......................' , 'The calls continue to increase.....................'

The corporate brain cell hasn't been able to figure the fucker out. If you put so much pressure on people to reduce call handling times, some people will inevitably hang up on people to make the calls shorter. So, it follows that these people will call back again and again, and again. There are so many calls on the network that shouldn't be there. Dohhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!!!!

How fucking stupid can people be??

They talk about us as a business. I'm sorry but businesses have to be much more effective than this.

Oh well........................... "

Rather interestingly the original post has since been removed from the board.

I wonder why?

Lucky it was spotted in time by Ken Frost who posted this.

For this week a sales tip

People Prefer Talking To Listening

The number one rule in communication is: People prefer talking to listening.
Think about the people you enjoy being with. Aren't they people who listen to you? Think about the people you avoid. Aren't they people who talk incessantly, and never let you get a word in edgewise? Now think about this:

Have you ever heard anyone complain about someone who listens too much?
People buy because they like you. Listening is one of the most genuine compliments you can give another person.

A good salesperson is a good listener. A great salesperson is a great listener.
------------------------------------------------------------------
On a scale of one to ten, evaluate yourself as a listener. One is low, ten is high.
How do you stack up? ______________________________

Now that you've evaluated yourself, ask your spouse or friends for some honest feedback. You might discover that you're not as good a listener as you thought you were.

What can you do to become a better listener?
_______________________________
Work on it each day this week.
Monday: _________________________
Tuesday: ________________________
Wednesday: ______________________
Thursday: _______________________
Friday: _________________________

Do you want to claim some FREE cash? Millions of pounds are owed to UK parents and families.

The year before the current tax credits were introduced there was a different allowance available which was never advertised by the Inland Revenue. You can still claim this £520 - £1,040 allowance provided the claim is made before
31 January 2009.

You are eligible to claim the £520 allowance if: -

• You have a child born between 6 April 1986 and 5 April 2003 and
• The child lived with you for all or part of 2002/03 and
• You worked and paid tax for all or part of 2002/03

You are eligible to claim the £1,040 allowance if: -

You can answer yes to the above questions and one of your children was born between 6 April 2002 and 5 April 2003.

• Making the claim does not affect your current or future Working/Child Tax Credits
• Your marital status does not affect your claim
• You or your partner must have earned more than £6,000 in the 2002/03 tax year
• If you claimed the allowance in 2002 you cannot claim now
• If your final tax code on your April 2003 notice of coding ended in a H or a T you have already had the allowance
• We will charge you a total of £97 including VAT for making the claim on your behalf

If you are interested in grabbing this cash which belongs to you please either email shaun(at) shaunmcguinness.com or call us on 0800 634 4476 and we will explain what needs to be done.

July Tax Tips

Welcome...To July's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.Please contact us for advice in your own specific circumstances. We're here to help!

July 2008
Mileage Expenses and Rocketing Fuel Prices
Planning to Sell Your Company?
£50,000 Annual Investment Allowance
Protect Your Pension Fund
Question and Answer Corner
Key Tax Dates for July 2008
Mileage Expenses and Rocketing Fuel Prices

Fuel prices are rocketing, so employees are increasingly reluctant to use their own cars for business journeys. As an employer you can pay a tax free mileage rate to your employees of 40p per mile for the first 10,000 business miles driven in one tax year, and 25p per mile for extra miles in the same year. These rates haven't been changed for over 6 years. To keep your employees happy you could pay a higher mileage rate, but you need to report the excess amount paid on the form P11D and the employee will be taxed on that extra payment.Where an employee uses a company car, but pays for all the fuel, the company can pay a fuel-only mileage rate for business journeys. This fuel-only rate is guaranteed to be tax free when it is equal to or less than the advisory fuel rates set by the Taxman every six months. This advisory fuel rate has just been increased with effect from 1 July 2008, although due to the escalating fuel prices the Taxman has said the higher rates can be used for journeys made in June.The new advisory fuel rates, with the old rates in brackets, are: 1400cc or less: Petrol: 12p (11p) Diesel: 13p (11p) LPG: 7p (7p)1401cc to 2000cc: Petrol: 15p (13p) Diesel: 13p (11p) LPG: 9p (8p)Over 2000cc: Petrol: 21p (19p) Diesel: 17p (14p) LPG: 13p (11p)These rates are based on average fuel prices per litre of 114.8p (petrol), 127.2 (diesel) and 57.1p (LPG). If the prices in your local area are much higher, or your company cars are less fuel efficient than average, you can pay a higher mileage rate. You need to keep a note of how you calculated the higher mileage rate.

Planning to Sell Your Company?

The process of selling an established business can take some time. Even when you find a buyer the negotiations over exactly what will be sold can be drawn out. It makes sense to smarten up the company financially first. For example, dispose of any assets which are not really pulling their weight, such as obsolete machinery. Also any assets which have a personal connection with the directors, such as holiday homes or valued cars, can be put in the directors' own names.Now look at what tax reliefs you could benefit from on the sale. If you leave the country before the sale and stay abroad for a period of five years or more, you could avoid paying UK capital gains tax on the gain. However, you may pay tax on the profits in your new country of residence, so be careful about the country you choose!Entrepreneurs' relief can be claimed for most company sales, which reduces the effective rate of tax from 18% to 10% on the first £1 million of gains made by each shareholder. This can reduce the tax by up to £80,000 for each shareholder who qualifies for the tax relief. To qualify each shareholder and the company must meet all of these conditions:
The shareholder must hold at least 5% of the ordinary shares of the company and 5% of the voting rights for the company for at least one year ending with the sale;

The shareholder must be an employee, or director, or company secretary of the company for at least one year up to the date of the sale;
The activities of the company must be at least 80% trading, as opposed to investments, or it must be the holding company of one or more trading companies.

Where family members hold a small number of shares check whether they will each meet the 5% threshold based on their own shareholdings alone. Consider gifting some shares to your grown up children or spouse to achieve this threshold. Where shareholders do own over 5% of the shares but do not work for the company, consider making them a director, or giving them a small part time position at the company for the year before the sale.Company sales require a lot of planning, so talk to us as soon as you consider selling so we can help with the long term arrangements.

£50,000 Annual Investment Allowance

All businesses can now claim a 100% allowance for items of equipment, including vans and trucks, but not cars, purchased from 1 April 2008, or from 6 April 2008 for unincorporated businesses.This allowance is called the annual investment allowance (AIA), and it is capped at £50,000 per year, per single company, or per group of companies. This cap is also reduced in the first accounting period that straddles 1 April 2008, to take account of the portion of the year that falls before 1 April (or 6 April). So a single company that makes up its accounts to 30 September, could claim the AIA 100% allowance on up to £25,000 of expenditure incurred in the period from 1 April 2008 to 30 September 2008. Items purchased before 1 April 2008 may qualify for the old allowances for small or medium sized businesses of 50% or 40% for the first year.Where expenditure incurred after 1 April 2008 exceeds the available AIA cap it still gets some tax relief at 20% or 10% in the first year, depending on the type of asset. Certain equipment, which is included on the Government approved list of energy or water efficient items, can attract a 100% allowance, called an enhanced capital allowance (eca). The eca is available whether or not the business has used its AIA cap for the year. Its worth checking on the eca website (www.eca.gov.uk ) whether an item of equipment qualifies before you acquire it.

Protect Your Pension Fund

The taxation of pensions changed on A Day: 6 April 2006. From that date a cap (the so-called lifetime allowance) was set on the value of a pension fund that can be used to pay out tax favoured pensions, including a tax free lump sum of up to 25% of the fund. On A-day the lifetime allowance was £1.5 million, but it increases every year and is currently £1.65 million.If your pension fund exceeds the lifetime allowance when you start to draw your pension the excess funds above the cap are taxed at up to 55%. The cap of £1.65 million sounds a lot, but if you have been in an occupational pension scheme for 20 plus years, especially one that has been well funded by your company, your personal pension fund could exceed that limit.If your pension fund did exceed £1.5 million on A-Day you can register the total value of the fund with the Taxman. That higher registered value becomes your personal lifetime allowance, which increases each year until you retire. The higher personal lifetime allowance protects your pension fund from the 55% tax charge. But you need to get the registration process completed by 5 April 2009 for this protection to apply, so if you haven't already done so, its time to start sorting it out.You first need to get a valuation of all your pension funds from your various pension companies as the lifetime allowance applies to the sum total of the combined values. As you can imagine it can take months to collect all the necessary information, as some pension companies are very slow to respond. The pension industry estimates that up to 500,000 people could be eligible to apply for pension protection.As a rule of thumb if you have been a member of an occupational pension scheme for 20 years or so and your highest salary multiplied by the years you've been in the scheme is more than £3 million, then your pension fund could be at risk of higher tax charges. However, the figures for you will depend on how the pension from your scheme is calculated. If you have the annual statements from your pension company we can help you get a rough estimate of the value of your pension fund, before going to the trouble of asking for a formal valuation of the fund.

Question and Answer Corner

Q. I've heard that my small pension is going to be taxed, but I've never paid tax on it before. Will I have to pay the tax due for all the years I've received the pension in one go?A. Don't panic. The change in tax treatment only applies to pensions of £1,000 or less per year, which were not previously taxed. If you have one of these small pensions you will not have to pay tax immediately, any tax due will be collected month by month after 6 April 2009 under the PAYE system. No tax will be demanded for small pension payments made before April 2008. It is quite possible that your tax free personal allowance will cover all of your state pension and small personal pension you currently receive, so no tax will be due on any of your pensions. Ask us to check this for you.Q. I receive maintenance from my ex-husband under a court order. Do I have to include this income on my tax return?A. If the court order, was made after 15 March 1988 the maintenance will not be taxable in your hands, so you don't include it on your tax return. If the court order pre-dates 15 March 1988 your ex-husband may be due some tax relief on the maintenance if he or you were born before 6 April 1935, and in that case the maintenance may in part be taxable, but this is unlikely. A ruling on the particular court order would have to have been obtained from the Tax Office before July 1988, to make any part of the income taxable.Q. I recently registered for VAT, effective from 1 June 2008, but my business has been running since 1 November 2007. I need to issue a credit note to a customer in respect of services supplied in March 2008. Do I have to include VAT on that credit note?A. The credit note relates to services you supplied before your business became VAT registered, so you do not add VAT on to the credit note amount. The rule is: the rate of VAT to be used in a credit note is the rate in force at the time of the tax point of the original supply. The tax point for services will normally be the date of the invoice, or it could be earlier if the customer agrees the service has been completely delivered at an earlier date.

Key Tax Dates for July 2008

6 - Deadline for 2007/08 forms P11Db, P11D and P9D to be submitted and copies of P11D and P9D to be issued to relevant employees6 - Deadline for employers to report share incentives for 2007/08 - form 4214 - Return and Payment of CT61 tax due for quarter to 30 June 200819/22 - PAYE/NIC due for month to 5/7/2008 or quarter 1 of 2008/09 for small employers19 - Class 1A NIC due in respect of the tax year 2007/0830 - Deadline for UK businesses to reclaim EC VAT chargeable in 200730 - Second self assessment payment on account due for 2007/08.Second 5% penalty surcharge on any 2006/07 outstanding tax due on 31 January 2008 still unpaid.Second £100 penalty if 2006/07 tax return due for filing on 31 January 2008 is still outstanding.