During October all businesses will receive their new business rates valuation. This valuation will form the basis of business rates for the next five years.
It is imperative that you check the fine print of the valuation to make sure that the rateable value applied to your property is correct. The rateable value is determined by a number of factors primarily the open market rental value on the valuation date. The valuation date for the 2010 changes is 1 April 2008.
Appeals against the new valuations should be submitted before the 30 November 2009.
Business clients should also be aware that there are a number of specific reliefs that you may be able to claim to reduce your business rates - these include small business rate relief (England and Wales) and transitional relief.
If you would like our assistance checking the valuation please call. The Valuation Office Agency (VOA) website can be accessed at www.2010.voa.gov.uk/rli/en/basic and has a number of useful FAQ sections.
From 1 October 2009 the new National Minimum Wage rates are:
HM Revenue & Customs are responsible for monitoring the National Minimum Wage. It is they who will fine you if you fail to pay the correct rates. Currently fines are 50% of the underpayment due to workers subject to a minimum £100 fine and maximum £5,000 fine.
From 1 October 2009 employers cannot use tips to make up wages to the National Minimum Wage, regardless of whether employees receive them through the payroll or in some other way.
Hidden away in the inheritance tax (IHT) regulations is a relief that can have a significant impact on the amount of IHT payable by estates which include business property.
What is business property?
Businesses which are mainly "investment" businesses are excluded from the relief, but qualifying business assets can potentially make a significant difference to IHT payable. Consider the following example.
At the date of his death Alfred had assets of £1m in cash on deposit and shares in an unquoted trading company valued at £1m. The shares qualified as business assets. In his will he left the shares to his wife, who wanted to continue running the company and had her own cash assets. Alfred's cash deposits were left to his daughter.
In this case the transfer of the shares from husband to wife was free of inheritance tax charge so business property relief was wasted. However, the £1m in cash left to his daughter would create an IHT bill of £270,000. (£1m less nil rate band £325,000 at 40%)
There is a quite legitimate way to restructure the Will and pay no IHT at all on Alfred's death. As a direct result of the required estate planning, Alfred's wife would obtain ownership of the shares and the daughter would have £1m in cash instead of £730,000 (£1m-£270,000 IHT).
Before we examine this issue from a tax perspective we need to emphasise the difference between limited companies and sole trader and partnership businesses in the way that they distribute taxed profits to the business owners.
Sole traders and partnerships are taxed under the self assessment rules. Profits are allocated as agreed by the business owners and tax is calculated on an individual basis based on this profit share. If sole traders or partners withdraw the retained profit after tax this is treated as drawings and not a business expense.
It is possible for sole traders and partners to draw out more than the balance on their current account, to become overdrawn, and suffer no tax consequence. Of course there is no long term future in doing this as funds needed for the business, will be dissipated and the business will drift towards insolvency. Businesses of this type pay tax on business profits, not the amount taken out of the business by the owners.
Limited companies and their owner directors are treated very differently. A limited company has a distinct legal identity of its own, quite separate from its shareholders/directors. Money that is withdrawn by the owners, in whatever way, always has a tax and possibly National Insurance consequence except as a repayment as a loan from a director.
Essentially money withdrawn by directors will be treated as:
So if you pay your private bills through a limited company what happens?
If you already have money invested in your company that has been credited to a director's loan account in your name, then the payment of a private bill can be debited to this account, reducing the amount the company owes you. In this case there is no tax consequence.
If you do not have money invested in your company in this way, any private payments you make will create an overdrawn balance on your director's loan - you will owe the company money. Now there are tax consequences.
If your loan account does become overdrawn the following options and tax effects are available to you.
1 November 2009 - Due date for corporation tax due for the year ended 31 January 2009.
19 November 2009 - PAYE and NIC deductions due for month ended 5 November 2009. (If you pay your tax electronically the due date is 22 November 2009)
19 November 2009 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2009.
19 November 2009 - CIS tax deducted for the month ended 5 November 2009 is payable by today.
1 December 2009 - Due date for corporation tax due for the year ended 28 February 2009.
19 December 2009 - PAYE and NIC deductions due for month ended 5 December 2009. (If you pay your tax electronically the due date is 22 December 2009)
19 December 2009 - Filing deadline for the CIS300 monthly return for the month ended 5 December 2009
19 December 2009 - CIS tax deducted for the month ended 5 October 2009 is payable by today.
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Exceed CA Limited
Bank House, 81 St Judes Road, Englefield Green, TW20 0DF
Tel: 01784 439 955 Web: www.exceedca.com
Exceed CA is a limited company registered in England & Wales (4473979). Registered for VAT (792 6771 79). Directors of the firm are members of the South African Institute of Chartered Accountants and the Institute of Chartered Accountants England & Wales.
“A member of the ICAEW Practice Assurance Scheme”